<B>IBM Builds T&E E-Biz</B>
By Jay Campbell
<I>Endicott, N.Y.</I> - IBM is forging extranet links with American Airlines, Delta Air Lines and others, consolidating worldwide booked and actual data, and even negotiating the merchant fees it pays to card vendors as it leverages its massive volume to provide, within policy guidelines, the "lowest price, best in class travel solutions anywhere in the world."
"We are more than hotel folio," said Anthony Angelo, IBM project executive in worldwide employee disbursements, speaking exclusively last week with BTN.
IBM's biggest T&E fish to fry is its rollout of an internally developed intranet expense reporting tool, which this week is going "prime time" in a 10,000-traveler per week expansion. The company expects its tool to be available to as many as 40,000 travelers by year-end and to all of its 100,000 U.S.-based travelers by the first week in February.
The system, an internal configuration of the company's Expense Reporting Solution branded as Expense Account 2000, now is in use by 6,000 travelers. IBM is confident enough in EA2000's stability that it is moving to an exception-only approval scheme in which travelers are prompted either to lower a given policy-violating expense claim or seek manager approval, allowing auditors to focus on more intricate tasks.
IBM expects that 25 percent of the expense reports filed will have exceptions and thus require manager approval, but "we may be able to reduce that to 10 percent," said manager of e-business solutions and strategy John Rosato.
In migrating globally to EA2000, IBM's goal is to have 90 percent of companywide expense reports processed by one of two centers either here or in Greenoch, Scotland. Endicott now handles between 5,000 and 10,000 paper-heavy reports each day from Canada, Latin America and the United States, and will add Australia, New Zealand and Singapore to the mix by 2002. In Scotland, IBM now processes reports from Ireland and the United Kingdom, but that will expand to include the rest of Europe, the Middle East and Africa.
Completed in September, the tool went through an exhaustive technical review. With estimated total 2000 T&E payouts of $1.2 billion on 2.2 million transactions, "you need something that will scale," said Rosato.
The intranet-based product offers a number of perks for both travelers and managers. They include the capability to break out hotel folio data (see story, page 1), monthly exception trend reporting, updated reimbursement status, pull-down menus for consistent data entry, cost center routing and direct payment of items prepopulated by the card feed, including airline tickets bought in advance.
Moreover, the system is a big leap toward IBM's goal of becoming 100 percent paperless.
"We're Kodak's single largest imaging customer," said Angelo. "We're scanning 50,000 pieces of paper a day, so if you consider the 80/20 rule, hopefully we can eliminate 80 percent of that. Now, there will be fewer people opening envelopes and more working on exceptions and honing the rules."
Other travel goals include maintaining a competitive cost advantage, providing superior employee service and leading in knowledge management through enhanced compliance, vendor contract support and data warehousing.
On the cost side, IBM reduced the percentage of its T&E budget spent on airlines year to date through August 2000 to 39.5 percent from 42.3 percent in the same period 1999. IBM estimated that through 2000, it has reduced airfares by nearly 7 percent, while corporations as a whole are paying about 5 percent more.
"That's a direct result of the global contract rates we've been able to negotiate, where our biggest leverage is in international fares," said Angelo.
The addition in September of nonrefundable fares and an accompanying tracking database is sure to enhance that. Meanwhile, the company's lowest logical airfare policy ensures usage of negotiated fares and boosts compliance. IBM's top 15 airline suppliers get 85 percent of its spend. The company expects to be "mostly" global with airlines in 2001. Its air policy requires coach for domestic travel and allows business class on intercontinental flights of more than eight hours or more than four hours if there is a same-day business meeting on the other end.
IBM also is working to save on agency transaction costs by developing direct links for certain flights through extranets from airline Web sites. With American and Delta, for example, IBM travelers can use their corporate cards to buy seats on specific, often monopoly routes where IBM has a fixed fare.
"They maintain it, not us, and it brings up some interesting security discussions," said Graham Wright, manager of global travel procurement. "Only a small percentage of travelers are using it, but we save the transaction fee and they save the GDS fee. It's not comprehensive, and we consider it complementary to booking with an agent or online tool. Where there is competition, we would encourage the booking tool because not all airlines' extranets are running and you need Web-based invoicing and fulfillment. There is no agency support."
American Airlines' links for now are "very naïve," Wright said. "I don't expect full functionality on AA's site until mid-2001."
With Hertz, however, both agents and travelers can book without a GDS; IBM is waiting for hotels to catch up in this regard.
Wright's three-year-old sourcing organization has 30 people and handles all negotiations with airline, hotel, auto rental, auto lease, agency, group and card suppliers. The department is pursuing longer-term contracts to reduce the churn and cost of the RFP process. It also is seeking leverage in new areas, such as meals and card merchant fees.
"One thing that I think is unique is that, like Dell and others, we sell products on the Web and are charged merchant fees by card companies, like American Express. So we're working with our treasury people to leverage that." That program will go global in 2001.
IBM splits its card usage 50/50 with Diners and Amex, which it said helps promote competition between them. The company has no plans to move to a single provider, nor does it expect to use smart cards.
On the agency side, IBM uses Amex domestically and primarily Carlson Wagonlit internationally. It is working with a third-party vendor to consolidate real-time data from agency sources, credit cards and the EA2000 software. "We're hopeful to have the first subset of users up and running by Dec. 31, and definitely by the first quarter," said Rosato. Offering a "total view of travel," the consolidation will "let us take it to a different dimension, to a department or substructure level," added Angelo.
In terms of benchmarking, IBM watches the consulting and business services members of the Corporate Travel 10, including PricewaterhouseCoopers, Andersen Consulting, Ernst & Young, Deloitte & Touche and KPMG.
IBM also is looking into a new benchmarking initiative over the next three to six months, though executives would not reveal more detail.
In terms of online booking, IBM has been in an RFP and piloting mode for three years.
"There are satisfactory products out there, but the whole package doesn't meet our needs," said Wright. "We need it to be integrated enterprisewide. It needs to be set up though our middleware so that travelers don't have to wait to be connected to the Web. We want it on Lotus Notes."
IBM is considering all vendors except E-Travel, citing competitive issues with E-Travel's Oracle parent. But the entanglements don't stop there, since IBM has a number of alliances related to online booking. For example, Wright said, IBM provides Lucent Technologies with help desk services to support Lucent's usage of GetThere.
The company also hopes to globally consolidate its back-end ticketing fulfillment.