Air Transport World

The last investment: reduced spending in tough times is essential, but too many reductions in IT investments may be a recipe for future disaster. (IT Conference).

While airlines are reducing their costs to survive the current environment, they must keep an eye on how their business will function during and after the recovery period, making it essential that information technology spending is the last investment to go. This was the consensus of speakers at ATW's third annual Managing Technology and Information for Profit Conference.

And although times are tough, the tough times make change not only important but possible, said David Melnik, founder and CEO of Kinetics Inc.: "Severe adversity should bring about sharp change, especially in customer relations." Given that the airline industry was already on the threshold of numerous IT improvements when the downturn began, Melnik predicted, "The airline industry will become the benchmark for customer service in five years. No other industry has the possibility for such change."

Susan Garcia, MD-IT strategy, finance and planning at American Airlines, said AA handles its IT budget portfolio much like a financial portfolio. Now centrally managed, "a few years ago, 42 departments were making individual IT-purchase decisions." Two years ago AA decided to adopt the portfolio management model, with each purchase judged for its ability to "move the company forward." The airline has centralized standards creation and platform types. "By year end, all of our systems will be viewed as part of the portfolio. The vast majority of our spending will be on projects that reduce costs," Garcia said.

Most carriers are not approving IT investments if the payback is more than a year, many speakers said, including Ian Riddell, COO of SITA. He agreed with Garcia's portfolio management strategy, adding, "It's not the application or the technology, it's how you apply it... There are three mantras that run through cost containment in IT: Standardize, centralize and professionalize."

Riddell implied that there is a fourth mantra to help achieve the other three: Outsource. In each of the key areas of IT spending--data centers, telecommunications, desktops, applications and processes--the use of common off-the-shelf solutions across the corporation will achieve all three goals, he said. …

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