Deem has enriched its product offering from one travel
platform in 2005 to more than 11 million individual products, including travel.
It connects its 34,000 corporate clients with 100,000 merchants and 40 travel
management company partners. It’s a broad commerce-as-a-service provider that
its founder and CEO likens to another tech company that has grown fat on
diversification: “Travel was to Deem what books were to Amazon,” said Patrick
Grady.
This year, alone, Deem Expense, an in-house expense
management tool for small businesses that launched last year, expanded to the
midmarket. In June, Deem updated its T&E mobile
app to include optical recognition that works with human verification. And
in July, the company announced updates for the Deem Car Service mobile app,
including plans to roll out advance-reservation capability in the fourth
quarter and on-demand mobile hailing by 2016.
Deem aims to expand its expense product into the enterprise
sector by mid-2016, and an expansion to Europe is on the way via development work
it's doing for a multinational client, Grady said. “The only delta between the
markets is the feature set. Larger companies have more complex business
processes that they need to automate, so it takes more time to deliver those
features to the market,” Grady said.
Suite Software Vs.
Stand-Alone Apps
The company first entered the travel space as Rearden
Commerce, in 2005, when it launched a travel
platform that combined air, hotel and car rental bookings, including such
services as shipping and dining reservations. The company’s sweet spot is the
midmarket, primarily companies with 1,000 to 5,000 employees, but it also counts
Fortune 100 companies and small
businesses as customers. Some clients use just one of Deem’s applications, but most
use multiple apps, Grady said.
Grady maintains that the company’s “one-stop shop with a
unified shopping cart” and end-to-end T&E management are differentiators in
a sea of expense management companies. Only a few like Concur, Deem and KDS offer
end-to-end, booking-to-expense services without integrating with a third party.
“When you lump T&E and e-procurement together—what we
call Deem Shopping, where purchasing office supplies looks exactly like
purchasing travel, where you have company policy and preferred vendors and an
employee profile that knows your purchase history and preferences—that’s how we
differentiate from our competition,” Grady said.
Integrating a suite of applications on a common platform with
a robust third-party developer community has proven successful for other business-to-business
sectors, Grady noted. He cited SAP within enterprise resource planning, Salesforce
in customer relationship management and Microsoft in the computer desktop arena.
“Companies don’t buy stand-alone apps in the presence of suites. They buy them
in the absence of suites,” he said. “Over the past 30 years, there really is no
precedent whatsoever in the B-to-B software or software-as-a-service [space] in
which companies that only provide stand-alone apps ultimately prevail. They
might get some early wins, but ultimately platforms with integrated suites
prevail.”
Grady emphasized SAP, whose past three years of acquisitions—of
Ariba in the procurement space, Concur in T&E and Fieldglass for services
procurement—totaled about $13 billion. “Now they’ll spend the next five to
seven years or more writing or integrating those apps into a common suite,”
Grady said. “The reason why is because customers want integrated suites.”
Similarly, Coupa launched in the procurement space in 2006 and
added an expense management solution in 2009 that can stand alone or function
within Coupa’s complete Spend Management offering. Coupa also believes in the one-stop-shop
model and similarly has been characterized as having an Amazon-like shopping
experience. In fact, Coupa began using Amazon Web Services' e-procurement hardware
and infrastructure in 2007. A Coupa spokesperson said Coupa’s platform facilitates the sale of “hundreds of millions” of products, from office supplies to travel management services, from more than 1.7 million merchants to more than 500 customers.
While the number of expense management players boasting a
consumerlike user interface has increased over the past few years, Grady isn't
worried about the competition. For one, penetration into the small to midmarket
sector is less than 20 percent, and penetration into the lower end of that
sector is even smaller, at 5 percent, according to Deem vice president of
product marketing Thomas Marks. “Often, we don’t compete against one another,
as hard as that is to believe. Our No. 1 competitor is the spreadsheet,” Marks
said. “There’s a wide open market, and there’s plenty of room for multiple expense
players.”
The company's marketing efforts are to convince potential
customers there’s a better way to manage expense reporting than spreadsheets
and taping receipts to paper and scanning them, Marks said. Deem’s retention
rate is about 98 percent. “Our job is not to replicate the Excel-based
management system in the cloud but to implement a world-class expense
management process that makes use of all modern technology that’s available to
you,” Marks added.
Customers new to expense management technology, he added, sometimes
prove tougher sells than companies that are coming off a legacy expense system and
thus appreciate the value of automation. Expense tech rookies, by contrast, are
reluctant to replace their “free” processes with automated solutions that cost
money up front.
Users Vs.
Administrators
The trend for cloud-based start-up expense apps is drifting
toward traveler-friendliness and attractive, easy-to-use interfaces. No longer
do CFOs, IT pros or travel managers buy new products in a vacuum, without end-users'
input. “Companies have realized that you can’t mandate your [employees] use
something that’s painful and time consuming because so many people are voting
with their smartphones every day,” Marks said. “We can have all of these things
to run finances but can also surround users with an amazing user experience at
the same time.”
Still, some travel managers have expressed concern that there
is too much emphasis on the traveler experience and that the new tools no
longer provide the controls they need. Deem, Grady said, was designed from the
onset to offer “compliance with convenience.” He added, “It’s a complex
undertaking. You have to build out a robust back end and insulate the user from
all that complexity. The lower-end-market companies that have come out with
really cute interfaces and really great end-user experiences fundamentally lack
the robust policy controls that the CFO or travel manager wants.
“That’s another reason why I’m not terribly optimistic about
the proliferation of the low-end expense app space: because there are a lot of
toys out there that have been filling a vacuum … but we’re delivering a suite
of robust policy controls and consumer experience.”
Deem is working to make the platform more capable of shadowing
users through their business trips. “Expense reporting in the future doesn’t
exist." Marks said. "The tool will be smart enough to do that on your
behalf, to consume information via credit card feed and receipt capturing and
package that information up for you into a smart expense report that you just
verify,” Marks said. “That’s a bit of foreshadowing of where we hope to go.”
Clarification, Sept. 25, 2015: A previous version of this report stated that Coupa sells Coupa products on its procurement platform. Rather, the platform connects third-party merchants and customers.