Better Negotiations Save Tech Co. Millions

Despite the lack of a mandate requiring employees to use its four-year-old meeting services department, Cisco Systems Inc. realized more than $4.5 million in hard and avoided costs this year through better negotiations, insourcing and the deployment of a new online meeting registration application.

The savings, totaled through Cisco's fiscal year that ended July 31, represent about $2 million in negotiated savings over standard group hotel discounts, approximately $2 million in avoiding third-party management fees—as Cisco has upped the compliance rate of meeting services department usage to around 60 percent—and about $650,000 derived from the installation of a meetings registration module in the corporate intranet, said Palo Alto, Calif.-based manager of meeting services Michele Snock.

The registration application was developed one year ago, after it was determined that Cisco was spending thousands on various online registration applications. The company, with an intranet travel page already up, decided to cut those long-term costs by creating internal registration capabilities.

"We hired a consultant with a background in this area, who understood the business," Cisco's Snock said. The consultant, Michael Benedict, later was hired by Cisco to manage the internal online registration system, which is comprised of a basic service offered by Cardinal Communications' RegWeb application and a template that allows for per-event customization when needed.

Before the development, Snock said, online registration was "very costly. It ran from $200 to $10,000 for the simpler meetings, to a few hundred thousand dollars for the more extensive events. Now, we can handle it internally with virtually no cost to meeting sponsors. Plus, we can control the attendee management data."

Technology companies have proven not to be particularly keen regarding mandates, and Cisco does not have a centralized meetings and events budget, so Snock's department has had to prove its value. We've tried to sell ourselves through word of mouth and reputation," she said. "Since we're part of the finance department, and we don't charge back for services, we've had to prove our ability to cut costs."

Cisco employees welcomed the creation of the meeting services department with something less than open arms. "There was resistance," Snock said. "They thought we would tell them what to do, but we told them they were our customers, that we would give them choices and suggestions, and wouldn't intrude on their relationships with vendors."

During the past four years, the department has grown from four people to a full-service team of 12 in the United States and 10 more planners overseas, handling events from 10 attendees to thousands. Snock has no solid numbers regarding compliance, but estimated that about 60 percent of domestic meetings and between 40 percent and 50 percent of events planned internationally go through the meeting services department. The steady growth of that number has allowed Cisco to generate significant savings by reducing its dependence on third parties.

"We've cut out a lot of the third-party profit, which we estimated at an 18 percent coordination fee per meeting," Snock said. "But since we're all stockholders of the corporation, we have a vested interest in saving money. We offer the same value for less money."

Much of Cisco's negotiated savings have come in the form of reduced liability and higher levels of cancellation and attrition protection, which Snock said has paid off. "There have been times those clauses have needed to be exercised," she said.

Cisco hopes to take its meeting management services offerings to the next step by exploring a deal with a single, specific hotel chain next year. The deal has not yet been negotiated, but Snock hopes to craft an agreement in which the chain's properties would receive booking priority in a given city in exchange for preferred group rates and possibly standard contracts.

However, Snock has no plans to consolidate Cisco's meetings or negotiate volume-based deals. "I don't know how much more negotiating power you can have once you establish contacts with a chain or a hotel," Snock said. "They can only go so low."