Lecture 16

Cathay Pacific
Doing More with Less

Announcements
Final Exam vote

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???

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%
4

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)
5

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

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
7
Continued migration from homegrown to package software.

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

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