Gelco to Split Company in Two

Gelco to Split Company in Two

Jonathan Klem

By Jennifer Freer, Staff Writer

Gelco Information Network, a provider of travel expense management and other services, has divided into two separate companies to take advantage of the booming e-business industry.

"The split enables us to more rapidly respond to customer requirements," said Daniel Ragheb, vice president of marketing for Gelco of Minneapolis. "It made more sense to split off and focus on the core businesses."

With the split, announced Sept. 15, Gelco is creating the Gelco Expense Management Co. to serve the travel management needs of government and commercial customers. Gelco Trade Promotions Co. will provide trade promotion management and commerce management solutions to the consumer packaged-goods industry.

In the government market, Gelco Expense Management provides agencies with its Travel Manager product, an
e-business application that simplifies travel management and transforms it into a paperless process that reduces costs. The product performs pre-trip planning and approval, processes expense claims and updates systems.

Gelco Information Network was a wholly owned subsidiary of HG Holdings of Minneapolis, a multinational concern specializing in products and services for mobile employees. The new companies will continue to be owned by HG Holdings.

Overall, the company processed $11 billion in travel reimbursements in 1999. Gelco Expense Management serves more than 1.3 million users in more than 1,100 corporations and federal agencies. Officials with the privately held company declined to disclose revenue.

Gelco expects to see the travel management business grow beyond those numbers, and with the company split, it can focus all its efforts on that industry, said Jonathan Klem, president and chief executive officer of the new company. He said Gelco has 20 percent market penetration in civilian agencies, and he predicts agencies will expand the use of automated travel solutions.

"In the government, federal agencies are coming to us for outsourcing of Web-based travel reports and other applications," Klem said. "We are encouraged by it, because in the past the government has been slow to adopt outsourcing solutions."

Gelco has made a concentrated effort to serve the public sector and has developed a product that complies with the federal travel regulations, Klem said. For example, a federal traveler has to file a pre-trip authorization to get approval for the trip and money to pay for it. The government specifies dollars that can be spent for food and lodging in every city, he said.

Gelco is not pursuing the government alone. The company in June signed a
deal with systems integrator American Management Systems Inc. of Fairfax,
Va., that integrates Gelco's travel
management solution with AMS'
federal financial accounting systems, Klem said.

"We want to play to our strengths in providing solutions to our government clients, and offer comprehensive solutions," said Zipora Brown, vice president of the e-government solutions group at AMS. "We have the financial accounting system, but we are not experts in federal travel. We wanted to team up with market leaders that will round up our offering in the marketplace."

The company also has a partnership with Sun Microsystems Inc., Palo Alto, Calif., which helps Gelco build its e-commerce infrastructure. Oracle Corp., Redwood Shores, Calif., helps Gelco with data platform and data warehousing solutions. Cisco Systems Inc., San Jose, Calif., provides network switching and bandwidth management technology.

Before the split, Gelco consisted of the consumer packaged goods division, a group that focused on promotional reimbursement for the consumer packaged-goods industry, and the expense management division, which provides Web-based travel expense management software and services to the government and commercial customers.

The names Gelco Expense Management and Gelco Trade Promotions may change, Ragheb said.

Expense Management will be headed by Klem as president and chief executive officer. Neil Vill is the president and CEO of Trade Promotions. Vill is the former CEO of Gelco Information Network.

The companies will remain based in Minneapolis, but Expense Management also will keep offices in Reston, Va., to be close to government customers, Ragheb said.

Agencies the company serves include the departments of Defense, Energy, Interior, Labor and State, the Environmental Protection Agency, the Federal Aviation Administration and the Social Security Administration.

Gelco is a part of the TRW Inc. team that developed the Defense Department's $264 million Defense Travel System to devise a paperless travel management system.

Gelco also is pursuing other government contracts, such as the Bureau of Land Management's Automated Travel Management System for Voucher Processing contract. Gelco submitted a bid, and the award is expected in December. There is no estimated value of the contract.

Gelco will bid on the Bureau of Public Debt Travel Management Software contract, but a request for proposals has not been issued. The company also serves the bureau with its travel solutions and finished installing its products Sept. 12.

Government travel expenses are one of the biggest areas needing control and management, Klem said. Using an automated travel and expense system allows commercial entities and government agencies to control their administrative costs, he added.

For example, it costs the government about $200 to process each expense report, which includes costs to pay the people who have to approve the report, the accounting department and clerks. Gelco can reduce those costs to about $10, Klem said.

Travel expenses that are not adequately tracked and controlled on a consistent, automated basis are susceptible to uncontrolled costs, said Judith Rosall in a recent report. She is research director of e-portals and payments for the Aberdeen Group Inc., a research marketing firm in Boston.

Gelco's services "offer significant cost savings," she said.

Gelco plans to develop software to Web-enable other administrative areas that are labor intensive and inefficient, company officials said.

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