Concur turns start-up investor to develop its ecosystem

Three or four years ago, the IT industry was obsessed with debating the pros and cons of cloud and SaaS. 

 Concur turns start-up investor to develop its ecosystem

Three or four years ago, the IT industry was obsessed with debating the pros and cons of cloud and SaaS. 

One common argument was that SaaS would improve competition in the business applications industry because, without any installed software to worry about, customers would be able to switch suppliers at the click of the button. 

As it turns out, there is no evidence that SaaS apps are any more or less switchable than on-premise software – your SaaS CRM provider, for example, still holds all your data in its own data model, and moving it to a rival is never going to be easy. 

But according to Pierre-Emmanuel Tetaz, vice president of product management and strategy at travel and expenses SaaS provider Concur, there is another reason why the business applications industry is much more competitive place than it used to be. 

"The mobile revolution has given end-users the power to find new software, new ideas and new content all by themselves," he says.

This means businesses are under constant pressure from their employees to adopt the newest, most accessible applications. 

"If our users find a new mobile app that gives a better way to do their expense claim easily and efficiently, they will put pressure on their employer and say, 'Why are we using Concur when we have this app which is so cool and easy to use?'," Tetaz explains. 

"This is why we have to innovate."

Concur has a few approaches to staying ahead of the game. Its 500-strong research and develop team is, Tetaz claims, "the largest R&D team in the travel and expenses [software] market."

"But we acknowledge that we can't do everything on our own", he adds. 

Last year, Concur launched a platform strategy, exposing core functions of its application as web services to allow service providers and ISVs to embed its expense claim process into their own offerings. 

This, the company hopes, will bring the Concur Connect platform into industry verticals and geographies it cannot reach on its own. 

Today, there is an ecosystem of around 90 companies that use the Concur Connect platform in one way or another, Tetaz says. 

But Concur is not simply building the platform and hoping an ecosystem thrives – it is taking an active role in encouraging start-ups to use it. 

In November 2012, Concur launched the Perfect Trip Fund, a pot of capital to invest in digital start-ups focused on the travel and hospitality industries. 

So far, it has invested in nine start-ups. These range from buuteeq, a digital marketing system for hotels, to Evature, a "virtual agent" provider which uses natural language process (NLP) to understand travel search terms. 

The idea is not to make money from the investment, but support viable companies that can add value to the Concur Connect ecosystem, says Tetaz. "We are looking for companies who are doing something that makes sense, and that would give benefit to our users."

One condition of the Fund's investment is that each start-up carries out the development work required to make use of the platform. "We define a parternship agreement where both parties commit to some mutual development and integration," Tetaz explains. "That agreement has extremely detailed timelines, deliverables and resource commitments."

It is not an exclusivity agreement, however. "These start-ups usually have a bigger vision, and were only part of that. We want them to become as big as they can be."

What the partnership means in practice depends on the nature of the start-up. Evature's NLP technology, for example, has been built into Concur's platform itself to improve the search function. In other cases, a start-ups app will be offer through Concur's App Centre – its mobile app store for customers – in a pre-integated form. 

Concur is not looking for a direct financial return for its investments; in many cases, this would be too hard to calculate anyway, Tetaz explains. 

Instead, it is tracking two metrics to gauge the success of the strategy. "The first is customer satisfaction: are our customers happy with the technology? The second one is the number of transactions using that technology."

Concur is not the first technology to fund start-ups: the likes of Intel and Google have whole venture capital arms to identify and develop innovative technologies. But it was not long ago that Concur was itself considered a disruptive start-up. 

According to R "Ray" Wang, founder of IT analyst company Constellation Research, this kind of ecosystem investment strategy is a "smart approach, but a long-term approach". In the long-term, growing the diversity of the Concur ecosystem will make it 'stickier' – i.e. harder to leave, Wang says. 

The question is whether it can make more money from that stickiness in the next three to five years than it invests through the fund. 

 

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