Outsourcing travel management to a travel management company is nothing new, but recent developments have taken the idea to a different level as firms including BAE Systems, ICG Commerce and IBM seek to apply business process outsourcing to travel management.
It's debatable whether the concept represents a long-term trend or fizzling fad, but either way, quite a few firms are trying to get in on it. The latest is travel management company BCD Travel's newly re-branded consulting arm, Advito, which claimed that overall business process outsourcing demand is rising 10 to 20 percent annually. Advito called travel management a "reasonable candidate" for outsourcing.
Although outsourcing may offer a healthy business opportunity, particularly as procurement's influence in travel management grows, travel managers who are not keen on the idea still represent a significant portion of Advito's and BCD's client bases. But Advito officials said employment trends and procurement goals are difficult to deny.
"Among some of the small or mid-market accounts we have talked to, procurement, and companies in general, are loading managers up with other responsibilities, so now you're seeing them get food services or other business services like facilities management," said Advito general manager Mary Ellen George. "In some cases, when we talk about outsourcing, their eyes light up because they keep getting more responsibilities. That's happening more and more in Corporate America."
Although George referred to small and mid-market accounts, it is clearly the larger firms where the potential return on investment is greatest. She said the "ideal profile" in the United States is a company that spends more than $10 million on air travel. In Europe, the threshold is €3 million. In one example, Advito suggested a very large organization with 15 travel managers could operate with one or two travel subject matter experts.
Advito's approach is somewhat unique relative to the big BPO providers in that it will take travel-only business. Officials with ICG Commerce and IBM said they mainly offer travel if it is part of a larger outsourced procurement program.
"They're coming to us because travel is not a core competency," said ICG Commerce travel category manager Mike Lynch. "When we're brought in, a lot of companies don't have someone who is the designated travel manager. It could be someone who had a part-time role in travel management as part of procurement, so outsourcing frees them up to be more strategic."
Lynch said nearly one-third of clients using travel services had outsourced program management. In the Netherlands, said one official, nearly one-quarter of Advito's revenues come from outsourcing. Advito described travel management outsourcing as a "booming" and "big, emerging trend," but others were not so sure.
"I think the peak of outsourcing has been reached and now a number of corporations are in-sourcing things again," said CMM Consulting's Cathrine Lundberg. Although she agreed that many corporations are limiting resources for travel managers and may be deciding that travel is not a core business, Lundberg argued that such "tricky issues" as traveler health, safety and productivity should be managed internally.
TCG Consulting's Albert Taras suggested that some TMCs are promoting outsourcing because they are seeking new revenue streams, and Management Alternatives president Carol Ann Salcito described the proverbial jury as "way out."
Certainly, third-party consulting firms that compete with the likes of Advito for travel supplier sourcing clients have their competitive reasons to slam the concept--even though many of them at least temporarily perform the role of travel manager for some clients--but there is also plenty of evidence that some corporations are going in the opposite direction.
"We brought everything in house," said Wal-Mart global travel services director Duane Futch. "We want to manage the entire travel supply chain. You need to capture that. We are taking out TMCs around the world right now, because their costs are too high and we can do it more cheaply by managing it ourselves."