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Vendor Summit: April 5-6, 2005 Lansdowne Resort

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June 01, 2005
Executive Vendor Summit Review
Geneva Rinehart - geneva@hospitalityupgrade.com

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© 2005 Hospitality Upgrade. No reproduction without written permission.

Over 50 presidents and executives of our vendor community recently chanced a day and a half out of their busy schedules to try something new by attending Hospitality Upgrade’s first Vendor Summit. Perhaps they thought the concept promised reasonable value or maybe they were simply curious to find out what Publisher Richard Siegel had cooked up this time. What I heard over and over was how an event like this has been needed, no, wanted for a long time. It is truly awesome to be part of the unknown, suffer through the anguish of giving it form, and then rejoice in the success of its outcome.

These men and women come together each year at various events with another common purpose: to sell products or services to others in the hospitality industry. Stemming from an idea that the vendor community has much to teach our industry as well as much to learn from one another, Hospitality Upgrade decided to bring as many vendor company principals as possible together in a relaxed, non-competitive setting. While several had met before, the vast majority used this particular event to meet many of their peers for the first time or get to know their counterparts a little bit better than before.

The Summit was held at The Lansdowne Resort in suburban Washington, D.C. This had also been the location of the second annual CIO Summit in 2002, and the positive vibe seemed to still be alive.

The key issues of the day were addressed in educational series on intellectual property, offshoring, partnerships, venture funding and the RFP process. The conclusion for the day was a panel of four CIOs discussing their challenges and priorities in dealing with the vendor community and technology in general, telling it like it is. Sally Kelly of BearingPoint did another superb job pulling everything together, with content that kept most of the BlackBerrys™ and cell phones silent throughout the entire day.

Why bring all these people together? The objectives of this event did not go unnoticed by the attendees; build relationships with each other, relationships with other partners and relationships with the hoteliers.

Vendor Summit Golf & Welcome Dinner
As if an omen for success, Northern Virginia had fantastic weather for the Hospitality Upgrade Golf Tournament. Nearly half of the attendees teamed up to play a round of 18 holes on Lansdowne’s beautiful Robert Trent Jones, Jr. golf course.

Tom Giannopoulos, chairman and CEO of MICROS Systems, Ron Tarro, president of SDD, Greg Pesik, president of Passkey, and Gary Eng, president of Southern DataComm, ended the scramble with the best score, even though Gary Eng was listed as the team’s handicap. Hats go off to Peter Marguglio, president of Eatec, for taking prizes for both the longest drive and the closest to the pin.

The relaxed nature of this event permeated the full two days. The first night's official welcome was a cocktail hour complete with the requisite ice-breaker game. In spite of a complete lack of instruction the hour fulfilled its requirement—or was this Rich’s plan all along? There was a good deal of laughing, quite a few handshakes, a tremendous conversational buzz and many, many people who were happy to meet for the first time.

The introductions continued through dinner, a magnificent buffet spread that included all-you-can-eat lobster, which is becoming a Siegel signature and was an ongoing joke for the rest of the summit. Good laughs were had during a short award presentation, and especially after receiving personalized pens for each attendee from HFTP, who sponsored the event along with IBM, as John Springer-Miller announced his discovery that the pens were missing one important detail—ink.

Intellectual Property
The day of educational sessions began with Paul W. Vince, associate group counsel at BearingPoint. This first session, Intellectual Property: Rights, Protections and Contract Law, covered patents, trademarks, service marks and copyright protection. Vince explained the difference between formal and common law registration and directed the attendees to Web sites for online searching and registration. On copyright law Vince advised that “Although registration is not required for copyrights to arise, in the United States registration must be made in order to enforce such rights.” When discussing trademarks, service marks and trade names Vince cautioned heightened attention especially when licensing a company’s brand or product. “All proposals to license a company’s brand or allow others to use its brand (product) in any form should be carefully scrutinized, because misuse or failure to attribute the brand to its rightful owner can dilute the mark, making it more susceptible to challenge.”

The session continued with specifics on licensing including support, maintenance, service level agreements, fees, export regulations, software escrows and third-party sublicensing agreements. Confidentiality was brought up specifically as it concerns third-party obligations. Vince said, “When there is a legitimate business need to disclose proprietary information outside the company, a non-disclosure (confidentiality) agreement is required.” He urged the audience to be sensitive to what they disclose without a formal confidentiality agreement, otherwise that information is most likely not protected.

Ron Tarro, president of SDD, asked what assignments product licenses have when a hotel is bought or sold. Vince responded that licenses are assignable to a property but to protect possible future revenue streams they should be specifically re-assignable in the event of an acquisition or merger. Rick Munson, president of MSI, added that “when someone picks up a support agreement they also pick up the obligation, for instance taking on three years of a five year support agreement.” However, license agreements may need to be renegotiated after a merger or acquisition, or may be susceptible to termination for non payment or if other requirements are not met.

A good discussion broke out across the amphitheatre sparked by John Springer-Miller, president of PAR Springer-Miller, who raised issues on dealing with gaming boards and the rights and personal details software providers are requested to give up during the agreement process. Vince advised that while these legislations generally are intended to protect against criminal activity, the first step should be to find the origin of such requests to verify their validity. Many hotels and casinos use blanket regulations for their agreements that are not always applicable. Others who lent their opinions or experiences on this topic included Brian Kretzmer, president of Hotel Information Systems, and Bill Lashley, senior VP and general manager for Agilysys NV, Inc.

To Offshore or Not to Offshore
The second session was led by Anurag Bhatia, director of business development and client services for IBM, and pondered the issue of whether companies should move business practices offshore. A key factor concerns the maturity of your operations, but other questions to consider include: Can the activity be performed remotely? Can it be realistically performed in a low cost location? What is the potential impact to your business and what should be the starting point?

As with any business decision, planning is paramount. From identifying what business process to offshore, to determining which location has the qualified skill set and degree of specialization you are looking for, to proper knowledge transfer issues, all require adequate planning and research prior to a decision to offshore. Bhatia particularly emphasized the need to visit the various locations you are considering, as there is no substitute for experiencing the locale first hand.

The presentation made it clear that while offshoring can produce substantial cost savings and productivity improvements under certain circumstances, it is not for every company. Bhatia confirmed that most companies that use offshoring or nearshoring do not move all processes, but rather embrace a mixed strategy.

Partnerships and Venture Funding
Mark Kreiser, a business law attorney in the Washington, D.C. area, intrigued the audience with a fast paced, double session. Kreiser’s discussions were animated, PowerPoint-free, and kept the audience engaged with the sheer volume of facts thrown from the stage.

Kreiser began with the analogy that a contract is like a machine. It has a function, and it has contingencies. The primary idea of a contract is not to protect yourself in case of a lawsuit, it is to position yourself and your company to avoid one.

Strategic partnerships and alliances were first on the agenda. Kreiser reiterated that the purpose of a contract is to avoid litigation. The relationship between the two parties entering an agreement is important to remember, however, as the contract is meant to foster and enforce a relationship.

When entering into a partnership it is important to ensure that confidentiality and nondisclosures are in place to protect proprietary information. Other ancillary issues to explore prior to contract signature include clearly stating there is no exchange of ownership (“what’s yours stays yours”) and placing restrictions on company assets, such as no solicitation of employees or customers.

Exclusivity is an advantage in that it locks out competition, but performance criteria should be set in place to define reasonable expectations, with the right to terminate the agreement if these are not met. Dispute resolution should also be considered at the start, so that after the honeymoon phase has faded there are still agreed-upon ways to dissolve the agreement if that time should come.

When protecting intellectual property rights certain clauses should be built into a contract to protect a company’s rights. Under no circumstances should a company ever give away source code, but a source code escrow agreement should be perfectly sufficient. Restrictions should also be put on the partner to prohibit reverse engineering. Kreiser stressed consideration of the what-if scenarios at the beginning of discussions, while the relationship is still on good terms.

Kreiser’s second session was on the impact on your company of receiving venture capital funds. He started by saying there is no way around it—with VC money your company is going to change. Examples included amending your company charter for different classes of stock, changes to your board of directors, restrictions placed on management, hiring or restrictions on equity or debt, i.e. how much money your company can borrow from a lending institution without the VC’s consent.

“The fuse is lit the moment VC money is obtained,” Kreiser said. “Once you take the money certain timelines are enforced, and if these timelines are not met the VC can become quite draconian.” It is not uncommon for the VC to fire personnel, elect a new board of directors, or sell the company if things do not go the way they wish. Your exit strategy should be planned for and well thought out; the venture capital company surely has one, even if you don’t. The VC is interested in only one thing: recouping their initial investment plus dividends.

This was an intense session with a highly attentive audience.

Honing the RFP Process
Jon Inge, an independent hotel technology consultant with experience gained from both the hotel and the vendor side, focused on how challenging the RFP process and systems demonstrations have become both to hoteliers and to vendors. Inge used this session to outline the barriers, including that the hospitality industry as a whole is more complicated, systems have become so much more functional as a result, and there is never enough time to demonstrate their full potential to perspective clients. Two byproducts of this increased complexity are incomplete requirement documents since hotels don’t always know what’s currently available, and viable solutions sometimes being eliminated by the lack of time to understand a system’s potential.

Inge keyed on several specifics that the vendor community and hoteliers can each do to improve the process, including using remote, Web-enabled high-level demonstrations to give hoteliers an overview of current system's capabilities and thus help them prepare properly comprehensive request for proposal (RFP) documents. These can be used to verify all the detailed functionality of the vendors’ systems, allowing the actual systems presentations to focus on critical features instead of trying to be all-encompassing. However, both sides need to maintain a clear focus on the most important operational goals of the property, and the most important ways the system can meet those goals, avoiding as many side issues as possible.

CIOs Speak
Probably the most anticipated and lively part of the day was the closing CIO Panel, moderated by Sally Kelly. The panel included Douglas Clark, vice president-technology, Mandarin Oriental Hotels Group, Michael Schubach, vice president of resort technology for ClubCorp, Carol Campbell Beggs, vice president-technology, Sonesta International Hotels Corporation and Jules Sieburgh, recently the chief technology officer for Host Marriott Corp.

The first question asked each panelist to profile their ideal vendor. Clark said that a good partner is a company that shares in the Mandarin Oriental vision, that is willing to work with Mandarin Oriental, is extremely flexible and can be forward thinking.

Schubach’s preference was for a company that has an understanding of his operation and who will respond to him immediately, especially when a problem arises. Beggs said she looks to vendors that have a vision and will bring that value to her, as well as someone she can call when there is an issue. She also stated that she would like the vendor community to make it easier to replace systems. Sieburgh agreed with all the above and added he values good communication and the importance of being kept in the loop.

Ron Tarro, SDD, asked the panel about the hotel owner’s view of technology today. Sieburgh said he believes understanding at the owner level is low, only about 30 percent. Clark stated that Mandarin Oriental has a strong mandate about technology that comes directly from owners. Beggs said that if she can get a few individual hotel properties and owners to buy into technology, more will follow.

Schubach emphasized that the whole process is getting so complicated that the IT guy is the only person who understands the issues of interoperability, cross platform, etc. so IT always needs to be heavily involved in owner discussions.

Mike Benjamin, EVP of Diversified Computer Corp., asked the panel for their opinion on who owns the data within the systems, such as customer profiles. Clark replied that it is always the guest who owns the data; the question should be “how do we protect it?” This protection is more important then just being compliant with 30 systems. Sieburgh said this issue of data security is not addressed in management and it needs to be. Beggs said the vendors need to help with these security issues and that currently the vendor community is not doing enough.

When asked to address what role compliance will play in changing IT, Beggs said that a significant amount of time is diverted from IT because of compliance issues. Schubach added that the requirements are very high and continue to change.

Switching to the future of IT, Clark said he sees a world where there is a common platform. Schubach took a different approach and challenged the audience with “I am looking to you for change and sellable change. I need vendors to make faster changes.”

Beggs said the future of telecommunications is voice-over IP, which she said is already pretty good. There will be a push for technologies based on what guests have at home. Clark agreed that VoIP is the future as well. He said the quality of service has been excellent and pretty much the same as traditional telephony systems. Sieburgh said that the ASP model is slowly coming into its own but is far from maturity.

For closing remarks, each was asked about their technology goals and the biggest obstacle to achieving these goals. Schubach said, “The issues around security and compliance are going to keep us busy for the next three to five years.” He lamented this really has nothing to do with his core business. Pinehurst would really prefer to work on more guest-centric issues, like communicating more meaningfully and less obtrusively with guests. Sieburgh said he believed the goals of the near future are security and wireless, while the biggest obstacle continues to be how to convince senior executives of the value of IT.

Beggs’ goal is to “webify” everything, and she believes it is still too hard to get timely information from individual hotels. Clark stated that it is Mandarin Oriental’s mission to facilitate the guest experience —the ability to take what the guest wants and make it happen.

The two-day event was completely vendor-centric, an event all about making relationships and by all accounts can be marked as a great success. The majority of the attendees of this first annual Vendor Summit said they couldn’t agree more that an event like this was long overdue. Even weeks later a buzz continues to resonate throughout the industry.

Special thanks go to Sally Kelly for her efforts with the educational program and to the inaugural Vendor Summit sponsors BearingPoint, IBM and HFTP.

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