One-On-One: Carlson's Madonna Talks Tech

By BTN / March 19, 2000

One-On-One: Carlson's Madonna Talks Tech

Carlson Wagonlit Travel president and CEO Jon Madonna talked to BTN contributing editor Amon Cohen about refocusing the company as a technology business, introducing its long-heralded Traveler Service System and adding value for corporate clients through call center reservations.

BTN: Where have you been making significant investments and where are you likely to make them in the future?

Jon Madonna: Technology, technology, technology. We spent over $100 million on technology last year, although a lot of that was driven by Y2K. This year, we will spend at least $60 million--it will be a good number, I can tell you that. This industry is becoming a technology industry. Historically, it has been a component but now it is going to become much more significant and the people that have the good technology are the ones who will win. The people who don't, won't.

BTN: Are there many travel management companies that currently do have good technology?

Madonna: No.

BTN: Does that include your own?

Madonna: Our technology is fine but it is not nearly as good as it needs to be for the future. A lot of the investment will be on e-commerce products--such as for people wanting to make reservations with their cell phones or Palm Pilots.

BTN: Are you essentially going to become a dot-com company?

Madonna: Directionally, that is what is going to happen.

BTN: Travel management companies seem to have changed their minds a lot over whether to develop their technology in or out of house. What are your current feelings on that?

Madonna: Most of the technology we have developed has been in-house. I guarantee you will see a lot less in-house but a lot more partnering and a lot more outsourcing in the future. We want more alliances with technology organizations.

BTN: Are any of these partnerships imminent?

Madonna: We don't have one but there are a lot of transactions taking place, with travel agencies linking with, buying or investing in dot-coms.

BTN: What sort of products are you hoping to design together with new partners and what sort of companies are you hoping to partner with?

Madonna: It is not limited to any specific project--it is going to be a part of who you are. The old days of having great technologists in-house who do everything for you are numbered. However, I think our technology today is probably the best in the industry now that we are rolling out Traveler Service System.

BTN: What is TSS?

Madonna: It is our front-end system--which is also Web-enabled--that makes the global distribution system transparent for any agent sitting in front of a PC. It is being rolled out now in the United States and there is also a self-booking tool that goes with it that is in beta test and will be released very soon.

BTN: When will it roll out in Europe?

Madonna: People have been waiting a long time, so I am reluctant to give a specific date. Clearly, what we want is one system worldwide. That was the intent of TSS when we designed it, but it has taken a lot longer than anyone hoped.

BTN: What can TSS do that the technology you had before couldn't?

Madonna: It is a lot more user-friendly for the agent. It is a lot better at capturing data and it enables us to self book with that system.

BTN: You have hired the Internet consulting company Proxicom to help design your digital business strategy. When making the announcement, you declared that one of your strategic initiatives is to become a "world leader in digital travel services." How do you intend to do that? Do you, for instance, intend to hive off your technology business as a separate company as WorldTravel Partners has done with WTT?

Madonna: We don't know. That is why we have hired Proxicom to help us. The only thing I can tell you is that we won't be the same as we are today.

BTN: Are you looking to partner with any ERP companies?

Madonna: Anything is feasible, but that is not on our list. It is inevitable that travel will be a key function in a whole series of functions connected with finance, so ultimately we will get there. How we get there, and whether it will be through an ERP, I don't know. Right now, there is not a serious demand in the marketplace for us to be part of an ERP solution but that could evolve over time.

BTN: You said you are becoming a technology company. Presumably that means that the consulting skills and IT tools you have developed could be applied to processes other than travel. Are you looking to expand into other corporate services?

Madonna: No. We are focusing on travel. One of the things we have done this past year is prioritize what we are doing and not get into lots of projects that cannot get done.

BTN: Are you happy with your position in the U.S. market or could you be doing better?

Madonna: You're never happy with your position. You always want to be stronger. To me, the competition in the United States is down to four companies. The problem is that is traditional competition. You've got a lot of other competition today. There are the start-up e-commerce companies; the airlines appear to be going into the travel management business; the GDSs are in the travel management business. So there are a whole lot of players that are in our space. I think the whole world is going to get redefined over the next couple of years. We have gone from a shrinkage in the number of competitors to a major growth in them.

BTN: Is it possible that some corporations will no longer deal with traditional travel management companies but will put all of their travel requirements through some of these new competitors?

Madonna: They will deal with whomever works for them. Right now, most of our corporate clients deal with a variety of these people. They deal with the GDS, they deal with at least one travel agent (probably more than one), they deal with the new e-commerce self-booking agents. I believe in the next few years they will be dealing with one that does all those things. Nobody is capable of doing it today, which is why corporations use all these players. If a company developed solutions that dealt with all these things, my guess is they would have more business than they could handle. Everyone has pieces of the puzzle and everyone is trying to figure out the ultimate solution.

BTN: Do you think there are going to be a lot of acquisitions?

Madonna: I do. There already have been a lot of transactions over the past six months and you are going to get a lot more. Many of the transactions heretofore have been investments--someone buying a piece of this or investing in that. I think you are going to see more pure consolidation, where a lot of these entities come together in some fashion.

BTN: Are you convinced that there is going to be a market for self booking? Take-up so far has been very slow.

Madonna: It is going to be very large, I can guarantee.

BTN: People keep saying that but it hasn't happened yet.

Madonna: It is true worldwide that there is still a very small percentage of self-booked reservations--less than 5 percent.

BTN: What is going to open the floodgates?

Madonna: Awareness. There are a number of leading-edge companies that are saying they want 50 percent or a similar figure of their reservations on self booking. It has just started, but it is happening. Also, there are now more and more facilities for self booking, such as cell phones and Palm Pilots. You see more and more of those things around and people are more comfortable with them.

BTN: How have you changed the organization of CWT?

Madonna: We have a global leadership team of about 15 people. Those people represent the four major geographical regions--the U.S., Europe, Asia/Pacific and Latin America--and each of the major functions, such as finance, HR, sales and account management, operations and technology.

BTN: So how can clients now expect to be served by CWT?

Madonna: You can expect to be served by an account manager and if you are one of our major global accounts, you are also going to have one of the global leadership team executives assigned to you.

BTN: How many accounts have one of these executives?

Madonna: There are probably 50 globally.

BTN: What has been your overall strategy?

Madonna: The first thing we have done is segment accounts, so there are essentially three levels--major, midsize and smaller. The nature of the service delivery they receive is different. The second thing we have done is consolidate call centers in Europe and in the U.S., although client segmentation has not taken place in Europe and probably will not take place. That is because in Europe a very large percentage of our clients are middle-market accounts and there is no change for them. With consolidation, there is a standardization of processes and in the way calls are dealt with. The third thing is technology.

BTN: Clearly, customers can see a cost-benefit in consolidation through large call centers, but do they worry about a drop in service standards compared with smaller, local reservations offices?

Madonna: In the U.S., we are closing those. In Europe, consolidation has been going on for some time. Customers should get better service. Off-operations tend to be inefficient and costly. They are personalized, so you may know the staff but they are inefficient, both in terms of cost and service. There is no industry left today with a network of little call centers everywhere. One may be good but the one next door may be no good at all.

BTN: But perhaps travel needs a more personal service than other industries served by call centers?

Madonna: I think what travelers want is a first-class service. They want someone that can do the job for them. The way they have done that historically is by having someone on the other end of the phone who knows them, but that is a very inefficient, old-fashioned method of service and it is very people-dependent. I would argue that any service that is people-dependent is not nearly as good as one that can be modernized to provide consistent service.

The reason some travelers want their own call center and agent is because they don't trust the system is going to work for them but if you look at our major competitors, this is the way all of us are going. If you look at other industries, that is the direction they are going too.

BTN: What will you be doing for your smaller clients? Have you devised a way to serve them?

Madonna: Absolutely. They are going to be in large call centers. Most of them will get more than they are getting today. There will be call centers, there will be a fixed price and there will be a standard set of reports.

BTN: You haven't lost interest in servicing small clients?

Madonna: Definitely not. On the contrary, we are very interested in servicing them.

BTN: How is the consultancy business going?

Madonna: One of the things we have done is get out of the product business and get into the consulting business. We call it the Solutions Group and it has been our major focus over the past year. It includes meetings management, self booking, sourcing and T&E management.

BTN: Do you think the idea of travel management companies as consultancies is beginning to sink in with corporations?

Madonna: To me, it is a natural. Clients want it.

BTN: Are you confident you have the expertise and the tools to deliver what they want?

Madonna: Yes. We are not attempting to deliver anything we can't. Sourcing: We have done it forever; T&E management: We have had some great success with General Electric; Self booking: Obviously, is relatively new; Meetings management: We have been doing it for a long time, but there has never been a really coordinated consulting effort before.

BTN: It sounds impressive, but have you managed to demonstrate the value of that to clients?

Madonna: Yes. We have had some good successes. I think it is a very good business and one that is clearly needed by our clients.

More