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As travel-expense management systems become integrated with booking systems, companies can finally see what they're spending, and reduce it.
David McCann, CFO Magazine
October 1, 2010
In these days of aggressive cost control, the 1% to 2% of revenue that a typical company spends on travel and entertainment (T&E) looks riper than ever for scrutiny.
Simply eliminate unnecessary travel? Sure. But a more lasting payoff from
travel-expense management hinges on understanding what is being spent, leveraging that knowledge to win volume-based discounts from travel suppliers, and encouraging (or forcing) employees to use those vendors.
Those have been standard aims of T&E management for some time, but it is now much more achievable as
travel-reservation systems become better integrated with systems that generate online expense reports and populate them with charges billed to corporate payment cards.
The trend was sparked in 2006, when Concur, already the T&E software market leader, acquired rival Outtask, which owned the Cliqbook travel-booking tool. Integrating the two systems gave Concur a further advantage over its competitors, and other vendors soon began to work with booking systems on similarly integrated approaches.
That strategy gained further momentum when the bottom fell out of the economy and travel costs were put under the microscope. Notably, IBM, the number-two player in the expense-management field, partnered in 2009 with Sabre, the global distribution system (GDS) that operates the most-used booking system in North America, GetThere. Big Blue this year struck a similar pact with TravelPort, which runs two other major GDSs — Galileo and Worldspan.
What You See Is All You Get
The integrated approach facilitates something that was always missing from travel management: an easy, single-view comparison between what was booked and what was expensed. That single view both enhances visibility into spending and promotes compliance with travel policy.
The system can flag, for example, last-minute upgrades to more-expensive flights or hotel rooms, or when hotels attempt to charge different rates from what was quoted — something that happens about 15% of the time, according to Mike Hilton, a co-founder and executive vice president of marketing at Concur.
The traveler might not feel like fighting a higher rate at check-in, but at least the company will know there was a change and can argue with the hotel.
"It's very difficult to track what employees do once they've departed on a trip," says Sally Abella, director of corporate global travel for Harman International Industries. The $3.3 billion audio and infotainment company recently integrated two systems it has been using for years — IBM's expense tool and the GetThere booking system. "Now we'll know if someone pays $80 to upgrade to a club floor. It will be interesting to see how we grow with this new functionality."
Historically, few travel programs have managed to capture 100% of spend, and companies have usually negotiated with suppliers based on reservation data. Those that can use complete expense data are in a better bargaining position.
"At the end of the day, an integrated system gives companies a much richer set of data to analyze travel patterns, negotiate discounts, and make sure travelers maximize their use of the discounts," says Tom Wilkinson of consultancy TRW Travel & Expense Management.
Insurance broker Beecher Carlson Holdings has been able to shave 3% off its travel spend since it chose Concur's integrated solution two years ago, says controller Scott Tofil. "We had never been able to tell anyone easily what we were spending, so we didn't get many discounts," he says.
Helping to drive that effort is the fact that company travelers are motivated to use the booking system, instead of making ad-hoc calls to their personal-favorite travel suppliers, because of the convenience of having expense reports generated automatically. The savings are especially important for Beecher Carlson, because travel spend is generally higher for insurance companies than others, at 5% to 6% of revenue, says Tofil.
Adding to the convenience factor are an expanding array of mobile applications being offered by expense-management vendors, which allow travelers to easily create and complete expense reports while still on the road. Some of the apps have features like the ability to make a taxi reservation and add it to a report, or to take a picture of a receipt and transmit it to accounts payable.
Another major advantage of integrated systems is that expense reports are audited automatically for policy compliance, which saves accounts-payable or accounting personnel from having to do time-consuming manual audits.
The work flow can be designed so that reservations are also audited pre-trip, allowing bookings to be overruled before the money is spent. Business rules are loaded into the expense- management software so as to automatically notify a manager when, for example, a traveler books a nonpreferred supplier or a higher hotel rate than the company allows in a given city.
"The ability to be timely with violations and have immediate remediation was a key factor" in the decision to integrate, says Christa Andresky, finance chief of Harman International's consumer group.
A majority of companies have integrated their expense-management systems with their T&E payment cards, which alone drops expense-report processing costs by 25% and pushes up policy compliance by almost a quarter, according to analyst firm Aberdeen Group. But the integration of travel-booking and expense systems has been slower to take hold.
The two types of tools were originally designed for different silos with different data requirements, so developers saw no need to integrate them. Travel managers were the overseers of bookings, and expense reports the province of finance. That perception began to change after Concur acquired Cliqbook, aided by a broad shift in responsibility for travel purchasing from travel to procurement departments.
Indeed, while Concur sells both its expense tool and Cliqbook as stand-alone products, 60% of new customers are choosing the combined solution, and the vast majority of those are experiencing an integrated system for the first time, says Hilton.
That, though, is at least partly because Concur has, until recently, taken data feeds only from Cliqbook. Competitors, in contrast, tout the fact that they will pursue integration with almost any reservation system or travel-management company. (Concur has, however, recently partnered with Amadeus, the largest GDS in Europe and Asia, to create an integrated system called Amadeus E-Travel Manager.)
Ray Curatolo, director of expense-reporting solutions for IBM, says the company's approach of partnering with the three big GDSs that collectively dominate the U.S. market is superior because it "provides the flexibility to discuss options with clients across multiple booking tools."
Those arrangements also allow IBM to capture data not just on reservations booked electronically but also on those made over the phone, for which records are created in a GDS, Curatolo adds.
Another market player, CyberShift, likewise says it can integrate with almost any booking system a client uses. Still, it has entered a formal relationship with NuTravel Technology Solutions, whose reservation tool has a strong market among second-tier travel agencies. Craig Fearon, senior product director for expense applications at CyberShift, says that the deal was motivated by the fact that companies are increasingly issuing requests for proposals for an expense system together with a booking system.
The move toward integration not only solves a pain point for CFOs, but seems likely to permanently ensconce travel within the purview of finance. "In the past, most CFOs had a very granular view of expense-reporting data, but little insight into the totality of travel costs," says TRW's Wilkinson. "With integration, the whole process becomes more interesting to CFOs, and their natural desire for control and visibility into data and processes will kick in."
David McCann is senior editor for technology at CFO.