Cathay Pacific

1
Lecture 16

• Cathay Pacific
• Doing More with Less

2
Announcements

• Final Exam vote

3
Final Exam Outline

• 8-11am, Wednesday June 13
• Half short and long answers on theory and
  principles from course
• Half case-study
• Open or closed book???

4
Cathay Pacific Characteristics

• Mid-tier airline
• 15,000 staff, 77 wide body aircraft
• Old airline 50 years history
• Vulnerable to cost cutting airlines
• Global everywhere except China
• Lost landing rights in 1984
• Geographically next to largest market but cannot
  access
• Excellent reputation for service
• Historically profitable
• Joined OneWorld alliance, increasing USA flights
  30

5
IT at Cathay Pacific 1970s

• Standalone development and operations activity
• Strategic value, attracted best IT staff
• Homegrown reservation system sufficiently good
  that Cathay sold to other Asian airlines
• Large computing center, 10-12 mainframes running
  24/7
• Independent with large no. of developers
• Fun place to work
• IT building leading-edge systems, valued in
  company (still there as legacy today)

6
IT at Cathay Pacific mid/late 1980s

• From develop/operate to acquire and manage
• IT no longer used to differentiate
• SITA handle complex telecom needs globally
• Telecom is often first IT area to be outsourced
• Began move from design and coding to acquiring
  packages and deploying
• Department name changes from systems development
  and support to systems delivery
• Emphasis on faster, cheaper, lower risk
  installations
• Less exciting employer for young tech staff
• Operations expanded to three data centers
• Issues of control intensified with 1991 fire in
  data center
• Mid-size player and IT not sustainable
  competitive advantage
• IT more of a necessity
• Challenge to be quick follower instead

7
IT at Cathay Pacific 1990s

• Continued trend from 80s
• Already outsourcing other core functions such as
  medical clinics, elevator repair for many years
• Outsourcing part of culture but not for key
  strategic activities
• 1995 moved data center to Sydney, Australia
• 2/3 of IT spending now 4000 miles from Hong Kong
  headquarters
• Similar timezone
• Seems to have maintained service levels
• Save significant costs
• Australia stable, lower land and tax costs
• Strong financial, infrastructure, strong IT
  skills
• RISKS? Distance, communication, vulnerability
• Seems to have worked? Should they move again????
• Cost pressures
• IBM / Sabre preferred vendor
• Commitment to Sabre software aligned with leading
  airline software provider
• Smartsourcing
• 2000, desktop infrastructure outsourced to IBM
  for 50 million, five year
• Continued migration from homegrown to package
  software.

8
2001 and beyond

• 300 people in IT organization
• Legacy systems support
• Systems delivery
• 200 people decentralized to users and responsible
  for package management
• Weakened IT heritage
• 100 people work in planning and architecture,
  selecting and evaluating packages for long term
• 3200 outport stations in 47 parts of world where
  IBM doesnt operate
• Providing hand-holding to ten most senior people
  in company and their assistants!
• HP manages website

9
Now what?

• Downsize entire IT team and outsource all?
• Move data center to China?