Tech Gets Reality Check - 2001-02-26

<B>Tech Gets Reality Check</B>

By Jay Campbell

Shifting toward substance over sales, Sabre's GetThere unit this week will announce a new consulting organization dedicated to pushing adoption of its booking tool. The company will offer consulting and an option for low-cost fulfillment by more than one unnamed travel management firm.

GetThere joins E-Travel in making recent moves to shore up its customer support. Along with pricing increases recently acknowledged by Sabre, these developments are designed to help GetThere move beyond what newly named COO Jeff Palmer called, "the dot-com economic reality--that a company paid for or funded purely by investors can't exist long term."

It's a message that has hit the travel technology industry hard. Recently closed URLs at Savvio and T-Direct were barely around long enough to be remembered. Byebyenow is bankrupt and established players, such as Concur and Captura are retooling their models in an attempt to accelerate the race to profitability.

Reaction to the dot-com meltdown and ensuing economic slump by buyers remains unclear as the investment required for new technologies is outweighed by their cost-saving capabilities.

GetThere, which last month laid off 60 employees as a result of its acquisition by Sabre, has appointed former Sabre BTSer Bev Heinritz to lead the new consulting group, which, Palmer said, "adjusts the dial of the relative focus" toward adoption and away from sales. Still, he emphasized, GetThere will go after new accounts as aggressively as ever.

During Sabre's last quarterly earnings report, the company said GetThere's top 25 accounts average 26 percent adoption while the overall rate is 8 percent. The goal will be to move usage above 50 percent, at which point companies will consider online booking to be mission critical, said Palmer.

Palmer cited "the maturing of the market for online booking well past early adopters and into the mainstream. The question is, how pervasive is it within the company? Due to the favorable economics with online, we've noticed increased use of strong encouragement and/or mandates."

E-Travel parent and customer Oracle Corp. on March 1 will mandate the booking tool for domestic reservations. To accommodate anticipated growth from its parent and other new customers, E-Travel last month announced a $2 million-plus investment in service bureau facilities and equipment, as well as expanded IT and account management staff.

At GetThere, Heinritz's new 100-person group offers a low-cost fulfillment option. One provider of that service is American Express (BTN, Oct. 16, 2000), but GetThere also issued an RFP to expand the list. Insiders said Carlson Wagonlit Travel and WorldTravel BTI are likely bidders.

"Sometimes your fulfillment strategy can affect adoption," said Palmer. "We're not an agency and never expect to be. Working with a client's existing travel management company was and continues to be our preferred practice." He would not reveal additional pricing or partner details.

If setting up corporate online fulfillment relationships puts Sabre in an awkward position vis-&agrave;-vis its subscriber travel agencies, which Palmer argues it does not, that's not all that's awkward at Sabre these days. For example, the company now has "one of our best managers working on a self-bypass strategy," said chief marketing officer Sam Gilliland. Strange as these developments may taste, Gilliland said, "We'd rather be at the dinner table than on it."

Nonetheless, "GetThere will lose money in 2001 and will continue to be a subsidized business," said Palmer.

Kirkland, Wash.-based Captura Software next month will unveil a global relationship with a deployment partner to help fill the implementation and support needs that an aborted public offering might otherwise have funded.

Citing "unfavorable market conditions," Captura on Jan. 26 withdrew its request of the Securities and Exchange Commission to be publicly traded, originally filed Oct. 12. Never profitable in its seven-year history, Captura had been seeking $60 million to $70 million from the public markets, said CEO Dan Vetras. Captura will instead pursue private investment opportunities and expects to turn a profit beginning in 2002.

"We probably could have gotten there this year had we not migrated most of our business to an outsourced, subscription-based model, which affected our cash flow," said Vetras. "We have a huge backlog of booked and contractually obligated customers."

Meanwhile, Redmond, Wash.-based Concur Technologies' share price remains at just more than $1 after steadily dropping from about $5 in July. CEO Steve Singh recently told Business Travel News that the company's profitability target remains September 2002.

Like Captura, Concur is focusing on providing solutions broadly described as outsourcing, which makes for more predictable revenue streams than does the up-front, licensing model.

"The IPO market has dried up and, in general, spending on discreet IS activities is drying up," said Tim Tow, an analyst with Stamford, Conn.-based GartnerGroup. "What we advise is that customers look carefully at the viability of a company--if it has a significant installed base, someone will at least buy them." He said Captura and competitor Concur make for possible acquisition targets.

"In this space, we see that Extensity has plenty of cash on hand and they're forecasting profitability for the first quarter of 2002," said another analyst. "The Captura news doesn't surprise us, and Concur's record during the past couple of years has not been spectacular; they missed earnings estimates on a few quarters."

In general, the travel technology industry is refocusing on profitability--a welcome development for many.

"A lot of companies build a Web site and spend their venture capital money on sales people and advertising, and then they can't scale," said former head of Amadeus Jim Davidson, speaking at the Masters Program conference earlier this month in Washington, D.C. Participants there debated whether, as stated by PhoCusWright president Philip Wolf, travel would prove to be "an oasis in the e-economy desert."

At the Masters Program, it was clear that concerns about capital are high on the minds of travel technology leaders. Asked to name his worst fear for 2001, XOL CEO Bill Diffenderffer, said, "To run out of money before accomplishing our business plan." He added later that, "I don't think that will happen, so we're not that worried. We have plenty of capital through year-end."

Diffenderffer claimed that in order to grow, technology vendors need "better customer satisfaction on the corporate side. My question is, 'Will travel managers pay for it?' "

At the moment, the answer to that question in general terms appears to be unclear. While vendor claims of continued strong demand must be taken with a grain of salt, their argument for the cost-saving capabilities of their products is a strong one.

"In a good economy, we're a good solution; in a bad economy, we're a great solution," said Captura's Vetras.

But even GetThere's Palmer admitted to being less than clear on any effect the current economic climate is having on the tech buying habits of potential new clients.

"Companies that do have long-term vision see it's practical to invest in technology and perhaps get a better deal, while other companies are not investing," said Bob Lichtman, consultant with The Corporate Solutions Group, based in Incline Village, Nev. "Those that are short term have slashed budgets and are retreating. My clients are about 50/50, some investing and others are saying, 'Let's sit this one out for a quarter or two.' "

According to Houston-based consultant Grant Caplan of Consulting Strategies, there is still plenty of interest, although buyers now are "wiser" about the vendors' financial security.