Outsourcing To Level Off - 2001-02-26

<B>Outsourcing To Level Off</B>

By Chris Davis

More than a quarter of corporate meeting buyers expect their companies to rein in meeting outsourcing levels this year, according to a new Meetings Monitor survey.

The reasons for outsourcing curbs varied, with respondents indicating that companies have fewer meetings, or fewer difficult or high-end meetings, to plan; few companies have reduced outsourcing as the result of a comprehensive insourcing strategy.

According to the Monitor survey of 132 corporate meeting buyers, half said their companies' outsourcing levels will remain about the same in 2001, while only about 7 percent expect more outsourcing than in 2000. However, 27 percent said there will be less outsourcing, and two-thirds of those respondents indicated that there would be much less. In an economic environment in which many corporations look to cut travel and meeting expenses, the survey indicates that a sizable number of corporations plan to do so.

There are few corporate and independent meeting managers willing to speak on the record about declining levels of outsourcing, but there are signs that such trends are out there.

"We are not seeing any changes in outsourcing for services like ours, and it's still to be seen what the corporate world will do with site selection, housing and other such services," said Joan Eisenstodt, president of meetings management firm Eisenstodt Associates of Washington, D.C. "Sadly, my guess is that corporations will lay off meeting planners rather than stop outsourcing. Eliminating a person who knows the corporate culture in favor of outsourcing may look like it saves money on paper, but it's a band-aid solution."

Eisenstodt speculated that there wouldn't be a widespread spate of canceled meetings, simply because many already-booked events would cost significant money in damages paid to the property if they were to be canceled. "Since the economy is still settling down, we don't yet know what will happen," Eisenstodt said. "But there are many meetings on the books that have to be performed or money will be lost in contractual fees. Someone has to do them."

The difficulty in forecasting meeting levels based on outsourcing trends lies with the possibilities that general economic trends can pull the meetings industry in a number of ways. Corporations seeking to cut meeting travel expenses may cut meetings themselves or internal staff, and most respondents who forecast an outsourcing increase in their companies attribute it to smaller staff. But many corporate activities themselves, including mergers and layoffs, require meetings to determine the company's course of action. Northfield, Ill.-based Kraft Foods, for example, will merge with Nabisco, which was acquired in December by parent Philip Morris.

"We'll likely stay at about the same levels of outsourcing," said Andrea McGrath, Kraft manager of conference services, who added that the merger could affect outsourcing levels. "We run a lean department that handles more than 250 meetings per year. That would be impossible to do without outside help," McGrath said. "We outsource many site selection functions to our agency. We work with them on negotiating travel. We provide them with budgets, and they help secure destination management companies, who we work with on theme programs and such."

Of particular meeting functions, the Monitor found housing and registration to be the most frequently outsourced, with full-service planning, site selection and securing onsite staff also frequent targets. "We're still seeing increases in corporate interest, particularly in site selection and full service," said Lynne Tiras, president of Houston-based International Meeting Managers. "There's more pressure now on corporations to come up with meetings in the short term; most of our clients need events in 30 to 60 days. It's not business we've actively gone after, either. Corporations realize, despite the economy, that it's more important to have professional service on a daily basis, which is more cost-efficient and time-efficient.

As with many economic trends, results will fluctuate based on geography and market sector, so some individual locations or industries see far more action in this area than others. "We've been going after tech companies, and there's been an increase in business as few people around here provide that service," said John McConahy, president of Pittsburgh-based meetings management firm Imagination Plus. "But that may be a demographic issue, rather than a trend. I suspect that any trend would be the reverse."

McConahy, though, said many corporations are better organizing their meeting departments, which allows for a more comprehensive outsourcing strategy rather than decentralization. "A good structure in the meetings department allows them to best take advantage of people in my industry," McConahy said.