As an increasing number of traditional corporate travel manager functions are farmed out to third parties, in a small but growing number of cases the role of the travel manager is being outsourced.
Three basic options are becoming apparent: One is giving the job to a self-employed individual, who manages a small number of companies' travel on a part-time basis. Tom Stone, chairman of the Institute of Travel Management of the U.K. & Ireland, is one example of this.
Another option is awarding responsibility to a travel management company, which situates on the client's premises a travel manager who acts as a client employee but is salaried by the TMC. Examples include GlaxoSmithKline (Business Travel International) and Saab (American Express).
Finally, a small number of companies are contracting responsibility for travel to outsourced procurement specialists. In this case, as with Procter & Gamble (IBM, with assistance from American Express) and BAE Systems
(Xchanging Procurement Services, see story), travel almost invariably is one of numerous purchasing categories dispatched simultaneously out of house.
IBM is not the only technology consulting firm-turned-outsourcing specialist sniffing around travel processing and procurement. Deloitte has teamed up with TQ3 Travel Solutions to launch a consultancy called Advito, while Accenture also is understood to be digging around. Carlson Wagonlit Travel has confirmed it is in talks with two big names interested in entering the market.
One consulting firm expressing a definite interest is A.T. Kearney. Bernhard Raschke, London-based vice president of the firm's operations practice, said A.T. Kearney has assisted clients for some time with such services as data analysis for travel vendor negotiations. Now, clients are beginning to think a third party could offer more. "More and more of our clients are starting to look at outsourcing travel," he said. "They are saying it is not a business-critical category."
Hitherto, this has led A.T. Kearney to help clients select a TMC for outsourced tasks but now the firm is looking at getting involved itself. "This is something being discussed with clients," Raschke said.
What is not clear is exactly how widespread outsourcing has become. Business Travel News is unaware of any systematic research into the subject, but buyers and suppliers alike confirm their impression that it is growing. "We have seen more interest expressed in the past six months than in the whole of the previous year," said Corin McGrath, who leads the travel team at XPS.
In the Nordic region, consultant Cathrine Lundberg said, "Some major companies are discussing this, and others are doing it." Her view is confirmed by Anders Magnusson, acting general manager of Nordic markets for Amex. "It is absolutely a hot topic among both new and existing customers," he said. "It has been successful, and word is traveling."
Ian Lawrenson, senior vice president for account management at TQ3 and a board director of Advito, agreed. "The race is on to provide the highest level of advisory services and lowest-cost processing services," he said.
There appear to be two related root causes to the outsourcing trend. One is the growing popularity for outsourcing a wide variety of corporate activities, ranging from manufacturing and back-office processing to service call centers and indeed procurement. "Companies are making decisions about what their core business is," Institute of Travel Management's Stone said. "It's the old story of, 'I like to drink, but I don't feel I need to own a pub to do it.' " TQ3 estimates the growth in corporate outsourcing at 10 percent to 15 percent annually.
The second cause is the transfer in recent years of the travel management function to the company procurement department. Improved technology and the application of standard procurement processes mean, according to Carlson Wagonlit executive vice president for Europe Richard Lovell, that "travel is seen as just another business expense. It is not special any longer."
His colleague, vice president for northern Europe Jim Tweedie, added: "The dedicated travel manager is becoming a rare beast." Tweedie estimated the proportion of Carlson Wagonlit clients with a full-time travel manager to have halved in the past five years.
The consequence is that travel increasingly is managed by non-specialist procurement people, often as part of a wider range of category responsibilities. In many cases, their duty is to find third parties that can carry out procurement and management roles better and cheaper and that have the time that procurement generalists lack.
As a result, the call upon TMCs and others is broadening well beyond their core competence of selling tickets at one end and more recent high-level consultancy on such issues as online booking implementation at the other. TQ3, BTI, Amex and Carlson Wagonlit describe their broadening list of outsourced tasks as including expense reimbursement, negotiating client-specific deals and even the classic touchy-feely travel manager's responsibility for internal liaison, such as selling policy.
"After the basics of booking and originating tickets, the rest is a choice of 'your place or mine?' " said Chris Fry, marketing director of BTI managing partner Hogg Robinson. "The contract could be for one year or it could be for five to 10 years."
Amex's Magnusson finds the decision to outsource comes from higher up in the organization than the level previously responsible for hiring a TMC. "There has to be someone in the management team taking away the roadblocks for us," he said. "We are dealing much more with CFOs and heads of procurement."
The increasing board level involvement explains to some extent why the big consulting firms are hovering. They have the ears of senior executives, and TQ3 has made no bones that this is a major reason why it has recruited Deloitte as its strategic partner for Advito.
Generally, however, TMCs argue it is better to outsource to them than to procurement specialists because TMCs have better expertise and only compare unfavorably with the likes of IBM in terms of brand reputation.
Carlson Wagonlit's Tweedie said that TMCs providing an embedded travel manager works well for clients committed to the principle of outsourcing non-core functions. "One of our people joins their team, but we pay the salary," he said. "It goes beyond account management because they have to drive policy through. Being seen as an employee of the client gives them credibility and an understanding of the company."
The most commonly expressed fear of handing responsibility in its entirety to a TMC is that it raises the age-old question of "Who guards the guards?" How, for instance does a TMC monitor its own performance? Do a TMC's supplier deals ever come into conflict with the needs of it clients? Tweedie and others argue that checks and balances can be built in through such mechanisms as service level agreements. Lawrenson said TQ3 intends to avoid such dilemmas by referring outsourced travel management to Advito, which can construct walls between itself and the TMC.
There also are concerns about the qulity of agents. "Very few account managers are any good," Institute of Travel Management's Stone said. "If TMCs got their act together as far as account management is concerned, the need for people like me would slow down."
Stone splits his outsourced travel management work into four categories: project work, lending additional support to in-house travel managers, interim service for such situations as maternity or sick leave and permanent part-time management of the role.
Unlike TMCs and outsourced procurement specialists, Stone does not necessarily claim to do the job better than incumbents. Instead, he pointed to the lower costs (one-third in terms of benefits) and greater flexibility of freelance help. There also is a market, he argued, for businesses that cannot afford a full-time manager but would benefit from the regular services of an unbiased expert.
All TMCs and procurement specialists interviewed for this article claimed they were not deliberately aiming to take managers' jobs. Instead, they said, travel managers are falling victim by an internal cultural shift toward outsourcing.
Cathrine Lundberg, however, is convinced travel managers will have their day again, having seen the vogue for outsourcing come around, disappear, then reappear during her 30 years working for construction company Skanska.
"I have already seen companies hiring a travel manager again," she said. "More will realize they can do better if travel is controlled by one of their own employees."