Given the vast expansion of new vendors in the playing field, automated expense reporting systems are more accessible, more affordable and more customizable than ever, according to a yet-to-be-released report by market research firm Aberdeen Group.
Much has changed since Aberdeen last took a look at the vendors in the expense management market in 2001, and many of the market changes have been to the benefit of buyers. In its last report three years ago, Aberdeen identified only 11 vendors that offered automated expense reporting tools, yet this year Aberdeen identified 25 total vendors—all vying for a piece of what is oft-considered a ripe market. New players have brought with them more options for buyers from companies of all sizes, while resulting in significant price compression across the board.
"Pricing is really the biggest area of change driven by the entrance of the new players," said Christa Degnan, Aberdeen Group Research Director. "One because more vendors means more competition, and two because the hosted delivery model means less upfront investment."
For large companies, the average cost of installing a company-purchased automated system was more than $235,000 less expensive than in 2001, as prices have dipped by nearly 50 percent. Meanwhile, among smaller companies the full cost of implementing and maintaining a system for one year declined by more than $58,000 to $106,020, or by about 35 percent.
While enhanced competition often yields a decline in overall pricing, another factor—as Degnan cited—is at play: Hosting has emerged as the delivery model of choice for the expense vendors and their corporate customers.
"Almost half of the companies providing expense management automation today only offer it through a hosted model. Two years ago, vendors were offering hosted but still relied on the dual delivery model," Degnan said. "I do think that for many companies they want to keep this an option, so that flexibility will be a differentiator for those who can provide it."
Consultants and vendors point to the economic era of cost-consciousness as playing a significant role in the increasing number of companies that select hosted offerings, which are significantly cheaper to put in place than their license counterparts. Companies that license T&E software—and therefore own the product—are responsible for its implementation and customization. In addition to a larger capital investment, licensing an internally hosted solution requires the aid of information technology personnel and other internal resources. Hosted solutions, on the other hand, require little or no adjustments to the company's infrastructure and are implemented and maintained by the vendor.
Yet, the pricing compression caused by hosting partly may be an illusion, considering technology subscribers of hosted offerings pay fees every month, while those who license typically pay only a single—although significantly more expensive—upfront cost.
According to BTN's 2003 Travel Automation Directory
(BTN, Sept. 22, 2003), the vast majority—roughly 88 percent—of Geac Expense Reports' customers opted for a license solution. Yet, the company is moving in the direction of the expense market in general by expanding its hosted offering. Geac CIO Tim Wright during an investor conference call in March said hosted solutions are "increasingly popular because they enable customers to realize significant ROI with a minimal impact on their own IT environment."
Concur Technologies—which boasts the most expense customers of any pure expense player and last year became the first to turn a profit—also has built its dominance on the hosted solution. In fact, revenues from its licensed offerings in fiscal year 2003 fell short of license revenues in 2002. Concur CEO Steve Singh said that while Concur will continue to offer its licensed solution, the company will maintain a focus on hosted offerings.
Meanwhile, other such established players as Outtask and Gelco rely exclusively on hosting, while 95 percent of IBM's expense customers go the hosted route.
"In large enterprise companies, licensing may become much more effective," said AIM International consultant Sam Andraos. "For the rest, which make up 80 percent of the market in the U.S. and Canada, I see no reason to go to licensing since a lot of software companies are willing to do certain customizations for the ASP."
As automation has emerged as the best practice for reporting employee travel expenses, others have joined vendors in extolling the benefits of expense systems: Travel managers often fawn over the data they yield, travelers enjoy quicker reimbursement and less time filing expenses and CFOs applaud the impact on the company's bottom line.
According to Aberdeen, automated expense systems on average shave 17 minutes off the time it takes for a traveler to file an expense report, while cutting to five minutes the time it takes for an AP professional to process them. Automated systems also on average decrease from 14 to three the number of days it takes to fully process a report from submission to reimbursement.