Technology Costs Perceived As Low Based On ROI

<B>Technology Costs Perceived As Low Based On ROI</B>

Unlike such inflationary expenditures as airfares, technology is a cost saver. The majority of required budgeting is associated with initial setup charges but, even then, travel managers are justifying the purchase because the products tend to pay for themselves.

For buyers, the cheapest way to automate their processes is to select an offering from an existing partner, whether it be a booking system provided by an airline or travel management company or an expense system offered by a corporate card or enterprise system vendor. Other departments, too, could foot the bill, particularly for expense management. But in these cases, travel managers are wary of limited technology or a purchasing philosophy that does not understand travel.

Third-party, travel-specific systems are more costly. For automated booking, buyers are paying as much as $25,000 for initial setup and per transaction fees under $10. Some vendors charge a maintenance fee of as much as $1,500 a month, which buyers may be allowed to forego or reduce if they are willing to spend internal resources on the upkeep. Third-party expense management systems are pricier, running into six digits for initial setup and similar transaction-based costs.

Consultants agreed that, as the supplier side of travel technology is only just shaking out and consolidating, it is unlikely that transaction fees will drastically fluctuate any time soon.

"Anything that carries transaction fees is pretty much at what the market will bear," said Grant Caplan, Houston-based principal with Consulting Strategies. Plus, unlike airfares, transaction fees are locked in for a set period of time, noted TRW buyer Harry Pierson, based in Cleveland.

At El Segundo, Calif.-based Computer Sciences Corp., global travel director Mike Kabo received approval for an online booking system based on the potential return on investment. "In terms of the reduction in agency transaction fees," he said, "the ROI just blows it out of the water. Now it's really cheap to implement booking. Expense management is different because you'd have more internal development and MIS costs."

What gets very costly is customization, said Kabo. "Whether it's booking or expense, the thing that can get you in trouble is when you try to customize, because you're asking the developer to work with you, but they charge $200 to $400 an hour," he said. "You've got to lower the expectations as to what these systems can do. They won't solve every problem."

Travel managers emphasized that they keep in mind hidden costs, such as their company's or their agency's time and resources in evaluating, implementing or maintaining products. Also, travel departments that have held onto some semblance of a profit center structure are finding they can invest in technology from their own budgets.

"We buy on a project basis, except the funding has to come from excess commissions or something like that," said Margaret Crowley, manager of business travel and fleet for ABB in Windsor, Conn. "We're self-sustaining on whatever revenues we get, so the implementation fee for online booking will be paid for out of this 'slush fund' we've built up. The monthly maintenance and transaction fees will be billed back to the cardholder.