Expense reporting tool supplier Concur is touting its pending acquisition of competitor Gelco Expense Management as a means to further develop its offerings and compete in a broader marketplace, although some analysts, buyers and competitors are concerned about the pricing impact in the increasingly contracting expense reporting realm.
The Redmond, Wash.-based Concur on July 30 announced the agreement to acquire the Eden Prairie, Minn.-based Gelco—which Concur said has about 625,000 on-demand users and includes such clients as Avery Dennison, Molson Coors, American Standard and Tyco.
Concur CEO Steve Singh said the deal, pending regulatory approval, should be completed by the end of the year. Concur would pay $160 million for Gelco's parent, the privately held H-G Holdings, almost twice what it paid to acquire Outtask in 2006
(BTN, Feb. 6, 2006)."As we look five to 10 years down the road, we need to drive scale," Singh said in a conference call to investors. "We need to increase investments and distribution. This acquisition adds unique services and helps us provide compelling value."
In particular, Singh said Concur would integrate Gelco's auditing services and CardLink, a control system tying together corporate card and expense reporting data. Concur and Gelco would need a few quarters to integrate operations and a few more to integrate the services, he said.
Bob Langsfeld, partner of the Incline Village, Nev.-based Corporate Solutions Group, said the acquisition is both good and bad news for corporate expense managers. "It's going to limit the alternatives and probably some of the creativity just because of competitiveness," Langsfeld said. "Overall, though, it's a good thing, and they'll be able to put all their resources directly into the products. It's a very healthy acquisition."
David Hillman, a principal with Deerfield, Ill.-based Consulting Strategies, however, said he saw the acquisition more as a power play by Concur. With Gelco effectively off the landscape as a competitor, he said, the pure expense reporting providers are decreased to just a handful: CyberShift's Necho, Databasics, Extensity, KDS and several smaller players with specific tools targeting small and midmarket customers.
"What they've done is add some clients, some revenue and some products, but I'm not sure they fit very well," Hillman said. "It just appears to be another example of eliminating a competitor from the market at a very expensive price, and it isn't very healthy for the marketplace to eliminate competitors by acquisition."
Concur will support the Gelco platform for current customers, though Singh told BTN the goal was for them eventually to migrate to Concur's platform. "We're going to make this a very simple, painless process to our customers," he said. "You're going to see the best of both worlds taking functionality to the next generation of technology," he said.
One of Gelco's larger clients told BTN that his intention was to stick with Gelco's platform for now. He said his bigger concern was facing potentially higher prices for expense reporting with less competition in the market.
Singh, however, said less competition was not an issue, as the prime competitors Concur now targets are the larger companies for which expense reporting is just part of the service offering as well as those not using technology at all. "If you look at the competitive landscape, the biggest competitors are paper, Oracle, SAP and American Express," Singh said. "Clearly, if you think about our market over a long period of time, every market will get more competitive, not less competitive."
BTN's most recent Expense/Payment Manager Survey showed only about one-quarter of companies use vendor-purchased solution for expense management
(BTN, Oct. 23, 2006).Concur and Gelco previously touted disparate philosophies in their development goals. Following the Outtask acquisition, Concur has moved toward a single tool melding booking, expense and other supply-chain capabilities. Gelco, meanwhile, has focused more on partnering with other suppliers, including TRX's ResX booking tool, to meet those needs.
Corporate Solutions Group's Langsfeld said the differing approaches should not present a major integration obstacle. "There's no reason why they can't take advantage of those relationships," he said. Singh said Concur would be open to continue relationships with Gelco's partners, but that would require research and development investment from both parties.
While KDS has taken a similar approach to Concur in developing a single booking and expense tool, both Necho and Databasics have followed the same path as Gelco. Now, those companies could gain marketshare by wooing Gelco customers, said Chris Harley, Databasics' director of sales.
"It's an interesting shakeup in the marketplace," Harley said. "Certainly, Concur is hoping they'll all move over to the Concur platform, but most of those have probably already evaluated the Concur platform, so you'll be seeing a good number rebidding those deals."
Databasics recently integrated with ResX to link booking and expense data and showed the finished product at the National Business Travel Association's convention in Boston in July, Databasics CEO Alan Tyson said. More agreements with other vendors are forthcoming, he said.
"This was something that was easy to do, and we can propagate those interfaces across the entire booking market," Tyson said. "Important doesn't mean difficult."
Concur, however, has continued to show enormous momentum in customer growth and retention. In the most recent quarter, Concur's revenue reached an all-time high of $33.3 million, and the company also raised slightly its revenue expectations for the year. The acquisition of Gelco should provide an additional $9 million in quarterly revenue, and ultimately should provide Concur with the ability to grow total revenue by a minimum of 25 percent each year, Singh said.
"We're operating in a big market" he said, "and we have an opportunity to build a global brand."