16 experts advise on what’s to come this year.
A little over a year ago, Deem founder
Patrick Grady boasted about Deem's Amazon-like experience and the 100,000
merchants and 11 million products that corporate clients could purchase from
its platform. Grady also had aspirations to expand Deem Expense into the
enterprise sector by mid-2016. However, in April 2016, Grady stepped
down and John Rizzo stepped in as president and COO, armed with $34 million
in secured funding, a narrower
strategy and a new
squad. He spoke with BTN payment
and expense editor JoAnn DeLuna.
BTN: How has
Deem's expense management strategy changed since Grady left?
Rizzo: We have a
relatively small existing customer base of 50 or so customers that were 2,000
employees or less. Around midyear, we decided to invest further in the support
of a handful that would represent the needs of a much broader set of customers
in that segment and do feature enhancements, adding capabilities and testing the
scalability in the platform. We want to make sure we have a product that is
second to none in that category before we start to market and sell it broadly. We've
done releases on the code, made improvements to the software and we continue to
focus on servicing those customers. We'll probably be doing that for another three
to six months before we decide whether we want to broaden.
BTN: What are
some of the planned enhancements?
Rizzo: We have
some customers that want to have per diems built in so that as long as [the
amount expensed] matches the per-diem amount per day, then it's OK. Some want
to do very sophisticated allocations of expenses across certain departments and
projects. Fortunately for Deem, we have a very sophisticated workflow engine
that we already built for travel because we do that every day on the travel
side. We also built a connector, a cloud service that allows Deem [Corporate] Travel
to connect to any other third-party software platform, which could be an
expense platform, as part of the overall vision and strategy. We wanted to make
sure that just because we had an expense product, we weren't going to be
religious about it.
BTN: Does that
mean you eventually will get rid of your expense tool?
Rizzo: At this
point, it's a strategic decision-making process. If you look at the market,
Concur is positioned clearly as huge expense, little travel. So effectively,
they monetize expense by giving away travel for free. We're huge travel, small
expense. We want to monetize travel to the extent that expense is an enabler to
do that. There's another philosophical question that's important, which is: Do
you believe employees are going to exploit the company or are honest most of
time? If you believe the former, then you put lots of stuff in place to
identify, surface and prevent exploitation. On the other hand, if you believe
that most employees will not [exploit the company], then you will do things
differently. I think expense today is a huge overhead to catch a tiny number of
Computers can basically model out and say, 'Tony is going to San Francisco for four days and it should cost $3,000.' … If the trip was [expensed for] $5,000, then maybe we should do something about it, but if it's within the band, forget it."
problems exist with expense tools?
Rizzo: They are
not context aware. [For] example, in Japan, entertainment is a key part of Japanese
culture. We had a successful event, closed a huge deal and took the team out
for cocktails. It was a special occasion. My expense report had a big cocktail
bill, and it got kicked out. I had to go back to our CFO [and explain]. If the system
was aware that this is what happens, then it can provide some intelligence in the
process and say, "We'll pay the entire expense report but flag this
particular expense as unusual. We're not going to kick the whole report. We're
going to ask a question."
BTN: Olset, your
recent acquisition, is all about contextual intelligence but applied to the
travel side: curating hotel rooms that meet individual traveler preferences. It
sounds like you are looking to apply that same context technology to expense.
Rizzo: We always
knew that we had to apply machine learning and AI, which is becoming more
commonplace in the consumer space than in corporate travel. Tony [D'Astolfo,
chief commercial officer] knew the Olset guys from his Phocuswright days, and
they happened to become available. That technology has to be a part of a
platform, not really a stand-alone technology feature. It was a match made in
heaven, and [the timing] was fortuitous. We could've not done the deal and a
year from now hired a bunch of people to do that, then taken it to market two
years after that.
BTN: How do you
see it working for expense?
Rizzo: If I'm a
project manager at a construction company and I have a certain behavior with
respect to expenses compared to other people in the same category, it allows
Deem to build a pattern match that says, "That person is way out of balance
relative to other companies or other employees at the company in the same job
class." So you can apply all this [hotel] analytics and machine learning
to expense, as well, but in a very different way. That's the magic leap. If we
have a strong set of data scientists and a mechanism to do machine learning and
natural language processing, you can apply a natural-language processor to scan
expense reports, just as you do to scan hotel room use.
BTN: What else
can such technologies accomplish?
is making it very difficult to not have real-time visibility into what's
actually going on. Meaning, you can data-mine how much a hotel costs in every
city and every moment in time, know exactly how much a plane trip should cost or
an Uber should cost. Computers can basically model out and say, "Tony is
going to San Francisco for four days and it should cost $3,000." It could
predict with incredible accuracy what value the trip should be. If the trip was
[expensed for] $5,000, then maybe we should do something about it, but if it's within
the band, forget it. If the orientation is that people won't exploit the
company, then there are lots of ways to solve the expense problem without doing
it the old-fashioned way, which used to be receipts taped to papers with Excel.
Now it's the Web version of that with Concur. It's really not different.
BTN: What other
companies are you keeping your eyes on?
mining, Big Data, data-rich and analytics-rich opportunities are really
interesting. [Companies that] think about optimizing mobile experiences. Finding
good mobile developers is very difficult.
BTN: There has
been so much activity in the expense management sector. Would you consider
buying a smaller expense company?
is possible, although for us, all the dollars are in spending rather than
accounting for the spend. If I go back to the philosophy that says most
employees are not going to abuse the system, then we don't think we can add a
lot of value in mitigating abuse on the expense side. We can add a lot of value
on optimizing travel.
Our job is to take the available money we have
and inject as much innovation in the market as we can. We'd rather inject the
innovation on the travel side, which is making travelers' lives easier and making
corporate travel departments run more economically. There's a lot more leverage
there in adding any bit of value than there is in being a better policeman for
people filing expense reports that everybody hates.
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