<B> Oracle Buys E-Travel</B>
<I>Enterprise Resource System Providers Race To Offer Travel Solutions</I>
By Mary Ann McNulty
<I>Redwood Shores, Calif.</I> - Just a month before SAP is scheduled to integrate travel into its enterprise resource system, Oracle Corp. has entered the race with its acquisition of E-Travel. In targeting travel management, Oracle has become the latest in a long line of vendors that have promised to deliver end-to-end products to streamline booking, expense reporting and management reporting.
The $8 billion software firm in six months expects to deliver its own end-to-end system and contends it is the only enterprise resource planning vendor to provide an integrated product that is available in a self-service Web application.
In the client-server environment, competing ERPs SAP and PeopleSoft also are targeting travel. SAP next month is slated to release its new version of R/3, which will integrate a travel booking component co-developed with Amadeus with its existing expense reporting offering. PeopleSoft released an expense reporting module last year and has since been working with clients to identify other needs.
The travel systems also are looking for distribution partners. Sabre Business Travel Solutions and Worldspan in recent weeks announced alliances with e-commerce and sales management applications.
Gadi Maier, the new president and CEO of E-Travel competitor Internet Travel Network of Palo Alto, Calif., said Oracle's entry is "an indication of some of the changes we'll start to see as people begin to look at opportunities to more fully integrate ERP and self-service systems with one of the main components of purchasing: travel. It's one of the directions we're going in."
American Express and Carlson Wagonlit Travel also have long promised to build end-to-end solutions, but instead ended up integrating third-party products. And travel software developers have marketed integrated solutions, but as yet have failed to garner a critical mass of customers.
Oracle, meanwhile, reportedly paid $35 million for E-Travel, a Concord, Mass.-based startup, which this month completed ETLink, a direct connection to travel vendors (<I>BTN,</I> March 8). Its 200 existing corporate customers and any prospects still will be able to use the online booking product in its existing hosted application. But Oracle will actively market the integrated solution to help corporations streamline and manage their travel operations. The Travel Management suite is one of several applications within Oracle's self-service Web applications arsenal.
Oracle intends to operate the new Oracle eTravel as a separate business unit, headquartered at its facility in Walton, Mass. Operating acquisitions as stand-alone units is a new business strategy for the company, with eTravel being one of the pioneers, said John Wookey, vice president of development for financial applications. E-Travel's 47 full-time employees will retain their current positions, though three positions were eliminated. E-Travel founder and president John Ackermann now has the title of vice president and general manager of the Oracle unit.
One of Ackermann's first tasks is to deploy the online booking system to 20,000 Oracle employees in North America. That may sound like a huge undertaking, but it is not E-Travel's largest deployment. Philip Morris is deploying the system to more than 24,000 employees and Coca-Cola is rolling it out to almost 50,000.
Internally, Oracle expects to save at least $50 million over the next five years as a result of the implementation, Wookey told financial analysts in announcing the acquisition earlier this month. The savings for Oracle and other corporations will come through reduced travel agency fees, increased use of preferred suppliers and better compliance with corporate travel policy, he said.
As the nation's 18th largest corporate travel buyer, according to BTN's 1998 Corporate Travel 100 (<I>BTN,</I> July 6, 1998), Oracle reported a 1997 U.S.-booked air volume of $112 million and a total travel and entertainment spend of $260 million. Worldwide, the company spent $450 million on T&E in 1997.
It was the potential internal cost savings that impressed John Hagerty, research director on ERPs for AMR Research, Boston. "It's a great add-on for Oracle," and pushes them into other high-touch applications, he said.
Financial analyst Marshall Leisten with Dain Rauscher Wessels Equity Capital Markets of Menlo Park, Calif., likewise viewed the news as a smart strategic acquisition for Oracle. "This is the last bastion of automation--or one of them--within a company," he said of travel applications.
Wookey said Oracle began building self-service Web applications two years ago, much like E-Travel did. One of its first applications in this model was an expense-reporting product, Web Expenses, which debuted last year (<I>BTN,</I> July 20, 1998). Already, almost 100 companies are using Web Expenses, although the interface to allow the download of corporate card charges and ease expense report preparation won't be released until this summer.
Oracle's travel manager, Val Cordell, played a crucial role in testing and selecting the online booking system that the company would use and eventually buy. Several hundred California-based employees began testing E-Travel late last year.
Oracle looked at a number of booking systems, Wookey said, but "thought E-Travel had tremendous domain expertise" and shared Oracle's vision of using automation to improve the distribution chain to the greatest extent possible.
It was that similarity of vision that convinced Ackermann to sell the business he founded in 1994. Ackermann said many companies have approached him in recent years about equity relationships or the outright sale of his startup. But, other than the distributorships he signed with 12 travel agencies, he rejected all offers.
Neither party would detail terms of the sale, other than to confirm the price was less than $50 million. Likewise, E-Travel declined to reveal its annual sales, though published reports and sources estimate it has generated about $5 million in total sales.
ITN looked at buying E-Travel, as well as other competitors, but didn't think its technology fit with the "direction of how this industry will evolve. It's kind of an installed model, which is what Oracle is," Maier said.
Ackermann noted that E-Travel and Oracle have many mutual customers who could take advantage of the integrated application. "Our partners and customers will be greatly benefited by this relationship. We'll be able to deliver more product, more quickly and more to their requirements," he said. At press time, executives couldn't detail how many of E-Travel's 200 corporate customers also use Oracle applications.
Beyond the United States, Ackermann said, Oracle's global sales, marketing and support network will be critical to deploying eTravel, either as a stand-alone booking tool or as part of an integrated suite.
Programming work already has begun on the travel suite, with release expected within three to six months, Wookey said. Not surprisingly, Oracle will be the first company to use the integrated application and to deploy eTravel globally. Executives currently are scrutinizing the booking product--as they do any product developed for the domestic market--to see what changes must be made as they take it abroad.
Oracle declined to say how much the integrated product will cost because pricing was not yet finalized and because its corporate policy is never to disclose pricing issues, including the basis, Wookey said.
But he did say that Oracle already is searching for the next group of functions to automate with Web solutions. "One of the things that's happening in our world of application is the radical transformation by the Internet of expenditure, procurement and human resources. There's really no part of Corporate America that isn't going to be transformed by the Internet.