American Express in the first quarter of 2006 plans to launch an electronic auction tool for corporate meetings negotiations to help customers comply with procurement policies and automate the bidding process, according to Amex executives in an exclusive interview with Meetings Today. The tool will be powered by Philadelphia-based meetings technology provider StarCite Inc.
"When we're working with customers, we start by looking at their policies, and a lot of times companies have procurement policies that require them to automate or essentially e-auction certain contracts of certain sizes. Once companies specify that threshold, they will be able to have that bolted into the process that we perform for them," said Jay Roseman, vice president of American Express Business Travel.
The tool will work like a typical electronic auction tool, but companies will be able to narrow bids to preferred suppliers and locations, Roseman said. A company sets predetermined qualifications on which meetings are put up for e-auction and suppliers that meet those qualifications would be able to offer a price and value-added services for that event, he said.
"I don't really see this as being an application for every meeting, because I don't think that's efficient. But it certainly is for companies that have a purchasing requirement, for example, that contracts over $250,000 need to go through an e-auction process," he said. "If one company sets a threshold very low, it could mean 40 percent of their meetings, or a company might only apply it to 5 percent of their meetings. Time will tell as to how widely we apply the tool across the number of meetings that they're going to have. Initially, it will probably be the larger programs and the larger spend that they'll apply this to."
StarCite and other meetings technology providers unsuccessfully have attempted to market online reverse auctions in the past, but Roseman said market conditions have now changed.
"There are a lot of reasons why it didn't work. A lot of it was timing," Roseman said. "Companies are definitely more ready to improve the rigor of procuring this area of spend. We have seen a big movement among our customer base to get interested in how purchasing works for meetings. The corporate climate is definitely different and, secondly, if you look at some of the reasons why it did not work in the past, it was that customers did not have a lot of rigor around making decisions on a timely basis. One of the things we will be working on very hard with our customers is to ensure that doesn't happen in the event that we're managing for them. If they're going to go down this road, they've got to make a decision and they've got to be efficient about the timing."
Hoteliers can choose whether to participate in the bidding process or not, but Roseman said there are benefits for suppliers.
"If they're interested in the business, they'll be able, in our estimation, to get a decision a lot quicker. It also allows them to make better offers because they can see the overall value of their offer versus others in the marketplace," Roseman said.
Pricing for the new tool will be on a customer-by-customer basis, he said, and Amex would continue to integrate with all major meetings technology providers on the market. The tool is just one part of other investments into meetings technology solutions that Amex plans to make in 2006, he said.
Corbin Ball, president of Bellingham, Wash.-based consulting firm Corbin Ball Associates, said procurement policies have had a growing influence on meetings management and reverse auctions are one procurement technique that companies have used in negotiations.
Though true meeting e-auction tools have failed to take root, despite the efforts of a handful of technology suppliers—such as with ProcurePoint, a third-party provider of hotel reverse auction software
(BTN, Feb. 17, 2004)—other technology companies adjusted their approach, Ball said.
"ProcurePoint died, but I think that was a matter of too narrow of a focus and poor management. StarCite has been using this some, tied into their RFP tools, and MPBid has also expanded their auction tool to include further spend tracking features," Ball said.
Michael Boult, president and CEO of StarCite, said his company's own e-auction tool, which debuted as part of StarCite's original suite of products
(Meetings Today, Jan. 25, 1999), but eventually was scrapped, may have been premature. Boult joined StarCite earlier this year
(BTN, June 6)."There was a prototype that was created in StarCite's infancy and adolescence phase of its existence. I don't know if the timing was right, or if the industry was right, the model was right or if anything was right for that to be successful," he said. "American Express clearly feels that the time is right, the market's ready and their customers are not only interested but expecting this type of tool in the market, so we were delighted to build that for them."
Amex customers have pushed for the tool more than StarCite's direct corporate customers, Boult said.
"It seems like an appropriate thing to build a capability for them. They were probably ahead of us in terms of their customers pushing for this type of functionality. We're happy to build it for them and sit back and see what happens," he said.
StarCite's role in the tool was as the technology provider, Boult emphasized, and American Express will work to get buy-in from both suppliers and buyers.
"We have a very strong and long relationship with American Express. It's very valuable for us. We're interested in providing new tools and services that they're looking for us to build. That's a smart thing to do. We've done it on the supply side in the past—provided custom technology and we think that that's the right thing to do now on the buyer side as well. You're going to see us come out with new things," he said.
As both StarCite and such travel management companies as American Express develop comprehensive solutions for meetings management—both in technology products and in consulting services—there has been some overlap in the market. StarCite will work to identify where it is directly competing with management companies for customers, he said.
"We understand our position in the market and we understand their position in the market. There's an overlap, so that's going to be defined further, but we're absolutely into partnerships," Boult said. "We don't care if we're in the background. No one needs to know it's us. If they want to label our products and services and put them on the market, then that is terrific. We don't have to have our name in lights. We believe in that."