Oracle Corp., like many global companies, has struggled over how best to manage the fractionalized area of meetings. Unlike most of its peers, Oracle during the past two years devised a global strategy, process and technology to authorize, source, procure, pay and reconcile about 7,000 annual global meetings. Implemented last April in Oracle's largest meetings market--the United States--the initiative is now being expanded globally.
"Obviously, one of the things we're trying to do by implementing these programs is to get our hands around what exactly is the spend. It's very convoluted. If the industry standard is 1 percent to 2 percent of overall sales is deemed to be spent on meetings, that probably could be pretty accurate, but we just don't know," explained Ralph Colunga, Oracle senior director, global travel, meetings and support services.
What Colunga does know is that Oracle's meetings follow the 80/20 rule. Eighty percent of the meetings are simple, small meetings that drive about 20 percent of total meetings expenditures. The other 20 percent are larger, more complex meetings that drive 80 percent of overall costs.
The challenge of managing meetings, Colunga said, is "how do we create transparency, as well as gain proper fiduciary control over this spend, because it is an unknown. We know it's a controllable expense, but it's hard to identify. Once you identify it, how do you sit down and manage it? That is really the objective." [PROFILE_1]Ultimately, Oracle is trying to create "somewhat of a closed loop system as it relates to travel and meetings," Colunga said. As with its global travel revamp, the "three cornerstones of our foundation are to simplify, standardize and automate wherever we possibly can," he added. However, simplifying, standardizing and automating the complex area of meetings is easier said than done. In the spirit of benchmarking and best practices, Oracle agreed to explain its procurement-driven approach and the results achieved thus far.
Hiring Subject Matter Experts
Oracle began the latest transformations of its travel and meetings areas in 2005, when vice president of global procurement, travel and disbursements Greg Tennyson hired Colunga to devise a vision for the rapidly expanding company and budget line items. Colunga quickly built a team of subject matter experts to plot a global--rather than regional--travel and meetings strategy for a company that would soon nearly double in size. With the acquisitions of PeopleSoft, Hyperion, Siebel Systems and numerous smaller companies, Oracle grew from 44,000 employees in 2005 to 74,674 in 2007. Two-thirds of its employee base is now employed outside the United States as it operates offices in 145 countries. Each region was negotiating its own travel and meetings contracts with hotels.
Colunga led a pioneering travel program redesign expected to result in a 40 percent reduction in overall travel operating expenses by year-end. It involves global consolidation with one agency (Carlson Wagonlit Travel), one online booking tool (GetThere), one of two global distribution systems (Sabre or Amadeus) and limited numbers of other preferred vendors. Oracle now has global hotel contracts with Hilton, Marriott and Starwood for both transient business travel and meetings. Previously, the company had more than 500 individual agreements with independent properties.
Soon after he was hired, Colunga hired Jack Eichhorn as director of global meeting services to begin the "discovery and recovery" phases of Oracle's meetings management strategy. Having worked together before, Colunga said, "Jack is second to none in the area of contract negotiations and contract management." Studying Oracle's meetings buying, contracting and planning practices for six or seven months, Eichhorn discovered that "procurement--or meetings management in this case because we sit in procurement--wasn't engaged in the front end of the meetings sourcing process. We had very detailed processes around contract review and contract execution; however, the front end of that--the supplier identification and negotiations--was happening outside of a subject matter expert."[PULL_1]Oracle also needed to do "a better job tracking the data, consolidating our supplier base, inserting subject matter expertise into the negotiation process and doing what we could to streamline that back-end contract execution, as well as payment processing," Eichhorn said.
The company has always had a "very self-service organization," when it comes to planning and contracting meetings, Eichhorn said. Some lines of business had meeting tools to register and source meetings and events, but "there wasn't a standardized or central corporate calendar." Consequently, Eichhorn needed a means to collect that data, determine how many meetings were planned and how much money Oracle spends on meetings annually, in addition to the $600 million T&E tab.
By year-end, the team expects to know much more than it does today about its meetings expenditures. "We know more each and every month," Eichhorn said. Eichhorn and Colunga recruited four subject matter experts (SMEs) to review contracts across Oracle's three global regions--the Americas, Europe/Middle East/Africa and Asia-Pacific--to "help us frame a new way of thinking" about meetings. One SME, for example, devised guidelines on what planners should and shouldn't order to maximize the company's food and beverage budgets. Colunga explained that very few planners understand the typical markups on food or all of the revenue streams that meetings provide for hotels, including from catering, audiovisual, gift shops, restaurants and other departments.
Creating Preferred Partnerships
Beyond knowledge, Oracle also needed preferred partnerships for meetings sourcing, logistics, hotels and audiovisual. Carlson Marketing Worldwide was contracted to do all the sourcing and, if needed by the meeting requestor, logistical planning. Oracle also "identified preferred suppliers in the hotel space that could meet our needs both from a business transient and group side, so we could leverage that total spend and consolidate our business with those preferred suppliers," Eichhorn said. It took several months, but Eichhorn negotiated master terms and conditions agreements for all meetings with each chain. Addendums are negotiated with each hotel for each meeting and reviewed by the global SMEs.
One of the reasons that Oracle needed to centrally source all meetings, Eichhorn said, was to ensure use of preferred vendors, as well as ensure that preferred hotel contacts were aware of the master agreements that Oracle had in place with their chains.
Oracle's six-person meetings team also focused on "the commodity within the commodity," such as audiovisual support needed for many meetings. The company just forged its first agreement with an audiovisual supplier for all services in the United States. Hotels often have exclusive contracts with such suppliers to force planners to use their in-house provider or pay to bring in their own AV provider. "That's something we're addressing and haven't had a major challenge with, quite honestly," Eichhorn said. "We're eliminating that clause from any contract agreement and have had success with it to date; part of it has to do with our size and volume."
Versed on the master preferred vendor agreements, standard terms and conditions and terms that Oracle precludes from contracts, Carlson sources meetings to preferred properties and provides the meeting requestor with availability and rate options. From a procurement perspective, the goal is "absolutely" to consolidate all meetings to the preferred properties, Eichhorn said. In reality, "there are going to be exceptions. Our goal is to limit those exceptions to where it makes sense," he said.[PULL_2]
The meeting requestor decides where to hold a meeting based on the options presented. Ultimately, "he or she who controls the budget controls the final decision," on location, Eichhorn said. "We're not telling them where to go, but we're giving them options within our preferred supplier base." An SME also reviews all contract addendums where specific terms for each meeting are added and "confirms that spend approval and total liability exposure is in place," Eichhorn said.
At most Oracle meetings, instead of billing all sleeping rooms to a master account, the company has delegates charge hotel costs to individual travel and entertainment cards. Consequently, the spend approval of the purchase order could be lower than the total liability exposure, often called attrition, should the meeting need to be canceled. In such instances, "we actually get an additional approval on the total value of the contract," Eichhorn said. Such approval is typically secured via e-mail "to the appropriate management level based on the spend approval authority."
With expertise and contracts in place, Oracle a year ago partnered with StarCite to deploy a Web-based, custom meetings request form that would authorize, spec and generate a payment card for each meeting. In procurement terms, the form serves as a purchase order for each meeting. Meetings requestors detail on the form the dates, locations, sleeping and meeting room needs and budget. "The innovation for us is that we integrated that meetings request with our internal iProcurement system," through a standard "punch-out," said Eichhorn. Part of the procurement software suite that Oracle sells, iProcurement is marketed as Web-based software that can "lower procurement costs by cutting transaction overhead, controlling maverick purchasing and realizing the full value of your preferred supplier agreements."
Within the meetings department, iProcurement allows the company to electronically route purchasing requisitions for meetings and events in the same manner used for other categories. iProcurement captures the data, automatically generates purchase requisitions, updates the StarCite meeting request with an approval and routes the request to Carlson Marketing to source.
To further streamline the process, Oracle added to the meetings request form all information fields needed to request an American Express Meeting Card to pay for each meeting, Eichhorn said. "We have partnered with American Express and essentially created one purchase order per meeting, and that purchase order supports one corporate meetings card," he said. Once the meeting request requisition is approved in the iProcurement system, the information automatically is sent to American Express, which creates a "declining balance" card for the dollar amount approved for that meeting and sends it to the planner or requestor. Oracle pays American Express only after funds are paid to suppliers. But the card provides not only data, but the controls procurement craves to limit spending to an authorized amount.
The technology, including payment card integration, was introduced in the United States last April. A phased global expansion is now underway--first in EMEA where contracts are now submitted to a global contracts team--and the technology is to be introduced soon in the United Kingdom and Ireland. "Rolling that out on a global basis and coming through on the back end to integrate the spend or payment process will enable us to continue to drive that user satisfaction and efficiencies with the Amex product," Eichhorn said. "However, market conditions might preclude integration of the payment vehicle in some countries," he acknowledged.
Within the United States, the meeting requestor retains responsibility for verifying that supplier invoices are correct and aligned with the Amex statement. They also must forward all invoices to the meetings services team for a back-end audit.
By moving payment of meetings expenditures to a meetings card, Oracle is gaining process efficiencies. Instead of multiple invoices for each meeting, there is just one--all consolidated on an Amex statement. Like other major corporations, Oracle requires that a vendor be listed in its database before payment can be made. A current W-9 tax form also must be on file for each vendor. The old process charged the meetings requestor with securing the form and submitting it for approval. Finance support staff in India then had to enter the supplier into the database.
An analysis revealed that "not only were we saving time and efficiency for the requestor, but we could save seven man days a month by eliminating that manual process of not entering new suppliers," Eichhorn said.
The speed of vendor payments also has "improved dramatically," Eichhorn said, with payment authorized on the card as soon as the requestor confirms the accuracy of an invoice. "What it's allowing us to do is really focus on driving value with our supplier ... to focus on negotiation and preferred pricing, as opposed to how I get you paid," Eichhorn said.
The meetings payment strategy also "ties into one of our initiatives to be the customer of choice for our suppliers," Colunga noted. "We want them to want to do business with us because we're innovative and/or producing and being fair in terms of our practices. There's no question that Jack and his team have turned around supplier dissatisfaction" with the prior process. "It has made a huge difference for us," Colunga said.
Mapped out, the new process has "almost cut in half" the number of steps in the meetings procurement, payment and reconciliation process, Colunga said. But the key to success, he noted, is "satisfaction of our internal requestors and external suppliers. When Jack and his team looked at our existing process flow, the purchase order, requisition, contract" and payment, they identified opportunities to include in the new automated process. "It really has driven satisfaction on both sides, and efficiencies for the user are over the top. They're very excited about the process."
Importantly, Oracle now has data on its meetings spending charged to Amex cards. But it anxiously awaits further integration that StarCite and American Express promise to deliver in June, Eichhorn said. Charge card details would then flow back into StarCite to reconcile with the meeting RFPs to provide richer detail about spending in a single database for joint customers.
Cost savings are indeed an objective of the meetings initiative "but not from the standpoint that we're currently spending x and want to reduce it to y," Eichhorn said. "We want cost savings through supplier consolidation, use of preferred suppliers, strategic sourcing and negotiations through subject matter expertise." To use an oft-used "Ralphism, we want to use the three Ts, which is track, trend and trim."