PwC, EDS Launch Web Travel Portals

<B>PwC, EDS Launch Web Travel Portals</B>
<I>First Of A Three-Part Series On E-Commerce Purchasing</I>

By Cheryl Rosen

Two huge and powerful new intermediaries kicked off what likely will be the E-Commerce Decade by jumping into the travel distribution channel. EDS and PricewaterhouseCoopers on Jan. 10 announced separate but similar business-to-business e-commerce initiatives to aggregate the purchase of travel and other services for corporate customers.

Both initiatives offer an Internet portal over which customers can buy "non-core" services, including travel, office supplies, personal computers, temporary labor and overnight delivery, in return for a per-purchase transaction fee. And both are betting that the rapid acceleration of Internet technologies finally will push travel industry suppliers to deal with the purchasing consortia they have traditionally scorned.

That optimism is shared by the Business Travel Contractors Corp. and Via World Network, two unsuccessful travel-buying consortia of the '90s, which also are gearing up to take the consortium concept out for a run in the e-commerce sun (see stories, pages 4 and 26).

EDS's new subsidiary, EDS CoNext, is charged with creating a series of purchasing consortia to deliver "market efficiencies and process improvements to buyers and suppliers through actively managed joint purchasing, strategic sourcing, auctions and e-procurement on a global scale." The service will use Ariba's B2B e-commerce platform.

The initial group of 12 corporate buyers--among them Bethlehem Steel, Clorox and Prudential Insurance--has a "managed spend potential" of $17 billion, EDS said. EDS itself is among the nation's Top 50 travel buyers, with a 1998 air volume of $142 million and a global T&E tab of $400 million (<I>BTN</I>, Aug. 16, 1999).

Through the year 2000, EDS CoNext expects to create "at least 12" e-commerce buying groups, organized by geography, size and/or industry, for more than 400 U.S clients. By June, it will head for Europe.

PricewaterhouseCoopers, meanwhile, launched E.conomy with 200 staffers and 30 customers. The service offers travel, temporary staffing, office supplies, and software and peripherals. Rich Beaumont, global leader of the E.conomy initiative, said that over the next few months it will be offered to customers in Canada and in the Asia/Pacific and EMEA (Europe, Middle East and Africa) regions. E.conomy expects to sign up 1,000 global customers by fall.

"First we'll continue to expand the level of indirect goods into a fairly robust basket, and then change to vertical markets and offerings that are specific and unique to their market, like raw materials," Beaumont said.

While both initiatives involve group purchasing in a B2B e-commerce network, PwC's offering is targeting the midmarket as well as the Fortune 1000, including customers with $50 million in annual revenue or above, and tackling hotel and car rental purchasing first, rather than air. It already has signed Hyatt and Starwood hotels and Budget Rent A Car as preferred suppliers. Interestingly, Carlson Wagonlit Travel will provide fulfillment, though PwC on March 1 will consolidate its internal merged travel program under American Express in the United States and Business Travel International in Europe.

"This is our highest priority as a firm. It allows us to leverage our e-business, procurement, compliance, integration and change-management skills, and goes to the core of our capabilities as a professional services firm," Beaumont said.

For PwC itself, E.conomy "allows us to take our own travel volume and aggregate it with members to deliver 10 to 20 percent savings relative to what members were able to achieve themselves," thanks to volume discounts, said global travel manager Jim Lennon.

While air travel is not yet part of the offering, PwC is "starting a dialogue with selected providers," Lennon said. Both suppliers and customers will receive purchasing data reports "that allow them to determine if they're getting usage in the field."

The offering allows for online purchasing, but it is not mandatory. Carlson Wagonlit Travel, the site's travel management provider, will handle fulfillment, and offer air travel discounts as well, said vice president of client services Jim Day. "If half of the 1,000 clients PwC hopes to reach want us to be their travel supplier, that would be a sizeable amount of new business coming in our door," he noted. "Historically, the airlines haven't been too sympathetic to buying consortia, so we'll go after the best available fares for E.conomy customers, and bring some air deals to the table."

PwC believes "B2B commerce will grow to 9 or 10 percent of all purchasing over the next two years," but also "recognizes there's a lot of change people will need to go through," and will offer change management consulting to help bridge the gap, Beaumont said. Customers will get a purchasing home page on which they can put up their purchasing policies and links to suppliers, as well as "best practices tips" provided by PwC on how to deal with major organizational change.

Asked if he is not concerned that Via World Network, a purchasing consortium initiative from Big Five competitor Andersen Consulting, has gotten virtually nowhere in its four years in existence, Beaumont noted that "four years ago is downright ancient history. We have done extensive research into this, and we think we're extraordinarily positioned in the marketplace."

But at PwC competitor Ernst & Young, chief global strategist for e-commerce Yobie Benjamin reiterated what he sees as the weakness of all purchasing consortia. "Any closed market lacks the efficiencies of the marketplace, so in travel the dynamics of the marketplace are on the side of the airlines, no matter how large the buying group. That's Economics 101," he said.

At Ernst & Young, "Our general thinking is that any attempt at a closed marketplace is not going to work, and these efforts are antithetical to the point of the Internet, which is to do away with intermediaries. The travel industry is starved for profits, and trying to maximize every nickel and dime."

Rather than pooling purchasing with a small number of suppliers, Benjamin suggested, the key to successful B2B commerce lies in "aggregating all the airlines and surpassing all the GDSs." While he declined comment on E&Y's plans in the e-commerce arena, he did note that "anything we do is not going to be based on a closed model, but on an open market."

Still, many are betting that the Internet is rewriting the economics curriculum.

Said former BTCC president Kevin Mitchell, "Priceline provided an incredibly important lesson to the travel industry: that you can successfully aggregate customers. The airlines had their classic reaction to it. First they derided it, then they ignored it, but sooner or later they had to be where their customers were."

For buyers, too, the new initiatives offer one thing that BTCC did not: a free ride. Where BTCC charged a hefty up-front membership fee, the new online buying consortia are using the ever-popular transaction fee model that allows customers to try them out at little risk.

At E.conomy launch customer Horizon Holdings LLC of San Francisco, for example, managing member Phil Estes described the decision to try the PwC service as "a no-lose proposition." Horizon, a private investment company that owns nine corporations, has a managed internal hotel program with buying power "in the significant six figures," but believes PwC can deliver bigger discounts--and sees little downside in giving it a whirl.

"Sometimes in life things that appear to be free really aren't, but in this case it clearly is worth" the time being invested. "This is a complete no-brainer, with a qualified, respected vendor and a variable-cost-priced program. It's terrific--an opportunity to benefit from the scale and purchasing power of PwC and the other E.conomy members with no up-front fee and pay-as-you-go," Estes said. "And it's very user friendly, very e-commerce friendly. At the end of the day, there are going to be companies that make this work, and I expect PwC to be one of the survivors."

Horizon will test the program at the holding company for the next two or three months--with the expectation of savings in the 10 to 20 percent range off historical travel costs--before rolling it out to all nine companies in its portfolio. Then it will mandate the use of the program for travel to any city that has a Starwood or Hyatt.

Even customers that have not yet signed on for the two services clearly are watching. Rio Tinto, the parent company of Borax, for example, "uses EDS for all its in-house computer maintenance, and will be undertaking a full-scale B2B study to be complete by June 2000," said sourcing manager John Gravel. "It will eventually encompass 94 Rio Tinto sites in 23 countries, but will be launched in the United States first."

As a current EDS customer, the company surely will explore the EDS offering, Gravel said, though it has not yet decided "what horse to put our money on, or whether to include a travel module or not.