Technology procurement for hospitality businesses

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How to achieve success

Breakfast Briefing, Wednesday 16th November 2011

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At this morning’s EP and DLA Piper legal briefing Partner Hinal Patel delivered an insightful and interesting presentation on the legal aspects of IT procurement as it pertains to the hospitality industry.

Whether it be increased personalisation and control demanded by customers, price competition, rising costs, threat of terrorism or reduction in disposable incomes, times are tough for those in the hospitality sector. The current difficulties are forcing organisations to innovate in order to distinguish themselves from the competition, as well as to streamline their own internal processes to become more efficient in business. Technology and also out-sourcing some key services are being increasingly used by those in the hotel, restaurant and bar sectors to enable and support these endeavours. Taking this into consideration it is now more important than ever for the hospitality sector’s procurement of technology or out sourced services be successful.

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Do your homework

Hinal’s presentation involved some very interesting points which are worth taking into consideration before embarking on an IT procurement project. Getting the contracting process and the contract “right” provides a good, solid foundation for the company to achieve its end-targets by

  • ensuring that all parties involved are clear on what’s being provided
  • setting the baseline for the accepted standards of performance
  • ensuring legal, regulatory and industry standards are met
  • establishing a workable pricing structure that is amenable to all parties

That final point on pricing is an important one. A business which forces too much of a burden on the supplier runs the risk of killing any chance of establishing a workable and mutually beneficial relationship. On the other hand, if the client is too lax or not specific enough is setting out their requirements and the door may be left open for potentially negative misunderstandings and ineffectual results.

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The market stipulates that in order to continue to exist, hotels, restaurants and bars must continue to innovate not just to stay ahead of the competition but in fact just to keep up. But how can a hospitality professional stay ahead of the competition without becoming a guinea pig for a new IT system? What are the protections if the system doesn’t work? What are the provisions for temporary glitches?

“So much of IT procurement is about research and product knowledge – if you want to stay ahead of the competition then you have to offer something new and exciting. But don’t take the word of the IT provider that they can meet expectations. Do the research. Have they ever run a new service before? Was it successful? Was the client happy with the outcome? Are other clients willing to provide references and recommendations? These are all key indicators in the viability of the company and the product or service they are offering”

Many travellers and hotel guests now expect their hotel bedroom to contain all the amenities and ‘creature comforts’ that they have in their own homes – wi-fi; international television channels; 24 hour a day access to food & beverage offerings etc. Expectations are being driven up in food service too as guests become accustomed to ordering food in restaurants on iPads as opposed to through the waitress, home delivery service from a local take-away is now available on a smart phone app and booking a table in a restaurant is expected to involve some sort of “kick back” (such as loyalty points or reduced menu costings)

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In order for the procurement process to be successful, it is important that the parameters within which the team are working are clearly set out.

“One of the biggest issues in IT procurement is the lack of expertise. Being more naturally financially focused the procurement manager will likely view the cheaper option as better whereas an operational manager will be looking at aspects of the system which will make their tasks simpler or more efficient … A professional expert opinion is essential for the business to make an informed decision”

Points to consider before making any purchasing decisions in terms of IT:

  • Purchasing software is essentially purchasing a service – expect an ongoing cost on a regular basis (monthly invoices)
  • If purchasing IT for a multi-jurisdictional company, what currency will the payments be due in? Which countries are covered by ownership laws and TM registration?
  • If transferring data from an old system to a new one (customer address details; credit card information; telephone numbers etc) what will happen to the information that has been copied? Will the service provider destroy all hard drives or simply delete? How robust is their online protection system?

Outsourcing Agreements

One of the key reasons that third party outsourcing agreements fail is that the ongoing relationship is allowed to fail. Post-deal signing it is important to maintain the relationship. Both sides must also be willing to adapt and embrace change. Technology is constantly evolving and so change is necessary.

It’s also fair, in terms of a long term agreement, for the client to expect that the service provider will improve over time. Becoming more stream lined and efficient are natural by-products of experience and know-how. In turn this should, in theory, lead to reduced costs and improved client experience.

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