Concur has been quietly investing in young companies in the past four years, sometimes taking a small share, sometimes larger, rarely with much fanfare.
The company has positioned itself somewhere in the blurring lines of technology provider and travel facilitator (although not TMC) and is admired by many for its strengths, particularly its balance sheet.
In first quarter 2014 results, Concur beat estimates for revenue, earnings and new customer growth. It effectively had more money than it could spend.
Its investments and strategy are plugging some of the gaps in the business travel experience to get to what it calls the 'Perfect Trip'.
Recent investment milestones:
- Aquisition of TripIt in a deal worth up to $120 million in January 2011
- Unveiling of $150 million Perfect Trip fund and investment in Evature
- Investment in Yapta, Trover and StayNTouch in July 2013
- Acquires TMC and travel data specialist TRX July 2013
- Investment in Visage Mobile in the middle of 2013
- Acquisition of ConTGo in March 2013
- Leads investment $9 million investment in Nor1 in December 2012
- Invests in Room 77 in February 2012
- Investment in Buuteeq in November 2011
- Investment in $40 million minority stake of ClearTrip in April 2011
- Investment in RideCharge, owner of Taxi Magic app in 2009
Where do you see Concur right now in terms of its role in the travel industry, what is your vision for it going forward?
I’m not sure that we look at our company as necessarily having a very specific role in the travel industry. This is a very important, very large market in which the experience is just not as wonderful as it should be.
Our approach is – given a clean sheet of paper – what would a business trip look like and what would the experience look like? What is the perfect trip? We’re trying to make that vision a reality.
One of the really important things is that there are certain things we can do but there is no one company that can solve all elements, it has to be a collaborative process. So, we think about the world in the framework of the perfect trip and how to deliver, how do we set the agenda, the pace?
It is an inclusive model and it regularly moves forward.
What is the strategy for achieving that vision?
It starts with a concept that says as much of what should happen, happens fully automatically. When I’m travelling to a city, I would like to book a car to take me from the airport to the hotel.
Whether it’s Uber, Lyft, Hailo or someone else, I want the service that is right for me and to have it integrated into my itinerary.
Now let’s inject reality – my flight is late but we know that, TripIt knows that and we should then be able to send a message so that Hailo automatically knows and there should not have to be a human intervention.
When I hop in the car, why hasn’t my location already been sent to the car? And, when I get a receipt it should be automatically sent into Concur. A huge chunk of this is either available or will be available in the very near future.
Here’s another example. I travel two-and-a-half to three weeks in a month. When I show up at a hotel I get in line to check-in. My feeling is that this should not have to happen.
They have my reservation so, on landing, why can’t TripIt send a message to say “Steve just landed, check me in, assign me a room” and even, “send me a bar-code.”
The first two pieces can be done with modest pieces of integration development to do. More and more, we can leave the hotel and the receipt is re-routed but when I make a dinner reservation why can’t a travel partner make a recommendation saying “you’re in the Knightsbridge area, there’s a fantastic Indian restaurant nearby, can I make a reservation for you?”
And, why not also capture the detailed receipt automatically from the restaurant into Concur.
Today these are disjointed processes and in reality there is no reason for it. It’s not because people don’t desire it but there is no common framework upon which to build that integration. None of the guys, TMCs, GDSs etc, are investing in open platform that everyone can build on because:
- Most legacy companies do not have the technology expertise
- if they do, they are concerned about the impact it will have on existing business models. As a traveller, that is not our priority.
We have been amazed by how many innovative companies have approached us saying: "you have invited us into your eco-system, you are giving us money and distribution to the customer which in the past has always been hoarded, it has not been a collaborative approach."
It’s the Apple model or Google or Microsoft or any open model.
How did the idea for the Perfect Trip (fund and concept) come about?
It came about from personal experience and the need to solve a real business problem. When Concur was started, Mike (Hilton) and I, and Raj, founded it and took every nickel we had and put it into Concur.
There were days when it looked like a bad decision but 20 years on it looks like a good decision. The problem we had back then was not atypical.
Every entrepreneur has a period when no one wants to back them and then they become a bit more aggressive. We don’t have an infinitive supply of money but we have capital to put towards an element we care about which is the perfect trip.
So, we invite people to come in and take every element and make it better. We saw 300 examples and at an early stage they don’t have the capacity to do this without our backing so we will take the risk because more people developing services makes the vision a reality.
And, they will end up being great investments.
We have invested in 10 companies and we’re quite happy with what is going on and just because we invest here, it does not mean it’s the only one we will work with.
How far down the road do you think Concur is with the perfect trip?
We created a video two years ago that illustrated what the trip might look like. Back then almost none of it was do-able, today about half is happening.
We think the video should be expanded and the boundaries pushed further. In two to three years 75% of that video will be accomplished but when a group of companies says it is going to do something you have to add two to three years in terms of mass adoption.
I’m bullish on this. There is tremendous opportunity to change this industry and we're focused on the traveller and the corporate.
What have you learned from the acquisition of TripIt that convinced you the Perfect Trip Fund is the right "buy" answer to the "make or buy" growth strategy for Concur?
Lesson one - the things that TripIt does we already did in Concur.
The reason why it was really ground-breaking was because it was being embraced by individuals by choice, not a corporate mandate. It’s a great product, specifically focused around itinerary management.
We thought it was amazing that it had two million users using a really compelling product and we wanted to maintain that. Now we have 10 million users, it’s five-times the size in 30 months, not because what we have done but because it is a great product.
Lesson two – the culture of how companies are being built is changing. In the past companies have said we will build it here but the reality is the next generation of companies will operate differently because it is the choice of the companies and the buyer is much more part of the decision process.
There is brilliance across the planet, innovation in every corner so the only way to succeed is to say how do we leverage that? Take Cleartrip, they are solving the travel problem in India and we could never do as good a job.
We’re not going to be Hailo in taxi software so we have the open platform and allow everyone to integrate and let the customer choose.
How will in-policy travel alter over time to account for Gen-Y?
I don’t think open-booking is being driven by Gen-Y. Gen-Y has moved towards favourite applications and sites but human beings naturally gravitate towards the easiest way to do things.
Corporate travel bookings have been happening outside of policy for 40 years so it is not a Gen-Y issue. It is people saying “the services you deliver or the way you deliver them are not good enough for me.” You can’t force a human being to behave differently. The reason people don’t like open booking is because:
- The economics shift.
- They are making the assumption the person booking outside is trying to be inefficient and is a maverick. The majority of people are good so the corporate tools are just not good enough.
When there is a problem you want to be able to help your traveller but you can’t if you don’t even know where they are. TripLink says it will bring all the information back in and you or the TMC can provide duty of care services.
Open booking is also being embraced by suppliers. The only companies having trouble with it are those that see this as changing the economic model.
What management have you developed or brought into Concur to make sure the company translates the strategy for acquiring a growing business, technology or skilled team into actual operations inside Concur?
We’re not acquiring, we’re only investing, sometimes small, sometimes larger but they are run by their own teams.
The expertise (we bring in) is in how we choose the companies to invest in and how do we integrate them so they can get value from us. So, we have developed a different type of expertise and I would argue that it does not exist in travel but it does in the technology industry.
It’s a very expensive decision and requires tens of millions a year in support for external development.
Some critics might say you are getting further away from the idea of a perfect trip with all the disparate investments, what's your view?
I don’t think that’s the reality. By investing in these companies we’re not investing in anything that is not solving some element of the perfect trip and including it all in the booking process. With Buuteeq, we’re integrating so deep into its technology stack to be able to tell which room a guest stayed in last and check them in automatically.
Another example, it’s not easy to get a cab and it’s not a pleasant experience but with Taxi Magic, you book online, take the car, pay through the app and the receipt goes into Concur.
That technology is now being made available to Uber and others. So, every single company is enabling the perfect trip.
This is important because we can’t build all that ourselves. We’re investing $1 billion in the next 10 years in product development and we think this is the right model – it’s inclusive and it leverages the intellect of companies all over the world.
What are the gaps in achieving the perfect trip?
There are some big, big gaps. When you show up at Heathrow, you have to pull out your government ID, why can’t it be integrated as part of your favourite device?
The world is going to a different model - the internet of things. Today if you count the total number of internet devices, it’s four billion, the number of human beings is seven-and-a-half billion.
In the next 10 to 15 years, best estimates say there will be 20 billion internet connected devices with the same number of people. These are connected devices we don’t even carry that change behaviour.
My internet connected devices are my computer, iPad, my car and refrigerator. You might say “What’s the point?” but more and more low cost products are being built that are being integrated that scan bar-codes, e.g. in your refrigerator which can develop a pattern of how often you buy milk.
Stores can then say “I know my customers” and the whole footprint of a store can change to less shelf-space, more warehouse. The only way we can get these things is if companies are investing on top of an open platform so now is right to continue to invest.
Is there close coordination between Concur's investment vehicle (Perfect Trip Fund) and the company's business strategy?
They are completely aligned – the objective is the perfect trip and an open platform anyone can build on.
What are your views on the consumerisation in business travel?
I love consumerisation. It is not a bad word. The consumerisation of enterprise is happening because we are insisting on it.
I have great products and services available to me for individual use, why are my enterprise tools not as great? We are not defining that trend before it happens, the individual defines the trend and then we name it.
I used to work for Apple years ago and I called a friend when the iPhone came out and asked for a meeting with Steve Jobs. He asked me what I wanted to talk about and I told him the iPhone is great but it is individual tool and can’t get into the enterprise.
Bill, my friend, laughed for about five minutes and when I asked him what was so funny, he told me Steve had a strategy for enterprise which was to make the product so good the consumer would make it happen.
What does Concur say to those who think it is becoming a travel management company?
It’s not a TMC. It doesn’t provide any TMC services and has no interest in becoming a TMC. It’s not our expertise and not what we excel at. It is a compelling technology company that is investing in pushing the boundaries of how technology can make the experience better and there are tremendous opportunities to partner with us. We have between 500 and 1,000 existing TMC partners.
Expedia boss Dara Khosrowshahi said recently there was no reason why business travellers couldn't have the same seamless experience as leisure - do you agree?
I agree but I don’t think leisure is a great experience. Expedia should try and enable the perfect trip for consumers and corporate should be as easy but consumer is nowhere near the perfect trip.
As you position Concur as providing a seamless travel experience do you come up against reluctance/resistance from intermediaries which feel threatened?
Yes is the short answer. No matter where you are or who you are in the world, change is the only constant but also the most difficult to deal with because we get comfortable with the way things are.
One thing people do consistently is we keep evolving, by and large for the better. Change is inherent in every living thing, the best enterprises embrace change. If you look at the Fortune 1000 at the beginning of the 20th Century and again at the 21st Century, less than 20% are still on it today.
Innovation drives better and better results and services and they don’t have the baggage and can solve things differently with better economies.
Why invest in startups when the success rate is so low?
Success rates are low. I think the idea that you don’t invest in things to make the experience better just because they might fail is not a good enough reason. What we look at more and more is whether the founders are passionate about what they do. If they are passionate about the problem and understand it, the combination of that with our money, help on distribution and business guidance increases their chances of success, we are happy to invest.
Of those we have invested in, seven out of 10 are doing a wonderful job, two are on the cusp of doing a wonderful job and one is at a very early stage. Most venture capitalists are happy if they get a 30% success rate so we are happy.
How much has the vision changed at Concur over the past two years?
It has not changed at all. From the original video we have added elements. Perfect Trip is top of mind for everybody and that is not going to change.
Long term view on the current ecosystem? Distribution, views on Iata NDC?
The changes you are going to see in the next five years in corporate travel and to be fair, consumer travel, are going to be more substantive then in the past 25 years because of:
- Mobility – devices change the nature of how we do things.
- Open systems allow more compelling apps to be integrated to add more value.
- Unlike the past 20 years, in the next five years the agenda will be set not by the GDS, the corporates or the TMCs but by you and I as travellers.
New distribution will be through app stores. We will go to a cloud that has apps and services integrated within a structure that helps the company. Individuals will have the choice.
Content and how that information gets from the original supplier into the GDS (existing or new) to us – GDS and Iata will still be there but will be pushed further down the technology stack. It's like plumbing in a house, we expect it to be there but the focus will move higher up the technology stack.
Concur has seen rapid growth in the past five years (share price is pretty much x6) and market cap is now close to $7 billion... Does that level off? Where do you expect the next wave of financial and strategic growth going to come from?
The things we have any say and control in, I feel really good about. Our ability to build great products I feel great about and there’s 10 years of work to do there.
I feel good about our ability to reach customers and we continue to invest to reach corporates and TMCs and the number of customers that have moved to automation is less than 10%. We have 22,000 companies, there’s a million corporates in North America and Europe that we could effectively serve.
Companies you admire most in and outside of travel?
I’m a huge fan of Apple because you have to admire anyone that can change the world in ways that delight you.
Tesla for going up against existing methodology of manufacturing and succeeding, you have got to admire the courage of people that say “we can make it different.”
Whole Foods is a company I love – why can’t we have quality foods made available. They tend to be local and they tend to be healthier.
The Nature Conservancy because it realises the consumption of natural resources is part of being human but there has to be a sustainable way – to find a balance between progress and renewable resources is the right approach.
Area of travel most ripe for disruption?
Corporate travel is being disrupted massively. It’s going through the same disruption there that consumer travel went through 10 years ago.
Why has it taken so long?
With leisure, the decision was made by individuals. Corporates tend to change slowly. They have a tight relationship with existing companies that don’t want to change.
What motivates you to get up in the morning?
It might sound hokey (sentimental) but I’m 52 and I’ve reached a point where I realise the number of days ahead is less than the number behind. I love that I get to change part of the world with people I care about.
What are business travel’s biggest challenges?
Embracing the traveller. How do you embrace, deliver services they actually want and make the experience wonderful for them.
NB: Image of Steve Singh as featured in a recent interview with Jim Cramer on CNBC's Mad Money.