Technology Costs Are High, But ROI Is Swift

<B> Technology Costs Are High, But ROI Is Swift</B>

By Mary Ann McNulty

Now that a handful of technology pioneers have proven business case justifications for automated booking, expense reporting and even data warehousing projects, a growing number of corporations are expected to blaze their own trails in the coming year.

The pricing models are as diverse as the technical platforms, and consultants advised that most travel technology offerings, including booking, reporting and warehousing systems, carry six-figure price tags when fully deployed. But they also held out the promise of a 100 percent return on investment in as little as one year.

Besides the licensing, implementation, hardware and per-transaction costs, travel technology buyers must factor in annual maintenance--typically 15 to 20 percent of the license fee--as well as training and support.

"Most of the budgetary uncertainty is more top line," and almost irrelevant, said Mike Premo, president and CEO of SatoTravel. "Are there going to be more airline commission cuts? If there are, corporations and agencies will have no choice but to adopt technology that can help them lower their costs."

For an automated booking system, initial implementation fees range from $30,000 to $80,000, said Shimon Avish, consultant with the Travel Management Group of Alexandria, Va.

"You have to figure out how to reduce the amount of money you're spending on travel," said John Ackermann, president and CEO of automated booking system vendor E-Travel of Concord, Mass. "If we can't demonstrate how automated booking can save money, they shouldn't be buying our product." For an expense reporting solution, "a corporation with $30-$40 million in total T&E should expect to spend between $200,000 and $300,000 for the purchase of the product and an equal amount for implementation, internal resources and hardware," he said.

Returns on investments on expense reporting systems, meanwhile, have been stunning and almost always offer payback in under 18 months, insiders said.

"Every customer we've worked with has seen at least a 50 percent reduction in its cost per expense form--with some as high as 90 percent," said Bob Zapfel, general manager of the IBM Global Services travel and transportation industry practice.

For a data warehouse, Avish said some vendors charge according to the corporation's total T&E volume, while others charge line-item transactions, typically less than $1 each. Either way, the costs usually work out about the same. That's on top of the initial set-up and implementation fees, which can range from $3,000 to $12,000. Still, he added, "there are so many issues behind the quotation, companies have to be very clear on what they're asking for."

Tom Wilkinson, president of the Travel Management Group, argued that corporations might very well be able to save hundreds of thousands of dollars in lower agency fees if they can find a budget line for the $100,000 a year a data warehouse can cost. "Ever since the first set of management fees came out and everyone started to track down costs, it's never been exactly clear what it costs an agency to process a transaction," Wilkinson said. A corporation with more than $10 million in air might very well be paying its agency $500,000 a year now for MIS, he noted. By outsourcing this to a third party, it might be able to lower its costs and at the same time get better travel spending data.

"Whenever you talk to any agency or car vendor, they'll say they want to do the data. Whoever owns the data controls the relationship," Wilkinson said. "Every vendor would most like to provide management information to clients and least like to provide raw data to a competitor. And in the middle is providing data to a third party."

Besides the technology itself, corporate decision makers might want to budget for the evaluation and selection process such an aquisition will entail. The cost is about the same as for selecting an agency, Wilkinson said. Hiring a consultant will usually cost between $10,000 and $20,000.

While the up-front costs may be daunting, though, insiders agreed that the end surely will justify the time spent.

"There's a confluence of three major events" going on this year, said Bill Diffenderffer, CEO of Dallas-based automated booking system provider Xtra On-Line. "The product is much better, the cost structure on the vendor side is going up and travel agents are more conscious than ever of lowering their manual transaction costs."

At the Times Mirror Co. in Los Angeles, travel services manager Betty Lucero is convinced that technology investments pay off. The first to test the new Amex-Concur (formerly Portable Software) end-to-end solution, she said "the cost savings will be tremendous in terms of redeploying all these people" processing expense reports.