The airline industry has started moving from legacy Passenger Service System (PSS) focused commercial IT operations to a customer-centric offer and order-based retailing environment. Through our engagements, we know that this is a complex undertaking involving internal airline departments, traditional distribution entities and partner airlines, just to name a few stakeholders, often with conflicting interests and agendas. And, of course, IT plays an important role here and is often a key entity when it comes to decision making.

Sometimes it is not very explicit that the migration to offer and order also manifests a fundamental change in IT architecture: from monolithic environments to a modular set up, from functions to services, from legacy IT to modern architecture and from classical hosting in dedicated data centers to cloud-based IT operations.

When I started my career in airline IT, running a PSS host was the highlight of every data center operation. The Swissair data center was the core of its airline IT and the pride of most of Swissair’s IT staff. The (at the time mostly) guys running it were some of the most reputable individuals in the IT department of the company, sometimes quite similar to the cast of pilots in the flying part of the airline.

However, the current evolution to offer and order is also core to triggering or accelerating the move to a cloud-based IT environment. The advantages of the cloud are widely known, such as scalability to grow and “breathe” with volatile market requirements, highest availability of services combined with a latency that is now negligible, all operated in a highly secure environment and driven by continuous improvement processes. These advantages also come with an relative overall reduction in CO₂ emissions when compared to the on-premise hosting model. Of course, big cloud data centers create large amounts of CO₂ as well, but it is generally accepted that the overall volume is lower than having the same computing power operated out of numerous smaller entities. Therefore, the need for an airline to operate a dedicated data center has vanished. The head of IT does not need to keep the data center secure and alive by “refreshing” it every three to five years to e.g., avoid security issues. This has also enabled the evolution of company IT leadership. The role of a head of IT or CIO has evolved into a role that drives enterprise-wide innovation by making an airline digital and customer focused.

However, moving to the cloud is more than optimizing IT operations. It is also a key element of the commercial transformation of an airline, because it can only become a true retailer if its IT system and application landscape enable this fundamental change. Both transformations, the “IT infrastructure” and the “commercial” one need to go hand in hand. The move to offer and order management is a particularly critical factor if this dual transformation: the airline becomes a retailer through its cloud based commercial IT systems.

Both transformations will not happen without initial efforts of finance, resources and management. They resemble the famous hockey stick picture – there is a lot of investment before the gains can be realized. However, the gains may come in earlier and at an increased rate, if a voyage is chosen where leveraging early commercial benefits might flatten (though probably not fully compensate) the required IT investments. Therefore, a business case should take this into consideration and frame the sequence of the transformation activities. We will probably not reach a scenario where the revenue increase of becoming a retailer will immediately pay for the IT transformation in full, but it may be able to contribute a lot, particularly in the early stages. This proves again that it can be very beneficial to look into the transformation from a holistic view, taking both the commercial and technological aspects into consideration.

The major vendors of airline offer and order management platforms and the big cloud providers manifest these interdependencies in their own partnership strategies. The three big cloud providers (Amazon Web Services (AWS), Microsoft Azure and Google Cloud) are very active in the airline IT sector, especially in the offer and order management segment. They all not only have airline clients, but they also support major airline IT providers: AWS, who seems to be the biggest player in this area, works closely Accelya and IBS, Microsoft has a strong collaboration with Amadeus and PROS in place and Google works closely with Sabre – just to name a few publicly-known partnerships.

Will we ever reach cloud nine, as it is the place we want to be? Transforming an airline’s commercial and IT landscape is full of challenges, while fully making optimal use of it is an ongoing effort. But both challenges should be addressed jointly, and airlines should not sell themselves short by only considering the transition to offer and order or only looking at the IT cloud transformation. They should go hand in hand, based on an overall transformation strategy. Both paths need to be taken simultaneously and interdependently to reach ONE cloud nine – being a fully retailing airline driven by a cloud-based infrastructure.

This post has been published in collaboration with Terrapinn.

Boris Padovan, Travel in Motion AG