Fusion: the union of atomic nuclei resulting in
the release of enormous quantities of energy
Fusion is an apt name for the Concur conference I just attended. With fusion, a small amount of matter creates a tremendous amount of energy. The analogy is especially relevant in the context of the acquisition of Concur by SAP last December. Concur’s annual revenue was less than 1/20th of SAP’s and arguably Concur’s solution footprint is less than 5% of SAP’s massive solution portfolio. So what impact might we expect from this acquisition? Well, a lot needs to go right for this scenario to happen, but I believe Concur just might transform SAP into an even larger and radically different company than it is today. Before you say I’m off my rocker, let me explain how I’ve come to this conclusion.
Travel & Expense (T&E) management is a relatively narrow application — even if you add invoice management into the mix as Concur has done. When I first heard about the acquisition, I thought, “That’s mildly interesting, SAP is adding one more arrow to their quiver.” But after hearing Concur’s CEO, Steve Singh, articulate his vision for Business Networks, and Elena Donio, Concur’s President, on the continued execution of the Perfect Trip vision, I believe it has the potential to create a new kind of business, quite different from today’s traditional Enterprise Software applications and beyond even the Networked Platforms that we have explored in prior research.
Everyone Who Loves Filling Out Expense Reports Please Step Forward
T&E is a natural place for this evolution to Business Networks to start. T&E systems are one of the most widely used of enterprise applications, since a majority of employees at many firms fill out expense reports at one time or another. The whole process of booking travel and especially the process of filling out expense reports is universally hated. “Oh boy, I can’t wait to photocopy my receipts and itemize all my expenses” is not a phrase you hear too often. Coincidentally or not, the people most allergic to paperwork (salespeople) are often the biggest users of T&E systems. Those tasks are rightly considered to be absolutely non-value-add activities that rob precious time from what the professional was hired to do.
Delivering the Perfect Trip
This drives Concur to try to absolutely minimize the amount of time employees spend on these matters, while providing the controls for firms to manage spend and prevent abuse. Concur encapsulates this mission in their obsession with enabling “The Perfect Trip” (a good obsession to have!). That includes things like the concept of ‘the expense report that writes itself.’ With Concur, we have already gone from photocopying expense receipts to being able to take pictures of receipts with our phones. But why stop there? Having booked the travel for you, Concur has contextual awareness of knowing what trip you are currently on when you incur some expense. So, when you buy that cup of coffee at a Starbucks or call that Uber cab in your destination city during that trip, why can’t it automatically add those to your expense report for that trip?
In fact, one of the live demos shown at Fusion was summoning an Uber cab, and one of the options shown on the Uber app was to “Send to Concur” which makes that expense automatically show up in Concur. They have a similar integration with Starbucks, AirBnB, and over 100 other vendors. The setup of these apps looked very easy: just a couple of clicks and login info to connect your Uber or Starbucks account with your Concur account. In the future, Concur is working on automatic itemization of hotel bills as well.
One can visualize other perfect trip scenarios. Suppose you’re in your hotel room, preparing that critical presentation for your big meeting tomorrow morning. Your prospects are old-fashioned ‘give me a paper printout’ types, so you want to print some handouts. Imagine in the PowerPoint print dialog box, along with the usual list of printers, is a list of nearby print shops able to print it for you. Clicking on one of them brings you to a dialog box customized with all their specific print options (type/finish/weight of paper, type of binding, etc.) and perhaps a ‘Call Me Now’ button so you could talk to the print shop manager directly. Further, there is a ‘Deliver To’ pull down that lets you choose whether to pickup at their location or have it delivered to your hotel room or directly to the meeting room. For now this example is hypothetical, but it is not far from what is currently being done by Concur.
Delivering the Perfect ________
It’s not a big leap to extend this same approach to any other process or activity besides travel, building a cooperating network of partners and software systems to accomplish “the perfect [fill in the blank].” For example, how about the perfect airplane repair? That was a hypothetical scenario described by Steve Singh in his keynote address. With ever-more sophisticated and numerous sensors embedded throughout today’s aircraft, the plane can sense when it needs maintenance or impending repair/parts replacement. Then it would automatically order its own parts via Ariba, and subsequently automatically issue a request for the required contingent labor from Fieldglass, requesting the specific skill set and resources required. Once the repair team has been confirmed, Concur would automatically book travel for them. Logistics providers delivering the parts and supplies would automatically notify if there were any delays, so that schedules could be adjusted. The suppliers of parts, courier services, repair services, and all the other pieces needed are fully integrated into this cooperating network of software and service providers to solve the problem in the most automated, touch-free and error-free way possible.
This represents a new level of supplier integration, a new level of inter-application integration, and a new role for the orchestrating software. In a traditional supplier network, suppliers register their contact info, capabilities, and product information, and use the network to receive and acknowledge POs, notify shipments sent, send invoices, and receive payments.1 With the Business Networks concept, suppliers implement a much deeper and more customized integration with the network, with each other, and across multiple applications. Each integration is designed around addressing a specific scenario and need.
Concur is initially creating a Business Network to address T&E needs and scenarios. But there’s no reason the concept can’t be extended to other processes and activities. For example, the employee onboarding process could become much more highly automated to incorporate automatic ordering of their ‘starter kit’ (computer, phone, cubicle assignment, etc.), benefits selection process (selecting healthcare plan, 401K plan, etc.), work orders to prepare their office (cleaning, wiring, furniture, etc.), issuing of ID card, and so forth. The HR system may be the orchestrator system, but it integrates with all kinds of other systems, internal departments, suppliers, and service partners to accomplish these tasks.
Potential Impact on SAP
So what impact might this have on SAP as a whole? For starters, Steve Singh has been asked to lead the SAP Business Network Group, comprised of Concur, Ariba, and Fieldglass. The Business Networks vision is first being realized in the Concur T&E world, but you should expect to see it expand to encompass all three of these applications across various scenarios. If those are successful, I would not be surprised if other areas of SAP follow suit. If that happens, SAP becomes more than just an enterprise software company. The service they offer becomes intimately interwoven with the services of the suppliers on the network. Customers will no longer be buying software, but rather will be buying holistic solutions to problems that involve the close coordination of multiple product and service providers as well as high degrees of automation. SAP would become the enabling hub of these integrated networks of providers.
Outcome-based Business Models
We have written many times about the outcome economy, where instead of selling a specific thing or service, companies sell specific outcomes. One example is Evergreen Lease from Interface — instead of buying the carpet, the customer buys the outcome: a perpetually clean, new carpet, without disruptions to the office (after initial install). Interface installs, owns, cleans, inspects, and replaces individual carpet squares the moment they get even slightly worn, all for a periodic fee instead of an upfront capital purchase. For problems that involve pulling together a variety of different services, someday SAP may offer the end-to-end outcome desired by the customer for a specific set of problem domains, partnering with providers on their Business Network. These might entail complex revenue sharing agreements among the service providers and would completely change and expand the nature of what SAP is as a business. Even if they are not the seller of the outcome themselves, they could still be the enabler and orchestrator and realize additional income from that.
Was the Concur Deal Worth It?
Some of our clients asked and many of my analyst colleagues have asserted that SAP overpaid for Concur. I don’t have the perfect crystal ball and in the real world, there are many unanticipated twists and turns. But, if even a part of Concur’s Business Networks vision is realized, and a part of this transformation of SAP plays out as I’ve described here, then that acquisition was a bargain!
1 The supplier may be integrated via a portal manually typing everything in, or via spreadsheet download/upload, EDI, or XML. — Return to article text above
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