Airline IT chief gives lowdown on business-IT interaction

Cathay Pacific CIO Edward Nicol sits on the airline's board, maintains a healthy scepticism about "hot button" technology and makes sure IT goals are aligned with business objectives. He talks to Stefan Hammond of Computerworld Hong Kong

CWHK: With today’s increasing emphasis on showing value and return from technology investments, is it harder for you to push through projects such as essential upgrades and maintenance?

Nicol: Not at all, this is not a problem for us. Airline senior management recognise that IT is very important for our business. [Industry players] have been pathfinding users of IT since the 50s and 60s and many airlines have a senior IT member on the management board — I’m a director of the Cathay management board.

So there’s an understanding of the importance of IT, but also there’s an understanding of the costs [associated with IT]. So we don’t have to explain the need to invest in infrastructure, but naturally we need to justify it.

Because I don’t come from the IT industry, I maintain a healthy cynicism about the latest 'hot trend'. My experience with IT over the years indicates that as soon as a 'hot button' technology fades, another one pops up. One of my maxims for customer-facing IT is 'Simplification has been oversimplified'.

CWHK: What are your most recent projects?

Nicol: We’re migrating various legacy systems to IP. The airline industry has an abundance of legacy comms and Cathay is one of the world’s most advanced in terms of conversion — we’ve been doing it for over three years now.

But difficult areas remain. There are many providers of managed IP comms, but there are also important operational messages for airlines and the internet is not a 100% reliable communication medium. What we need for certain types of comms is guaranteed delivery within a guaranteed timeframe.

Another project is an ongoing SOA (service-oriented architecture) implementation. The motivation for SOA is: we have a lot of interfaces between our systems and to put them on a modern technical footing would be sensible. This is a long-term project.

CWHK: Can you tell us about your overall IT structure?

Nicol: I break it down into two categories. One is basic IT department work: infrastructure and network. It needs to run reliably and cost-effectively — it’s basically a commodity service. The second category is the value-added stuff: the applications, the functionality and the use of IT for business, which can get very sophisticated and which we view as a partnership relationship with the business side.

For the first category, what business wants to see overall is increasing reliability and decreasing costs. So if we can explain investments in that framework, we have no trouble getting our projects approved.

The second category is much more ROI-based. We have a central body in the company that controls expenditure and we’re very happy to present proposals in a project format. We present business cases with business benefits and ROI, and the board makes its decisions.

Overall, Cathay’s IT budget is about 2% of overall costs. It’s a small amount relative to cost of airplanes, maintenance and staff. We keep close track of IT costs on a unit basis and have maintained a continuous and substantial reduction in costs per ATK (available-ton-kilometres) over many years. That’s a core objective for me and my staff.

CWHK: Business-IT alignment: how do you address this challenge?

Nicol: To me, as a non-technical CIO, the biggest challenge to the business is not the technology, which by and large is under good control. That’s not to say that it’s ideal, or even easy, but it’s under control.

The biggest issue for IT today is what I call the BU/IT interface: aligning IT with business objectives. And we’re working very hard within Cathay to make sure it works better. We have our IT teams embedded within the business units — they work with them, they partner with them, but still, there is a communications gap. And it’s on both sides. The business generally doesn’t know what IT can and cannot do, and what’s hard versus what’s easy. And the IT teams may not know what business really wants. Business tends to over-specify something thinking it will be helpful, but that isn’t always the case. So there’s a lot of work to be done on the BU/IT interface.

I see educating senior staff members on IT issues as important. I’m also extremely keen to make sure that — with the exception of the infrastructure network — all our projects are seen as business projects and headed up by business people.

We’ve invested a lot in IT governance and I’m insistent that every IT project be chaired by someone from business, not someone from IT. We have IT people on the steering committees of all our projects but the chairman should always be a business person.

That makes it essential that what the IT team is saying to the business team is intelligible. We mustn’t use jargon, because business wants to discuss IT issues using business terminology. Then the steering committee becomes useful, because if you spend your time discussing technical details, it becomes boring, whereas if you discuss business issues, then they like to get involved.

For me, governance is a core issue for projects. But before that, there needs to be an understanding of the key IT issues.

CWHK: What’s your take on RFID (radio frequency identification)?

Nicol: The issue is this: the industry does lose bags, and most of them are found, but some, regrettably, are lost forever. The effort of keeping track of them and finding them is obviously expensive. But I don’t believe that RFID is the right solution for baggage-tracing at this time.

I’m not against RFID — we know that it can work really well. For example, in the technology used in the automatic Hong Kong Cross-Harbour Tunnel [toll] readers, it’s fantastic. I think there’s a number of good uses for RFID, but I don’t think baggage is the right one to be tackling now.

I think we’d have to make changes to all the baggage systems in the world to get it to work properly. A common agreed-upon standard is critical, though that’s being worked on so it’s under control. But the important thing is that you’ve got to have RFID at both ends. So if you’re shipping luggage to airports with RFID at one end and not at the other, you’ve got to have both RFID and barcode. This is always a problem with any technology migration: you end up with two systems running concurrently, so the migration costs are huge.

If you look to the future, you can see that RFID — or the next generation, whatever replaces RFID — is an opportunity. I think that in general, RFID is a struggling technology. People have seized on it and can conceive of the benefits, but they aren’t necessarily aware of all the issues associated with it. I’m sure if you look back, 10 or 15 years in the future, you’ll wonder why we ever used those silly old barcodes!

CWHK: What new technologies are you following?

Nicol: We’re working very hard on things associated with self-service at the moment: e-tickets, improved forms of barcoding, getting away from the magstripe-ticket model of boarding passes. The industry is moving towards two-dimensional barcodes and while there are as many issues associated with that as with RFID, the payoff is higher. We do have trouble with readership levels of magstripe readers at boarding gates and 2D barcodes will enable people to issue [their own] boarding passes at home. You’ll be able to print them out on your own computer printer.

With 2D passes, we do have the same issues with technology availability at each stage, but I think there’s an awful lot of single-journey [tickets], so that’s easier to implement — the migration costs are lower. I think this is the best new technology for airline travel I’ve seen in a while. Another implementation — now at the trial stage — is being able to check in over your 3G telephone. You’ll get an image of your 2D boarding pass on your mobile display.

All of these implementations are dependent on the end-facility. In some airports — for example, Delhi — you have to have an airline-issued ticket, they won’t accept e-tickets. So we face those challenges.

CWHK: How do you balance the need to understand and support all departments and business units while also running and managing your own IT organisation?

Nicol: When IT is important to a company, then it’s important that IT be represented at a senior [management] level. In some businesses, IT is not a core system — it’s limited to a few desktops and peripherals. But IT is central to any airline, whether it’s a low-cost carrier or a full-service airline.

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