Salesforce.com (NYSE:CRM) is not the first company to realize that software can be delivered as a service to customers. One of the pioneers of this approach is Concur Technologies (NASDAQ:CNQR), which was founded over 10 years ago.
By logging into a Web-based system, companies can automate their corporate expense management (such as for travel and entertainment). In fact, it is more than just reporting; the technology is also useful for enforcing expense policies and reducing costs, as it streamlines a process that might otherwise prove unwieldy.
This week, the company reported its first-quarter earnings results. Total revenues increased 31% to $17.3 million. During this time, net income was $1 million, which was up from $200,000 in the same period a year ago. Cash flow from operations was $900,000.
Like Salesforce.com, Concur is moving its business model to subscription revenues. This makes it more cost-effective for customers (that is, there is no large, upfront licensing payment). As for Concur, it means the company has a reliable recurring revenue stream.
Wall Street's skepticism for software companies has certainly weighed on Concur's stock price. The company seems to think Wall Street's concerns are overplayed, as it purchased 1.1 million shares of its common stock in the first quarter and is likely to buy more.
What's more, Concur upped its guidance. For the next quarter, the company expects a minimum of $18 million in revenues and $72 million for the year. Earnings per share is expected to be $0.03 or better for the next quarter and $0.14 for the year.
True, corporate expense management software seems to be a discretionary item. So why are companies buying this type of software? While it helps to save costs, there is another important reason for using the software: compliance.
With Sarbanes-Oxley, companies need strong internal controls, and this means better tracking for such things as travel and entertainment expenses. The traditional approach -- using Excel and even manual systems -- is prone to error.
With its leadership position -- as well as key alliances, such as that with ADP (NYSE:ADP) -- Concur is in a good place to benefit from this automation trend. And, even in a tough software market, it is growing its business where many other enterprise software companies are seeing declines.
Fool contributor Tom Taulli does not own shares mentioned in this article.
