American Express Buys Into Rearden

American Express Business Travel last month made a major commitment to the Rearden Commerce platform as it launched a new Web-based marketplace powered by the San Mateo, Calif.-based company, took a minority equity stake in Rearden, put COO Priyan Fernando on Rearden's board and created a senior-level council to develop the product further.

The private-label American Express Intelligent Online Marketplace, or Axiom, offers American Express customers the breadth of the Rearden procurement platform, which holds inventory from more than 135,000 suppliers of travel and related services, including package shipping, dining, event tickets and airport parking. The technology also can recognize a traveler's identity, itinerary details and physical location, and to alert travelers and update their calendars when there is a change in plans.

American Express paid $22.5 million for its equity stake in Rearden, which has now capitalized the company with $100 million in venture and corporate capital. "The balance comes primarily from Oak Investment Partners, Foundation Capital and myself," said Patrick Grady, Rearden Commerce founder and CEO, who said the proceeds from the equity investment primarily will be used as working capital. "We're expanding the network on the buy side and the merchant side very aggressively, sustaining research and development and continuing to open up the network to more merchants and service verticals."

"Maybe equally as important as part of the deal construct," said Andy McGraw, American Express Business Travel executive vice president and general manager for North America, "we've developed a joint product council that will include three senior members each from the management teams of American Express and Rearden Commerce, who together will build the development road map for future suppliers to add to the grid as well as new functionality."

While the deal is not exclusive, whatever the product council develops will be exclusive to American Express for up to six months. There are five objectives the group already is working on and council expects to generate its first features as a result in the coming weeks and months.

"This is a well-thought-out construct that I do think differentiates this relationship from any other," Grady said, "and I think it's something that has been in place these past few months. It's a good cross-functional productive group that engages weekly. The product council really separates this from other agreements I have seen between innovative technology companies and large offline organizations."

The deal certainly looks good from Rearden's perspective, according to Grant Caplan, principal of Consulting Strategies, who said, "Amex will bring the clients. They are a big sales machine. As with TravelBahn, they're able to sell things that are tangible and not tangible. Rearden is a solution that actually works and it is touchable. There are enough clients taking Amex's advice without doing research that will accept that and there are enough clients that Rearden is good for. Amex will bring Rearden clients that Rearden would not have been able to get on their own."

The shift in booking tool focus is significant, he said, in light of "the fact that Amex has been so pro-GetThere for so long, and now for them to change their tune to a certain degree—ask them and they'll tell you they still have a very positive relationship with GetThere—but the truth is they're a making a very big push with Rearden and they're being very verbal about it."

Tom Wilkinson, president of TRW Consulting, also said this announcement represents a challenge for GetThere and an opportunity for travel buyers. "This redefines the role of the travel manager, because it does extend the technology and methodology of online booking tools into non-travel areas like shipping and restaurant reservations," he said. "Some of those ideas aren't new, but the implementation is pretty darn sharp. It puts pressure on the legacy players GetThere and Cliqbook and is one of the more exciting developments in the online booking industry in the last couple of years."

Wilkinson said he recently did some tests with online booking tools in which he saw that, "GetThere and Cliqbook both are very good, but Rearden has a very flexible and streamlined booking tool. GetThere and Cliqbook have made significant advancements in the last year, but the Rearden GUI, at least on the face of things, has raised the bar on that business. Getting Amex muscle behind that kind of technical benefit shows that there's something attractive about Rearden."

The parties, which began talks about two years ago and previously had what McGraw termed a "casual reseller agreement," closed this deal in July. In the past two years, Amex has gone through a complete due diligence process on the technology side, as well as the customer side. In the past two months, Amex has trained a portion of its sales team, which has signed 15 clients, large and small, that it is now in the process of implementing and is pursuing a healthy pipeline of other customers.

Meanwhile, Amex has one client, JDSU, which has been beta testing the product for the past 18 months. "Working with them," McGraw said, "we got a lot of experience and feedback in terms of the application, which has been overwhelmingly positive for the travelers and administratively to gain transparency into a host of spend categories."

Terry Wood, JDSU director of workplace solutions, said, "Rearden's technology enhances my visibility and control over travel and services spending, provides management with a better understanding of spend levels and savings opportunities and gives our employees a single source for services purchasing to aid in productivity and policy compliance."

American Express will offer Axiom to all customers on either a subscription or a transactional pricing basis.

Rearden has about three dozen non-Amex customers, including global and small companies. Grady said Rearden would continue to be agency-agnostic, but noted "headcount has doubled in the past nine months. While we may continue to expand that ecosystem, there will be a significant commitment of time and resources in this partnership. This agreement evidences a very material commitment to change the game. I think it will be transformational for the industry."

Priyan Fernando, executive vice president and chief operating officer of American Express Business Travel, agreed: "We've been able to bring together the expertise of Rearden with other competencies that make us extremely relevant and in many ways change the face of T&E management going forward. We think their technology is spot on in this world of Web 2.0."