With resources spread thin, travel program footprints expanding and a fluid negotiating environment, many corporations are outsourcing more operational and tactical travel management activities to keep pace with supplier relationships, drive compliance, provide more scrutiny and, in the case of multinational programs, increase local support.
While there has been a steady increase in outsourced travel management activity in recent years, Advito vice president of business solutions Mark Williams said there has been "more of a noticeable blip in the last nine months or so, as companies are really focusing on restructuring and how they can best allocate their resources."
As layoffs and other cost-reduction initiatives accelerated during the economy's fall, some travel buyers found their roles expanding into other sourcing areas inside and outside of travel, and are picking up more regional responsibilities.
"Most of it is not that companies are deciding they don't want internal people to do travel management anymore," said Williams. "It's more that companies are deciding that their travel management people have developed certain skills that can be valuable to the organization and may be more valuable in a different area than in what may be deemed the non-core area of travel management."
Also advancing outsourcing is the maturity of such travel management technology as online booking tools and communication portals. While travel managers once spent significant portions of their time developing communications to drive compliance, encouraging online adoption or waiting for reports, many of these functions are now automated and have been ingrained into travelers' behavior.
"We spent the last five years bringing them from manual processes to today, where they can be almost fully automated," said Consulting Strategies principal Mark Walton. "Now it's at the level where they can take the next step. Now they can go in and manage the business. They really have more of the tools to go into the details."
Travel managers now are required to make decisions faster and alter their programs in shorter timeframes. With resources scarce, many are looking to their TMCs to help implement policy or operational changes, including new supplier agreements and pre-approval processes.
"The need to scrutinize and make decisions quicker has become more necessary because the speed to implement any new idea or the speed to which the industry is implementing new charging mechanisms or structures is so fast that the customer is in a position to switch business, communicate better or evaluate it quicker," said HRG director of client management Stewart Harvey. "The metabolism of the business has just accelerated. When you couple that with changes in terms and conditions or an unbundling of airfares, then you have the customers saying, let's get a better listening device out there that gives us more notice and can manage and measure the impact. Then, we can take evasive action or mitigate the impact if there is additional cost."
The acceleration of ongoing and one-off outsourcing projects also has strained the resources within travel management companies. Harvey said there now are fewer people dedicated to single accounts, in favor of teams of consultants and project managers who handle about a half-dozen accounts.
"We still give dedicated resources, but those tend to be for major customers that want that, or they are dedicated at the senior management level," he said. "We are putting more people onto teams of a shared type and giving them a cluster of accounts to look after."
American Express Business Travel Global Advisory Services has created new practice lines to deal with the influx of more granular travel management operations, including change and demand management, offloaded to them, said Frank Schnur, the consulting unit's vice president.
Of course, cost often is the primary consideration in outsourcing decisions, but there are some challenges that can arise when moving travel management to a third party, including potential conflicts of interest in sourcing, negative internal reception to a third party's role in controlling traveler behavior and, in some cases, actually being more expensive than an in-house staff.
"It's awfully hard for an outside person that isn't in the company culture and on the company payroll to do that kind of persuading and encouragement to good behavior if they aren't part of the enterprise," said Caldwell Associates president John Caldwell.
In one of the more extensive outsourcing efforts, Procter & Gamble last year brought its travel management operations back in-house after scrapping its nearly fully outsourced model with IBM
(BTNonline, July 21, 2008).Some buyers are putting together more stringent statements of work and service-level agreements to clearly define the role the travel management company plays.
"They need enough teeth for the supplier to know their roles and performance," said consultant Walton. "If they aren't going to achieve agreed-upon levels, it will hurt them financially. Without that clout, the only thing they have is loss of the account. Nobody wants to go through a re-implementation. It's difficult, time-consuming and costly. Just having an out clause is not a very smart structure, as far as ensuring performance goes."
While some corporations outsource all program management functions, maintaining a single travel manager in a centralized role, others now are opting for a central global sourcing or management team, offloading such operational functions as communications and local supplier relations to the agency.
Royal Philips Electronics currently is going this route. In June, the company migrated to such a hybrid model, using American Express Business Travel to provide support, consulting and data consolidation for the Corporate Travel 100 company's more than 35-country travel program. Philips still maintains a team of seven strategic sourcing managers who oversee the program and manage supplier contracts on a global level (see story, page 6).
When Philips was evaluating its travel program as part of a global supply chain review, global supply market manager of travel John Guarneri, senior sourcing managers and the internal business process outsourcing team decided the company no longer wanted to make the investment internally to properly maintain a program of Philips' size.
"We said, savings is important. Can we do it more efficiently? What would we need to do in order to do that?" said Guarneri. "We didn't feel that we wanted to make that commitment financially personnel-wise to do it. Travel is important, and in order to make something really good, you have to put some resources to it."