By Minda Zetlin
HemisFair ’68 was the first world’s fair to take place in the southwestern United States. It was held in San Antonio, Texas, in conjunction with that city’s 250th anniversary. More than 30 nations hosted pavilions at the fair, which featured a 622-foot Tower of the Americas that’s still in use today as a broadcast antenna, restaurant, observation deck, and 4-D theater.
La Quinta Inns & Suites got its start at HemisFair ’68, where it opened its first hotel to accommodate fairgoers. More than 40 years later, a lot has changed. Today there are more than 800 La Quinta hotels, making it one of the largest limited-services chains in the country.
In 2006, La Quinta was purchased by affiliates of the Blackstone Group in a US$3.4 billion-dollar public-to-private transaction. Soon after, La Quinta’s management made a strategic IT decision: outsource systems to selective product and service providers to sustain long-term innovation at the lowest cost. “We changed the model of how we deliver IT,” says Vivek Shaiva, CIO at LQ Management, La Quinta’s parent company.
PeopleSoft Financials, PeopleSoft Human Resources, PeopleSoft Enterprise Portal, PeopleSoft eProcurement, PeopleSoft Asset Management
Shaiva’s team did an ROI analysis and found that hosting systems in-house would not deliver the best IT value. So most key systems have now been outsourced to a software-as-a-service [SaaS] model. “We’re a hotel company, so we want to leverage the best-of-breed providers for IT services, rather than building those services in-house,” says Shaiva. “Then we can focus our energies on initiatives that more directly affect our customers.”
It was an easier decision to make once La Quinta became a private company, adds Temple Weiss, CFO at LQ Management. “As a public company, you provide guidance to analysts and report quarterly numbers,” he explains. “A significant systems change like we underwent would cause short-term disruption in revenues and cash flows that would have been difficult for Wall Street to understand.”
Unable to Scale
La Quinta staff used Oracle’s PeopleSoft Financials and PeopleSoft Human Resources applications for years before the Blackstone acquisition, generating profit and loss statements and managing payroll for the company’s properties. As part of the general move to outsourcing, La Quinta switched from a licensed model to SaaS, using a different vendor to host and manage the software.
La Quinta’s original SaaS investment operated respectably at first. But as the company began to expand rapidly, the system began to reveal its weaknesses. “We’ve grown the chain to almost double its size since 2005,” says Shaiva. As the size of the company—and its data stores—continued to grow, so did the outsourced IT problems.
“We had performance issues with several different processes,” reports Elise Sammarco, vice president of IT quality at LQ Management. Company IT performance standards dictate that users of critical systems should never encounter a delay of more than eight seconds. But some frequently used functions, such as purchase order inquiries, were delayed for five minutes or more—sometimes so long that the system would time out.
The vendor tried to help, but with mixed success. “A lot of change requests with our previous vendor were performance related, and they would stay unresolved for very long periods of time,” Sammarco says. “Their methodology for diagnosing and solving problems was not great. There was a lot of trial and error, and we spent a lot of time trying to resolve issues. They weren’t able to properly document the root cause of a problem.”
Worst of all, La Quinta staff wasn’t getting the information it needed. The company requires monthly performance metrics five days after the end of each month, but according to Shaiva’s estimate, those figures were late about 70 percent of the time. That was a big problem. Hotel industry experts often note that a hotel room night is one of the most perishable products on earth—if unsold, it loses 100 percent of its value within 24 hours. “Timely information is very important to us,” Weiss says.
Improvement Every Month
Frustrated IT leaders looked for an alternative. HP, which serves as La Quinta’s systems integrator and primary contact for support or other issues, recommended a move to Oracle On Demand for La Quinta’s PeopleSoft implementation. Shaiva’s team agreed that this made sense, and his IT staff made the switch in June 2010.
Improvement came quickly. “We expected performance to decline temporarily in the first few months after the migration,” Weiss says. “In fact, the first month was on a par with the best month we ever had with our other provider. And each month since then, performance has improved further.”
“We moved from an IBM DB2 to an Oracle database, and Oracle was able to work on tuning and indexing and other such items that were overdue,” Sammarco notes. The result is that the user interface no longer hangs up, and La Quinta’s software is now able to meet its eight-second deadline.
Shaiva says one reason for the improvement is the level of expertise available at Oracle, especially when it comes to the PeopleSoft platform, databases, and database tuning. “I have access to that specialized talent pool whenever I need it,” he says. “I don’t have to worry about recruiting, hiring, and training that talent myself.”
It’s useful that Oracle offers access to PeopleSoft application developers who work directly on the software—and know it better than anyone else. For instance, before the move to Oracle solutions, some financial jobs would take as long as six or seven hours to run, one of the main causes for the delay in monthly financial reporting. “That was a long-standing problem we’d been living with for a while,” Shaiva says.
During migration, Oracle engineers found the problem was custom code created by La Quinta IT staff years earlier. “That required someone with in-depth data-tuning knowledge and in-depth knowledge of the software,” Shaiva explains. “They were able to bring that six-to-seven-hour job down to 15 minutes.”
In another instance, Oracle engineers ran analysis on La Quinta’s databases and found that the company could benefit from better archiving. “The way the old databases were structured, we had to perform jobs sequentially or they would overload the system,” Weiss says. “HP and Oracle showed us how, by moving some of the data to an archive, we could run jobs in parallel. It’s saved a significant amount of time.”
Core IT Focus
Oracle On Demand costs about 15 percent more than the previous vendor, says Shaiva, but he reports better overall service. “We get access to the right talent at the right time, and having the development company be the same as the hosting company provides advantages we’ve tapped into several times.”
It’s worth paying a bit more, he adds, because having the right outsourcing partner is critical. “We had problems the first time around because we didn’t pick the right partner,” he says. “When you go to an outsourced model, you’re putting all your eggs in the provider’s basket, and they have to be up to the mark to meet your needs. They become an extension of your IT department.”
Even with the higher cost of Oracle On Demand, the move to hosted solutions has saved the company millions. “Our IT budget overall is half of what it used to be in 2005, despite having grown the chain to almost double its former size,” Shaiva says.
La Quinta put the savings from outsourcing to good use, redirecting savings to areas that directly affect guests, such as properties and services. “We’ve invested in our hotels: enhancing exteriors with new paint and new signage, overall renovations, and opening in new destinations,” says Weiss.
At the same time, he says, freeing IT staff from hosting and maintaining La Quinta’s back-end systems has allowed them to focus on technologies that really matter to the chain’s guests. “If you compare where we were 10 years ago to where we are today, the significant difference is that the back end is run by folks outside our company who do it every day and have great expertise,” he continues. “Meanwhile, we’ve been able to make our customer-facing systems, such as the call center and Website, much more efficient in the way they work with customers, because we’re now able to redirect our energies to these areas.”
It’s also allowed IT staff to focus attention on a common problem for hotel chains: providing dependable high-speed internet access. “High-speed internet is a common pain point for hotel companies, and it’s directly guest impacting,” Shaiva notes. “Internet service at hotels is huge. We’ve seen an explosion in usage, and in some places we need six to eight times the bandwidth that we used to. My team had to do some detailed technical innovation to get there, and outsourcing our back-end operations has helped us focus our energies on improving guest-impacting technologies like these.”
And that aligns perfectly with the company’s priorities. “I now have my team focused on serving the properties, which is the primary goal of IT at La Quinta,” Shaiva notes. “Hotels are revenue-making machines, and now that we’re not putting a whole lot of energy into revenue-counting systems, we can be more focused on services and guests.”
Watching the Cloud
Shaiva has no doubt that cloud-based services are the way of the future for enterprise IT. “There are real benefits, not just soft savings,” he says. “It’s the way IT should be run, in my view.”
A report from technology analyst firm Gartner predicted that by 2010, most large enterprises will have a team in place tasked with overseeing cloud services. And, Shaiva notes, such management is essential for any outsourced solution to succeed. He believes that monitoring the security and service levels of outsourced IT solutions has become a key function of his department—everything from observing hardware and CPU usage to application availability and response time. His team is alerted if there are any disruptions to the functionality or level of service La Quinta staff require to execute their jobs. And Shaiva also has a view of IT performance trends over time.
Indeed, the management and monitoring function is something Shaiva would never outsource—Sammarco’s main responsibility is to track performance of the company’s SaaS systems and service providers. Shaiva believes that monitoring ultimately leads to better performance than resident IT. “Unless your company has formal in-house SLAs [service-level agreements], I guarantee there is no consistent performance monitoring,” he says. “And even if there are SLAs in place, not everyone holds their in-house staff to those standards.”
But serving the end customer remains the core focus of Shaiva and his team, even when they are reviewing performance metrics and monitoring system service levels. “The overall effect is that by outsourcing to the cloud, you wind up delivering better service to end users.”
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