Companies do not need to stop traveling during the recession, they simply need to travel smarter and scrutinize their travel program to maximize the value of their travel spend. But before making any changes, a business needs deep insights into the value and benefits it derives from travel to avoid hasty decisions from being made or unwise expenditure cuts. Ariba, in conjunction with the travel/procurement manager, can assist in looking at streamlining a company’s travel strategy, ensuring that employees travel to the right places, at the right time, with the right suppliers in advance, to extract the highest return on investment.

Ariba recommends both a travel strategy review to maximize savings and utilizing key strategic suppliers where possible to ensure employee security compliance. Focus first on the travel policy itself to ensure it is up to date and covers all areas of travel to maximize overall policy compliance. The second area of focus is the travel agency. Look to consolidate all geographical spend with one travel agency to maximize purchasing leverage and standardize overall service delivery. Another potential area to drive substantial savings within a travel program is by use of an online booking tool in conjunction with the travel agency. Use of a sophisticated online booking tool for point-to-point flights and hotels can greatly reduce agency fees and enhance overall program compliance, which can generate total cost savings on airfare in the 11 to 33 percent range. As an added benefit, the data collected within these booking tools allow for the traceability of employees in the event of a disaster or other issue and enhanced visibility into air, hotel, rental car and rail spend facilitating future negotiations.

Recent corporate surveys have shown that 68 percent of companies had achieved savings of six to 15 percent through travel procurement techniques in 2008, while 80 percent expected to achieve cost reductions of over 20 percent by the end of 2009.

Market Buzz and Trends to Watch

Towers Perrin and Watson Wyatt to Merge, Forming Towers Watson
The global professional services firms of Towers, Perrin, Forster & Crosby and Watson Wyatt Worldwide announced in late June of 2009 that they intend to merge, thereby forming the new company Towers Watson & Co. The resulting value of the all-stock deal is estimated at $3.5 billion USD and will have estimated sales of over $3 billion USD annually. The new company will have approximately 14,000 employees located in over two dozen countries and will result in the creation of the largest global employee-benefits consultancy. 

Ariba's Take: Overall, this merger will likely have mixed benefits and detriments depending on the perspective and services to be purchased. This merger of equals in the professional services space will serve to create the largest global employee-benefits consultancy from the previously ranked second- and fifth-place companies. There has been anticipation and rumor regarding consolidation among the larger employee-benefits consulting firms as the industry faces mounting challenges. In addition to the implied increase in stability of the resultant firm, the creation of a firm with a larger breadth of services than the constituent companies provides the benefit of increased competition for companies looking to source a broader range of services to a single consultancy. Contrary to this notion, however, is the standard thought that the merger of these two major players will serve to reduce the overall competition within the market place as one less company competes for business. This is ultimately true, if previously both firms offered the same services that a company was looking to purchase.

Buyers looking to source employee benefits consulting services should evaluate their consulting program goals to fully understand how this merger will affect future sourcing initiatives.

The Implications of U.S. Regulatory
and Legal Provisions on Off-shoring
The U.S. Government has taken several steps to combat the economic crisis that began in October 2008. One of the actions taken in this regard is the Troubled Asset Relief Program, or TARP. Within this program are provisions that have implications for U.S. businesses that incorporate off-shore services into their business model. The Treasury Department has implemented both implicit and explicit rules to discourage TARP funding recipients from off-shoring and encourage investment in the domestic economy. For instance, provisions limit the amount of call center work that can be handed off to foreign companies to ensure domestic spending of relief funds.

U.S. Focus

by Nicoleta Diaconu