Avoid "Big Name" Vendor Nightmares
May 11, 2007
UPDATED
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"We have written off $9 million spent on a new reservations system that may
never see the light of day."
- Virgin Blue CEO Brett Godfrey
"Without Reservations"
Air Transport World, April 2007
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IF LOW COST AIRLINES LOSE MILLIONS ON A RESERVATIONS SYSTEM, IS IT NEWS?
Last January Canada's premier low cost carrier, WestJet, warned shareholders
it may write down $30 million invested in a new reservations system
purchased from a major airline IT vendor. Because after years of
development, the system still cannot be used by Westjet.
In April, Air Transport World magazine reported "the troubles were not over"
for the new system. The CEO of another early customer, Virgin Blue, told a
press conference "we have written off $9 million spent on a new reservations
system that may never see the light of day."
While the system's problems have slowly become industry news, we could not
find this acknowledged on the websites of either the big name IT vendor or
its India-based software development partner. Promotion of the new system
citing Westjet as the "launch customer" continues.
Are airline losses of millions of dollars because of an IT vendor news?
Novak Niketic says this is not only big news, it is a critical lesson for
all airlines.
Why was WestJet planning a change in reservations systems in the first place?
WestJet was looking for a new system in 2003 because it wanted functions its
current software, Open Skies, didn't provide: a website which can display
multiple fares, process online changes and sell optional services, and the
support of interlining. WestJet, like several other airlines we spoke to
that year, was also concerned that Navitaire had turned its development
focus from the Open Skies platform to building a Microsoft-based system.
With that concern, WestJet decided to become a customer for "a new product
that hasn't been used by an airline before," as a WestJet spokesman told the
Dow Jones news service. Our guess is WestJet made this decision in part
because a big name in the industry is backing the Indian developer.
But the system hasn't been delivered as agreed?
Apparently not. That's why WestJet suspended the contract and issued its
warning of a potential $30 million loss to shareholders.
This isn't just big news, we think all airlines can learn some critical
lessons from it.
What will WestJet do?
WestJet has extended its agreement to use the Open Skies system with the
promise Open Skies will be upgraded to allow for interlining, multiple fare
displays and online changes. WestJet told the Dow Jones news service it has
no specific date for these upgrades, but they would be "functional well
before [the big name vendor's system] would have been up and running."
That begs a question. Your AirKiosk system has provided all of these
functions since the time WestJet was looking for a replacement. Why didn't
WestJet choose the AirKiosk system?
When we spoke to the WestJet team they were intent on owning and maintaining
their reservations software at the source-code level. That was a mistake
many legacy airlines made, and have spent years reversing. We told the
WestJet team this and it was probably not what they wanted to hear in 2003.
But we also don't think that completely answers the question. Why would an
airline turn away from a proven, low-cost solution in order to invest years
and millions in something that didn't exist?
We see every day that airline management continues to be vulnerable to the
old school IT mentality that "more expensive must be better." This plays to
the "strengths" of traditional suppliers, they are very expensive.
Even when they don't deliver...?
We see many big name vendors announce "new systems." Although we think they
are taking tremendous risks with their reputations, we guess they have to.
Traditional suppliers have been hard hit by the rise of low cost carriers
and, worse, the desire of traditional carriers to adopt LCC innovations.
These suppliers struggle to keep up with the functionality needed for the
modern airline model, and they can't match the cost structure of solutions
like the AirKiosk system, which was built for this model.
We see these suppliers buying as much time as they can to try to realign all
airlines with a high-cost, complex way of doing business.
What they have on their side are such large marketing and legal budgets that
they can dominate every forum and industry organization. Only time will tell
if any vendor can afford the remarkable arrogance of selling solutions which
do not work at the expense of airline shareholders.
What do airlines do to avoid being raked over the coals?
Reexamine your IT decision-making process and decision makers.
Examine every solution offered, even when offered by a big name vendor, as
though it doesn't exist.
Do not believe "more expensive must be better." The last 20 years of
technology history assure you it isn't.
Keep in mind the sponsorship behind industry conferences.
Be very careful when evaluating any solution from a vendor also in the
legacy GDS business.
Turning your airline IT over to a GDS is like trusting
Dracula to run the blood bank.
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