Expense Management Software Grows Up

Systems for managing employee expenses can be as unruly as a bowl of spaghetti, but two software publishers are tying together the loose ends.
John XenakisFebruary 28, 2001

Managing expenses and collecting revenue is a piece-by-piece affair, and Extensity Inc. is attempting to integrate three major areas — travel expenses, procurement expenses, and timesheet tracking — into a single set of software modules.

The company’s first application was travel expense management. One of its customers, Bestfoods, purchased Extensity’s Connect software in 1998 and uses it to enforce its cost-conscious management style, according to Bob DeLuca, Bestfoods’ director of corporate services.

“We’ve done it with approval-by-exception only,” DeLuca says. “Your manager only sees expense reports on an exception basis, based on our particular parameters. But if someone takes a trip, and it’s not on the approved airline, the software books it. At the end of the month, the manager is E-mailed a report containing all the employee expense reports.”

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Extensity’s prices start at $500,000 for 5,000 seats ($100 per seat), and include procurement and timesheet modules. The company’s biggest competitor is Concur Technologies, which introduced a client/server product in 1993. The firm came out with Web-enabled products, called Expense and Time, in 1999.

One of Concur’s customers, Avnet Corp., selected the firm in December after a lengthy comparison with Extensity.

“We test-drove both products, and we had both apps accessible by a dozen or so people within the company, to experience it within our four walls,” says Jim Strand, vice president of financial operations for the electronic component distributor. “That proved to be pretty useful.”

Strand decided that the products were roughly equivalent in the way they matched up with Avnet’s requirements. Although he did not reveal the precise cost of each system, the prices were comparable.

In the end, Strand selected Concur because it offered a 90-day fixed price “rapid implementation” consulting plan, which began on February 1. “The intent of the rapid implementation plan is to get it up and running within the company, and then it’ll be our job to roll it out.” Ultimately, 7,500 Avnet employees will use the system.

According to Timothy Tow, an analyst with Gartner Group., a Stamford, Conn., based market research firm, other vendors have offered 90-day, fixed-price implementation plans, but discarded them.

“A 90-day guarantee is a throw-away statement,” Tow says. “It’s easy to get a pilot site up, but it’s a lot harder to get the back-end integration completed after the pilot is over.”

Strand agrees with this statement, but says that Concur’s 90-day rapid implementation plan is valuable because he’s getting his staff involved in the implementation.

“The whole concept of rapid implementation sounds good, but it’s useless if you don’t have the resources internally to support it,” Strand says. “We have all the resources lined up from IT, finance, and training, and they’re all part of the project.”

Concur’s business model is different from Extensity’s. Concur targets the same high-end businesses as Extensity, but it also sells to midsize companies. Software license prices start at $150 per seat, and decrease to $50 per seat in large volumes. Both companies sell software licenses for their products and make them available on an application service provider basis.

Concur has aggressively targeted the medium-size business sector with its ASP model, typically charging $10,000 up front plus several thousand dollars per month. In the ASP model, the customer outsources operation of the computers running the application.

“Concur has an agreement with its customers that guarantees the application is up and running, or Concur doesn’t get paid,” says Andy Goloboy, an analyst for the Framingham, Mass., based market research firm International Data Corp. “The old support model of ‘bring down the server, we’ll send you the patch tomorrow morning’ doesn’t apply in the world of ASP.”

However, Concur last year canceled plans to implement an E-procurement application in competition with Extensity’s and decided to stick to its core business of travel expense management and timesheet applications, says Rajeev Singh, executive vice president for Concur.

By contrast, Extensity has not only continued to pursue the E-procurement market, but it has also announced a series of applications to manage hiring and related human resources functions, dubbing the products “workforce management.”

“We believe that the world is just waking up to the tremendous gains that can be realized by applying technology to the employee lifecycle,” says Bob Spinner, Extensity’s CEO.

However, both companies are investing heavily in technology, and neither company has been showing profits. In fact, continued technology investment will be necessary for either company to survive, according to Gartner Group’s Tow, because of competition from the publishers of enterprise resource planning systems, such as Oracle and PeopleSoft.

“Concur and Extensity have to invest heavily in R&D to keep their functionality ahead of the competition,” Tow says. Without that investment, both companies will become acquisition targets.