Loathing can be a profitable motivator. Just ask Steve Singh, CEO and board chairman of Redmond-based Concur Technologies (Nasdaq: CNQR), about filing expense reports. In his prior travel-heavy post, he put off submitting any for the first nine months of the job. Catching up on all the paperwork, sorting receipts and completing forms took nearly a full work week of his time. Of the necessary irritation, Singh says, “I’m not a fan.”
Mike Hilton, the company’s cofounder and current executive vice president of worldwide marketing, agrees. “It’s painful,” he winces. “Everybody hates it.”
Yet for the past 18 years, Singh, his brother Rajeev, and Hilton have grown a company whose single-minded focus is the expense report. Concur provides on-demand software services through the internet that simplify creating, submitting and processing them. But it’s not from any fondness. The company’s mission is really more like a vendetta. It wants to make the despised expense report disappear—or at least become a virtually effortless task that no one dreads.
Lots of companies have signed onto the mission. More than 15,000 firms in 100 countries pay subscription fees to Concur for access to its cloud-based travel booking and expense reporting services. In the fiscal year ended September 13, 2011, total revenues were $349.5 million, up 19 percent from the year before.
Despite the rapid growth, Singh and investors say the market remains largely untapped. Most companies still rely on handwritten forms with stapled receipts to reimburse employees for their expenses. Concur provides its subscribers access to standardized online expense reporting that can be easily integrated into a company’s accounting system to create a streamlined, ultimately paperless experience. It lowers processing costs, offers opportunities for expense control and speeds reimbursements to employees.
“Concur has always been a very well-run company with big growth prospects,” says John Kraft, an analyst at Portland’s financial services holding company D.A. Davidson, which maintains a positive rating for the company. “They’re a nice breath of fresh air in that they’re focused on the future.”
Steve Singh is investing heavily to make sure Concur emerges as the global leader in its market segment, maintaining a dizzying pace of acquisitions, partnerships and expansions into new global markets. Those investments contributed to an $11 million net loss last year. Still, analysts are so confident of the management team that the company’s stock is valued at nearly 50 times earnings, giving the business a market capitalization of more than $2.5 billion.
That’s a far distance from the spring day in 1993 when Singh called his younger brother Rajeev back home in Michigan to tell him he had an idea for a new firm. Steve had already launched one startup, a contact management company he sold to software security firm Symantec. He wanted Rajeev, who had just graduated from college, to come to Silicon Valley and work with software engineer Mike Hilton to create an expense-reporting program.
“I thought I would take a stab at it for six months before going to law school,” Rajeev recalls, “but I got the bug and I never left.” Steve joined the company as CEO in 1996 after his obligations to Symantec were fulfilled.
The three-person partnership became the core of Concur’s leadership team and remains so to this day. Steve is the temperate spokesperson, a knowledgeable chief executive and a reassuring face to investors. Rajeev, now president and COO, is a personable, hands-on manager and, according to Steve, “a terrific operations executive.” Mike, the development engineer now heading worldwide marketing, is a thoughtful driver of excellence and, vouches Rajeev, “as much a brother to me as Steve is.” The move of the company to Redmond was a group choice for a place to raise their families, where their children have grown close.
In its first six years, Concur’s technology rapidly evolved from a desktop software package to a client-server product, then to cloud-based web pages browsed on the company’s secure network. Concur went public in 1998 and its stock price soared from its issue price of $12.50 to a high of $59 as the business quickly diversified into new markets, addressing such back-office functions as procurement and HR. But with the dot.com bust, investment in all forms of IT plunged and the share price fell to a low of 31 cents. The plunge in stock price shook not only the faith of investors, but also the confidence of the three partners. “There were plenty of times we looked in the mirror and asked, ‘Are we the right guys?’” Rajeev recalls.
The company decided to pare back its ambitious plans, focusing instead on its original strength in travel and expense management. More daringly, it was among the first to shift completely from a licensed software model to a software-as-a-service (or “SaaS”) model, where firms pay as they use the product through the internet. The trio was an early rider of the cloud computing wave, betting the company on what was then still an unproven approach to computing.
The strategy has paid off, helping Concur fight off such tough competitors as IBM and SAP. While those large software providers feature custom-built solutions as part of their comprehensive back-office systems, the offerings tend to be expensive and take time to put in place. Concur made inroads by presenting a more flexible, lower-cost set of services, says D.A. Davidson’s Kraft. “The beauty of it,” he explains, “is plug-and-play functionality that’s cheap and low cost.”
American Express, a key investor in Concur since 1998, with a 14.6 percent stake and a board seat, remains a vital partner. In addition, Concur has built a broad network of hotel, rental car and travel service partners that are directly accessible through their service for booking, upgrades, check-in and payment.
Last August, Concur partnered with Salesforce.com to integrate Concur’s travel and expense management services into Chatter, Salesforce’s popular cloud-based collaboration software. Chatter is a private social network that a subscribing firm’s employees use to share their work activities in a manner similar to Facebook, but securely within the company. The Concurforce extension was released in November, making Concur’s services now available within Chatter to book and share travel information as needed, with a direct and secure connection to an accounting department.
Ron Huddleston, a vice president at Salesforce, says the Concur feature was a top request from its customer base of more than 100,000. The fact that Concur’s service was already available in the cloud made it easier to align the two companies’ services, Huddleston notes. “From the moment we started to work with them, our vision was aligned completely,” Huddleston adds. “If someone is not already in the cloud, there’s a lot of catching up to do, but not in this case. Things can be up and running immediately.”
The next revolution for Concur is making its services available on smartphones, says Steve Singh. While the great majority of users still access the internet through notebook or desktop computers, smartphones are on track to outnumber those devices in only a few years, with manufacturers shipping nearly a billion a year by 2015.
To that end, Concur completed last spring its $120 million acquisition of TripIt, a travel booking and management app for mobile devices. Concur also added a service called Concur Breeze that automatically posts expenses from a credit card account and allows users to submit photos of receipts from a smartphone and go paperless.
“Two to three years ago, we didn’t employ any mobile developers. Now it’s at the heart of everything that’s going on here,” says Hilton. “Either you embrace this or you don’t.”
Responding to the opportunity offered by the worldwide spread of smartphones, Concur has become truly global. In just the past year, Concur established a joint venture in Japan and purchased a stake in India’s Cleartrip travel company. It also expanded its European presence through the acquisition of London-based GlobalExpense.
Steve Singh sees the move into Asia as a long-term investment; Asia is expected to outpace North America as the largest air travel market in the world. A recent report by Boeing projects the region will need 180,600 additional pilots in the next 20 years, based on its orders for jetliners. “We’re making a bet in a part of the world where decades of growth will make [business] travel go through the roof,” says Singh. In the end, Concur’s goal is to be everywhere, all the time, to provide an end-to-end travel experience in which expense reporting is so seamless that it becomes invisible. That may take 20 years and, Singh acknowledges, several more reinventions.
But even as so much changes, it will still serve the same objective, to make expense reporting so easy that executives won’t have to set aside time at the end of their trips to do it. Focusing on that one goal, says Singh, will assure Concur remains the dominant player in this space. As he puts its: “Being great at one thing is exceptionally uncommon.”