<B> AXI Hits Open Market</B>
<I>Free Of Amex, Microsoft Seeks Distributors</I>
By Mary Ann McNulty
<I>Redmond, Wash.</I> - After ending its two-year exclusive agreement with American Express in mid-May, Microsoft Corp. has begun offering its corporate booking technology to agencies, airlines and other suppliers.
While American Express will continue to offer clients the AXI product it co-developed with Microsoft, Microsoft now is free to license the technology to others.
The software giant has wasted little time hitting the travel agency circuit in offering its core product that can book air, car and hotel, support negotiated rates and policy compliance, and provide the administrative reporting customers want, said Dhiren Fonseca, group product manager for the Microsoft Travel Technology unit.
Microsoft also is talking to airlines interested in offering a booking product to their corporate customers, and is "continuing to discuss our relationship going forward with Worldspan," with whom Microsoft has "a very close working relationship," despite the fact that the GDS markets its own booking system, Fonseca said.
At press time, though, he was not ready to announce any deals.
Worldspan has more than 300 corporations using its Trip Manager, a private label version of Travel Technologies Group's ResAssist. The GDS has been negotiating with TTG to buy the source code so it can customize its product further. Ironically, TTG, owned by WorldTravel Partners-BTI Americas, developed ResAssist to compete against the AXI offering, noted Danny Hood, WTP-BTI co-president. A WTP unit, Online Fulfillment Services, handles quality control, ticketing, live agent help and technical support for Microsoft Expedia corporate customers, and also licenses ResAssist to other agencies.
Refuting rumors that Microsoft is branding its offering "Corporate Expedia," Fonseca said it is simply known as Microsoft Travel Technology for Corporations.
"There will probably be 20 to 30 customers max as licensees in the next year. It will be up to them to put their own label, their branding, on it," he added.
The agencies also will determine how and how much to integrate the booking tools into their existing technology infrastructures, to allow travel agents and/or travelers to view online booking reservations and any changes that were made by either one.
"We have a whole team of people dedicated to bringing licensees up to speed," Fonseca said. He contended that an agency could have the system implemented and ready for deployment to corporate customers within 90 days.
Of the 180 employees in Microsoft's travel business unit, about one-third are dedicated to the corporate booking product, he said. Although American Express took the sales lead on AXI, Microsoft representatives frequently have accompanied them on sales calls, implementations and efforts to convert lookers to bookers, said Suzi Levine, Microsoft Business Travel unit product manager.
Fonseca declined to comment on product pricing, but agency executives privately told BTN that they've been quoted an up-front fee of $1 million to $5 million plus $7 per transaction.
"I believe that we have developed the best product in the marketplace," Fonseca said. "There is tremendous value associated with our product offering. To the extent that corporate travel agents see that same value, they'll want to use our product. I'm not in a position where the viability of my business requires me to do whatever it takes to get new licensees, which is not necessarily the case with some of my competitors. We're not giving it away free."
<CENTER><B>Competitive Pricing</B></CENTER>
Fonseca said it would be up to each licensee to determine how to price the product for customers. By comparison, Sabre Business Travel Solutions has an agency distributorship program in which agencies are paid $25,000 to offer BTS to customers. Corporations pay an up-front implementation fee of $10,000 to $35,000, depending on the complexity, and per transaction fees ranging from $4 to $6. Internet Travel Network also charges corporate customers both an implementation and a per-transaction fee, though new management there was overhauling the pricing at press time and couldn't provide details.
Other online vendors include Oracle eTravel, which is offering promotional pricing of $10,000 through June 30 to entice corporations; Xtra Online; Galileo, which offers private-label versions of the ITN and TravelGuide Software systems; and Amadeus, which offers both home-grown and private-label products. And many airlines and agencies offer private-label versions of these products.
Consultant Bob Langsfeld of Langsfeld, Fazio & Associates, Incline Village, Nev., wasn't surprised by the pricing and expects agencies that offer an online booking product to license it. "I see this as another item on a bid list," he said. Agencies will weigh the potential for winning business by having the product versus not having it, he added.
"What do you pay to have something that integrates with 85 percent of the desktops?" he asked, alluding to the corporate market share that Microsoft Office controls.
Fonseca declined to say whether Microsoft plans to add a travel icon to its Office suite. But Langsfeld noted that Microsoft likely will enhance its offering to distinguish it from AXI.
More than 200 corporations are using AXI, which has 300,000 registered users, of which 200,000 are booking transactions. American Express Corporate Services president Ed Gilligan said 0.5 percent of Amex's $9.7 billion 1998 air sales was booked through AXI.
Although neither party would disclose terms of the erstwhile exclusivity deal, American Express spokesperson Melissa Abernathy said the company wanted a year's head start in integrating the Microsoft booking engine into its process, and its low-fare search and quality control tools.
"Now that we built that and feel we've got that nailed, there is no longer a need for exclusivity," Abernathy said. "We are still their biggest channel and will continue to be for some time."
American Express and Microsoft initially announced their partnership in July 1996 (<I>BTN,</I> July 29, 1996), and rolled out the first beta customers a year later. By the end of 1997, 20 companies had rolled out AXI. Initially linked only to Worldspan, AXI now is available on Sabre and Apollo as well.
The joint development in which the partner gains a window of exclusivity is a familiar one to Microsoft, Levine said. Some Office customers have agreements to receive custom fixes and engineering tools that later are rolled into upgrades.
"Now, we're entering a different phase of our business," Fonseca said. "We have developed a product that we believe meets all the requirements of corporate travel managers and travelers. Now, we need someone who can distribute it.