Best Back Office Outsourcing Relationship
2000 Editor's Choice Award Unisys/First Travel Corporation
From the Editor: This is a fascinating example of how an international IT company moved into BPO outsourcing. Outsourcing its back office gave First Travelcorp two strategic advantages: marketing muscle and cost flexibility. First Travelcorp could provide new, sought after services for its corporate clients, which provided a competitive edge. The result: First Travelcorp landed new clients, the biggest it has ever had. And it was able to turn a fixed cost into a variable one, boosting the bottom line.
The impact of Unisys on the growth of First Travelcorp, one of the largest travel agencies in the U.S., is no secret. "Our outsourcing relationship with Unisys gave us the competitive edge, and we are seeing tangible results," says Ken Taylor, senior vice president of finance and accounting at First Travelcorp. In the last six months, First Travelcorp has landed the three biggest clients it has ever had.
Deciding to Outsource
One of the reasons that First Travelcorp chose to outsource was because the company had been growing rapidly through acquisitions. The ability to make acquisitions, and fold them into an arrangement where the outsourcer has to worry about the system being the right size, appealed to First Travelcorp executives.
Also, the founders of the travel agency come from the brokerage business, where it is very common for the back office systems to be outsourced. The founders saw many similarities between the two industries. Both have a large number of high-volume, low-dollar transactions. "A supplier doing this on a bigger scale can do it more economically than we can as a single company," says Taylor. "It also allows us access to intellectual property, programming and people who are in the business and have a competitive reason to make this the best product available. And it gives us access to the kind of people that will help move us forward."
Choosing a Supplier Partner
Taylor says Unisys is unique in the travel agency industry in that very few suppliers cater to the industry in the area of accounting. When Unisys offered services for the travel industry, First Travelcorp decided that the supplier (Unisys) "fit the bill" for its needs. "There are some smaller players," admits Taylor, " but they aren't big enough for a large agency like us. Our needs are very different from smaller agencies."The two companies began their five-year contract on June 1, 1998. All of First Travelcorp's accounting functions are managed by Unisys, which also houses and manages the system that the applications are on. Services include all upgrades, nightly back up, as well as disaster recovery procedures and protocols. The supplier also writes the programming and manages the database remotely from its Phoenix service center; First Travelcorp accesses that system through a remote location device.
Outsourcing has "freed up time for me and my staff because we do not have to deal with all of the things that come up when a system is running internally on our site," explains Taylor. "We can use that time to better serve our customer. We aren't running around here worrying about whether or not the system is up, who is going to be here until midnight and who is doing backup. We don't have to worry about staffing an accounting department. I had nearly 20 to 25 people working up here at one time and now I have twelve." But the ability to focus on its core competencies is not the only benefit First Travelcorp has gained from its outsourcing relationship.
Although First Travelcorp offers corporate and leisure services, the majority of its services are travel management solutions for corporations. One of the valuable services of Unisys is to supply its clients with reports of their travel. The reports include such matters as who is going where, when they will travel, the number of tickets purchased, what airlines they fly on, what cities they fly to, and which car rental companies they use. "The quality of the Uniview product, which is the current reporting product, is very good," Taylor explains. "We have used that product successfully in our marketing efforts and in landing new business." Unisys tailored its software to meet First Travelcorp's needs and provides a product where information is taken out of the accounting system and put it into a database. The database then is used to generate reports that can be given to First Travelcorp's clients.
In the travel agency business, Taylor explains, there is a time-consuming accounting process that must be done every week. Travel agencies must submit a report to an organization called the Airline Reporting Corporation, which acts as a clearinghouse for the purchase of airline tickets. From those weekly reports, the organization makes sure the taxes are paid to the government, credit cards get properly charged, airlines receive compensation, get paid, and the travel agencies receive their commissions. Unisys handles this entire process for First Travelcorp. "It was the single biggest chunk of what we were doing here," Taylor says. It was not a core function for the company, yet it had seven members of its staff devoted entirely to submitting those reports to the ARC. Since the process is now outsourced, the necessary staff has been reduced to one person.
Managing the relationship has changed over time. In the beginning, they had regularly scheduled meetings to make sure everything was on schedule. Today, the two companies stay in constant communication. They also attend user conferences on a regular basis, participating with two or three other Unisys clients who use the same services. The participants share their ideas with each other and communicate on their plans to move forward.
Reaping Prosperity from Expertise
First Travelcorp's costs have held steady at a level maintained before its outsourcing relationship. "We will begin to see cost savings as we grow," comments Taylor. "But the real value of this arrangement lies in how we have been able to promote a partnership with Unisys to land us new business." That has occurred because of the expertise Unisys brings to the table to help First Travelcorp develop its ideas and bring them to reality.
One of those ideas is a service that allows First Travelcorp's clients to access their travel information in the system. Currently, its clients have that access because First Travelcorp looks up the information and then deploys it to the clients. The idea Unisys and First Travelcorp are currently developing is to give access to that information via the Internet, thereby reducing the time and reliance on the travel agency for that service. With the expertise of Unisys, that reality is around the corner. The effect will be to "lighten the load here," explains Taylor. "Our customers will get answers when they want them. Conversely, we will be able to service even more customers without increasing our staff."
Lessons from the Outsourcing Primer:
- Outsourcing can provide a competitive edge by allowing you to provide new services. These additions can help you land new and even bigger clients.
- Outsourcing can help companies acquire new companies by letting the outsourcing supplier handle the back office integration.
- Outsourcing the back office can provide better customer service by allowing the customers access to their accounts through the Internet.