SAP Seals Concur Deal: Desperate Or Strategic? - InformationWeek

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Doug Henschen
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SAP Seals Concur Deal: Desperate Or Strategic?

SAP finalizes its purchase of cloud-based travel-and-expense management vendor Concur. Is it a coup or a misfit?

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SAP's $8.3 billion acquisition of Concur, the cloud-based travel-and-expense management company, is a done deal, the company announced late Thursday. 

SAP paid quite a premium for Concur, shelling out more than 15 times last year's revenue and nearly 12 times the $700 million revenue Concur is expected to bring in this year. SAP said Concur will contribute 40 million to 45 million Euros ($49 million to $55 million) in cloud subscriptions and support revenue to its fourth-quarter and full-year 2014 results.

The deal adds Concur's more than 23,000 customers and 25 million users to the SAP cloud. Concur will operate as a business unit within SAP, the company said, with existing Concur management reporting into SAP CEO Bill McDermott. 

The deal vaults SAP ahead of Oracle in cloud-revenue run rate, and makes it second only to Oracle's Safra Katz, recently promoted from co-president to co-CEO, publically criticized the Concur deal as non-strategic, saying "maybe tomorrow they'll buy Dairy Queen."

[Want more on SAP's Concur deal? Read SAP $8.3 Billion Concur Buy Caps Pricey Cloud Push. ]

Executives at SAP are working to counter that perception, describing Concur as a crucial addition to its 1.6-million-supplier-strong business network. The cornerstone of that network is the cloud-based Ariba commerce network, which SAP acquired for $4.3 billion in 2012. SAP reportedly paid another $1 billion in May (though terms were not disclosed) to buy Fieldglass, which offers cloud-based apps for contingent workforce management. 

The idea is that businesses today are highly virtual, far more likely to outsource sub-manufacturing, parts of the supply chain such as warehousing and distribution, and even substantial parts of the workforce with temporary or contract labor. These connections must be visible, and Concur is the proverbial cherry on top of that business network sundae, SAP reasons. 

Travel-and-entertainment spending typically represents at least 10% of the corporate budget, SAP CEO Bill McDermott recently told InformationWeek. "If you were to ask a CEO, 'Is 10% of the expense in your company important to you?' and they say, 'No,' I would be surprised," McDermott said.

SAP already had its own cloud-based travel-and-expense app, but SAP execs say Concur has built a consumer-grade experience and has been particularly adept at building direct relationships with travel, hotel, and entertainment suppliers as well as through global distribution systems such as Sabre. As a result, users are much more likely to find their preferred travel options and more likely to use Concur for all travel and entertainment spending. That means corporate customers get better visibility into spending. 

The next step with Concur will be standardizing integrations with SAP financials and supplier-relationship-management applications and bolstering analytical capabilities so companies can drive better deals with airline, car rental, hotel, food, and entertainment suppliers. 

"The dirty little secret is that few companies really know what they're spending with which suppliers," said Tim Minahan, CMO of SAP Cloud, in a phone interview with InformationWeek. "Our business network lets you manage the entire supplier relationship, from discovery and qualification through purchasing, fulfillment, and payments in all spend categories." 

Travel managers, in particular, will be better able to "load balance" travel spending, Minahan said, because they'll have better knowledge of room nights at hotels, total miles and numbers of segments between airport destinations, and days of car rentals in particular cities. This information can be used to trigger bigger dicsounts.

SAP last year introduced analytics-driven Ariba Recommendations whereby it suggests alternative suppliers or best times to buy based on the experience of other buyers on the network for particular commodities or services.

"These are the types of insights that you can only get when you have networks transacting at scale," Minahan said.

Travel-and-expense management is no small part of corporate expense. My own company recently implemented a single instance of Oracle E-Business Suite and its travel-and-expense-management app so it could get a better, global handle on these expenses. That rollout involved months of planning and a week-long (planned) service outage. If SAP can promise more agile, cloud-based transitions in service, I'm sure plenty of customers will be interested.

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Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of ... View Full Bio
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User Rank: Ninja
12/6/2014 | 1:34:46 AM
Re: Just a satisfied user
I just heard about this company recently. While the price tag does seem a little high, SAP can afford it and needs to find new business units to sell services strategically to its enterprise clients. 

Everyone would outsource everything if they could. They problem is they can't right now, but it could happen someday...
User Rank: Apprentice
12/5/2014 | 2:29:07 PM
Realities of Concur Acquisition for SAP Customers

SAP has spent nearly $15 billion on four acquisitions over the past 30 months to assemble the "SAP Business Network" and have stuck their customers with separate hard-wired and monolithic application architectures with disparate data and user experience models and absolutely no possibility of integration. For SAP customers, these acquisitions means a higher TCO, lower adoption and savings rates and will inevitably result in a highly dissatisfied employee population. 

While SAP, Concur and Ariba are no longer asking you to host their legacy monolithic mess and are hosting it themselves (while calling it "cloud"), it's still an unwieldy, expensive and generally unusable mess that you'll simply be renting vs. buying. Once you're locked into this application and network mess, whether buying or selling, prices will invariably rise, choices will be limited and the exit doors will be closed.

Before any business in the world takes SAP in the Cloud seriously, the company needs to prove that it can match its press releases and deliver a "real-time global Networked Economy to reduce complexity without sacrificing sophisticated work." 

I wouldn't hold your breath.

D. Henschen
D. Henschen,
User Rank: Author
12/5/2014 | 12:20:54 PM
My company's travel-and-expense experience: no cakewalk
As I mentioned above, my employer, United Business Media, just went through a major relaunch of its Oracle E-Business-based travel-and-expense reporting system, and it was a really big deal. Everyone in the company had to prepared for this transition. It involved new business processes, new rules on how and when to file expense reports, and a new interface. The project team started an email and Wiki education campaign weeks before the transition. We all had to submit reports before the switch-over date. That was followed by a dark period of more than a week during which time the app was not accessible. Then there was a big rush of new submissions when the new system was brought live.

This is the kind of on-premises application migration experience that many companies are trying to avoid by switching to cloud-based applications. SaaS apps are upgraded by the vendor, not by the customer, so you avoid these sorts of interruptions. I wasn't privy to the decisions, but I assume our company stuck with on-premises T&E management because they use E-Business Suite to manage all other company financials.

I had a long online text chat with an Oracle sales rep who pointed me to Oracle Fusion Expenses. This rep told me I would have to talk to sales consultants about whether Oracle Fusion Expenses could run in the cloud yet integrate with E-Buisness Suite on-premises. I'm guessing the answer was no when my company made the choice of upgrading its E-Business Suite deployment. Either that, or it was just more financially or operationally practical to stick with an entirely on-premises approach.

According to SAP execs, customers have built their own integrations between Concur and SAP financial apps. Building standardized, out-of-the-box integrations will now be task #1 for SAP now that it owns Concur.
User Rank: Apprentice
12/5/2014 | 10:20:52 AM
Just a satisfied user
Concur has made dealing with expense reports simple. I just take a picture of the receipt, add a few additional details like expense type. It ties in with my corporate card, so those expenses are also automatically added. My only small problem is that the airport parking is slow to process my transaction, and it takes a couple of days before I can submit my report since it has to match the card transaction to the expense. Any cash, such as for miles or tolls, is repaid within a week of the expense approval.

Concur's strength are both on the back end, with travel provider relationships, and with the front end, with execellent mobile and web apps. While I don't have a lot of experience with SAP's user interface tools, when I have used them, they were absolutely aweful, slow and non-intuitive. If Concur can help bring their user interface strengths and cloud backend performance to improve SAP, they will get a strong return from the purchase. If they just let it wither as a travel subsidiary of SAP, they won't get the full benefits of the purchase.
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