Payback Doesn't Have to Be Painful

By Joshua Weinberger Print this article Print

Automated expense reporting was supposed to reduce paperwork, minimize process and provide new insights regarding employee expenditures. Oh, and it was supposed to save corporations money, too. It does all that. So why aren't more companies pursuing it? A

Imagine your company's top business travelers, spending hours each month—useless, wasted hours—filling out expense reports by hand, or using Excel spreadsheets that need to be printed. Sorting through crumpled-up receipts. Hunting down forgotten expense codes. Cross-checking credit-card statements and travel documents to make sure nothing was missed or listed twice.

What kind of business still operates like that? Believe it or not, most Fortune 500 companies fall into that category. Even though versions of the software have been around for the better part of a decade, some firms—even those considered early adopters of enterprise software—have nevertheless neglected expense management. (Others have simply built their own, in-house product.)

The software has matured and become more robust, says Monica Barron, AMR Research analyst. As vendors in the field have merged with and acquired each other, it's also made the evaluation process that much quicker. The two obvious camps are pure-play vendors and larger software companies offering expense management as a module of their enterprise suites.

In the "added functionality" space, procurement specialists and enterprise resource planning (ERP) vendors, among others, have tried to extend existing deployments. IBM, for one, treats expense management as part of its overall approach to employee productivity.

No matter what expense-management software a company installs, chances are its employees will end up with a little more time on their hands—once they get past the learning curve, anyway.

When the U.S. Postal Service deployed expense-management software, it didn't bother to calculate a finite cost-savings figure, says CTO Robert Otto. Instead, the USPS estimates that "automation has reduced the amount of staff time required to process travel reimbursements." Previously, Otto says, "this process involved approximately 80 part-time individuals. The Web-enabled system now only requires the time of three full-time staff members." Similarly, at agricultural firm John I. Haas, expense management "lets our accounts payable people explore things that they knew that they needed to do but never had time to get to," says Kyle Lambert, vice president of information solutions.

Added productivity is nice. But, as Barron notes, in an age of return-on- investment demands, "going from a paper-based system can reduce the price from $30-$35 per expense report to just a couple of dollars." At any mid- to large-size firm, that can quickly add up to millions.

In the pure-play arena, companies could opt for the self-proclaimed leader of the pack, Concur. Its purchase last year of competitor Captura not only gave Concur what one analyst called "an edge"—it also added both a sizable client base and some much-needed overseas experience. (Concur's prior shortcomings in that regard had been seen as a major liability in attracting multinational customers—country-specific taxes and regulations are a persistent concern.)

"In terms of Fortune 500 companies, Concur will end up with 80% of the market," boldly predicts Charles Stahl, DuPont's manager of reimbursements and a longtime Concur user. "They're the only company that has really implemented worldwide." Some, such as Necho and SAP, might argue with that assessment. But with the market projected to nearly triple over the next four years and corporate spending in this area expected to outpace significantly that in other technology categories, it seems fair to predict that 80% of the Fortune 500 will be getting on board with some kind of expense management.

Extensity, for its part, agreed to be bought for roughly $46 million by Canadian enterprise vendor Geac Computer Corp. (The deal was completed in early March.) Ironically, as the other ERP vendors try to leverage their platform position to generate expense-management sales, Geac is in the reverse position: hitting up Extensity users to offer them enterprise software from the Geac stable.

Whereas Gelco and Necho are notable for going it alone—and Necho has both profitability and a devout customer base on its side—the blanket appeal of ERP systems may have waned a bit. RMH Teleservices, for example, uses PeopleSoft's human-resources platform—but, as Controller Andy Bronstein says, "it doesn't extend to accounting. I'm a little reluctant to integrate an ERP [system]."

That sentiment and a slight lead in performance might be the only things the pure-play vendors have going for them, and it may not last. It's one thing to convince a paper-and-Excel-using shop to make the switch to automation—the potential savings speak for themselves. The tough part will be the next generation of sales cycles—stealing customers from each other. That fun will start soon enough.

Many of the vendors have begun offering digital imaging services, to scan and store receipts and invoices required by the IRS for auditing purposes. Itemized corporate credit-card account data (AmEx, Diners' Club, Bank One) feed directly into the system, as does up-to-the-minute exchange rate information.

But automating expense management also can provide larger opportunities. Sharon Hunt, information technology manager for construction company InfraSource, thinks that "moving people from paper to technology on the Web is an ideal time to do some mind-shifts and begin retraining people."

For Phil Walton, controller at network-technology firm Spirent Communications, it was an opportunity to correct an imbalance: "Folks in the field were spending too much time in administration. This let our sales staff focus on its primary role—taking care of customers."

Which, after all, is the reason companies incur expenses in the first place.

Group Dynamics

Category: Expense management

What It Is: Automation of employee reimbursements

Key Players: Concur, Extensity*, Gelco, Necho (pure plays); Oracle, PeopleSoft, SAP (enterprise software suppliers)

Others: American Express, Ariba, Lawson, OneMind Connect

Market Size: $700M** (2002)

What's Happening: Consolidation is ongoing (Concur captured Captura, Geac snapped up Extensity, Necho plucked Acceleron), partnerships abound (Microsoft's eExpense is a version of Concur's software), and larger enterprise players have expanded their offerings—but automating expenses is not yet done by 50% of the Fortune 500

Companies in bold italic type are featured in Dossiers this month

* Extensity's acquisition by Geac was completed on March 6

** Source: AMR Research, April 2002 (figure includes travel-management software)

This article was originally published on 2003-04-01
Assistant Editor
After being on staff at The New Yorker for five years, Josh later traveled the world, hitting all seven continents in a single year. At Yale University, he majored in American Studies, English, and Theatre Studies.

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