Expense Management Software Grows Up
Written by John J. Xenakis for
CFO.com,
Feb 28, 2001.
Systems for managing employee expenses can be as unruly as a bowl of
spaghetti, but two software publishers are tying together the loose
ends.
Managing expenses and collecting revenue is a piece-by-piece affair,
and Extensity Inc. (http://www.extensity.com) is attempting to
integrate three major areas -- travel expenses, procurement expenses,
and timesheet tracking -- into a single set of software modules. The
company's first application was travel expense management. One of its
customers, Bestfoods, purchased Extensity's Connect software in 1998
and uses it to enforce its cost-conscious management style, according
to Bob DeLuca, Bestfoods' director of corporate services.
"We've done it with approval-by-exception only," DeLuca says. "Your
manager only sees expense reports on an exception basis, based on our
particular parameters. But if someone takes a trip, and it's not on
the approved airline, the software books it. At the end of the month,
the manager is E-mailed a report containing all the employee expense
reports."
Extensity's prices start at $500,000 for 5,000 seats ($100 per seat),
and include procurement and timesheet modules. The company's biggest
competitor is Concur Technologies (http://www.concur.com), which
introduced a client/server product in 1993. The firm came out with
Web-enabled products, called Expense and Time, in 1999.
One of Concur's customers, Avnet Corp., selected the firm in December
after a lengthy comparison with Extensity.
"We test drove both products, and we had both apps accessible by a
dozen or so people within the company, to experience it within our
four walls," says Jim Strand, vice president of financial operations
for the electronic component distributor. "That proved to be pretty
useful."
Strand decided that the products were roughly equivalent in the way
they matched up with Avnet's requirements. Although he did not reveal
the precise cost of each system, the prices were comparable.
In the end, Strand selected Concur because it offered a 90-day fixed
price "rapid implementation" consulting plan, which began on February
1. "The intent of the rapid implementation plan is to get it up and
running within the company, and then it'll be our job to roll it out."
Ultimately, 7,500 Avnet employees will use the system.
According to Timothy Tow, an analyst with Gartner Group., a Stamford,
Conn., based market research firm, other vendors have offered 90-day,
fixed-price implementation plans, but discarded them.
"A 90-day guarantee is a throw-away statement," Tow says. "It's easy
to get a pilot site up, but it's a lot harder to get the back-end
integration completed after the pilot is over."
Strand agrees with this statement, but says that Concur's 90-day
rapid implementation plan is valuable because he's getting his staff
involved in the implementation.
"The whole concept of rapid implementation sounds good, but it's
useless if you don't have the resources internally to support it,"
Strand says. "We have all the resources lined up from IT, finance, and
training, and they're all part of the project."
Concur's business model is different from Extensity's. Concur targets
the same high-end businesses as Extensity, but it also sells to mid-
size companies. Software license prices start at $150 per seat, and
decrease to $50 per seat in large volumes. Both companies sell
software licenses for their products and make them available on an
application service provider basis.
Concur has aggressively targeted the medium-size business sector with
its ASP model, typically charging $10,000 up front plus several
thousand dollars per month. In the ASP model, the customer outsources
operation of the computers running the application.
"Concur has an agreement with its customers that guarantees the
application is up and running, or Concur doesn't get paid," says Andy
Goloboy, an analyst for the Framingham, Mass., based market research
firm International Data Corp. "The old support model of 'bring down
the server, we'll send you the patch tomorrow morning' doesn't apply
in the world of ASP."
However, Concur last year canceled plans to implement an
E-procurement application in competition with Extensity's and decided
to stick to its core business of travel expense management and
timesheet applications, says Rajeev Singh, executive vice president
for Concur.
By contrast, Extensity has not only continued to pursue the E-
procurement market, but it has also announced a series of applications
to manage hiring and related human resources functions, dubbing the
products workforce management.
"We believe that the world is just waking up to the tremendous gains
that can be realized by applying technology to the employee
lifecycle," says Bob Spinner, Extensity's CEO.
However, both companies are investing heavily in technology, and
neither company has been showing profits. In fact, continued
technology investment will be necessary for either company to survive,
according to Gartner Group's Tow, because of competition from the
publishers of enterprise resource planning systems, such as Oracle and
PeopleSoft.
"Concur and Extensity have to invest heavily in R&D to keep their
functionality ahead of the competition," Tow says. Without that
investment, both companies will become acquisition targets.
(This is a modified version of an article that originally
appeared on
Feb 28, 2001
on
CFO.com
at
this location.
)
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