InformationWeek: The Business Value of Technology

October 30, 2000

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Quest For Calm Waters

Royal Caribbean is on an aggressive voyage to overhaul IT and its business culture

By Cheryl Rosen

More on CRM:

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hen Tom Murphy took the bridge as CIO of Royal Caribbean Cruises Ltd. last year, he agreed to an uncharted voyage aimed at giving the cruise line a smooth sail into the new millennium. He was to develop a plan to modernize the systems that run the ships, determine new ways for technology to help boost sales, and, most of all, keep customers happy and safe.

His IT systems would launch against a backdrop of moist air and salt water, the natural nemeses of secure systems. The movement of the ships adds another interesting dimension: Royal Caribbean's first onboard teller machine once gave new meaning to the term rollout by careening across the deck in high seas, sailing past passengers until it was caught by crewmen and permanently bolted to the floor.

The need to unravel, simplify, and modernize Royal Caribbean's IT infrastructure is of crucial importance as the cruise industry ramps up for unprecedented growth in the next few years. Rolling off the production lines are soaring skyscrapers of ships that offer everything from rock climbing walls to skating rinks. The 12 new ships in Royal Caribbean's pipeline will add 45,000 passenger berths in the next five years, increasing the line's total capacity by 27%. And behind the scenes, technology will be required to run it all.

Even before beginning the technical work, though, Murphy took on the task of revamping Royal Caribbean's company culture and the role IT plays in it. He advanced his IT troops from their traditional supporting role and turned them into the front-line commandos in driving Royal Caribbean's business operations and sales effort. Where previously IT responded (or failed to respond) to the ideas of others, now it's driving change through three major initiatives: the transformation of the employee, customer, and supply-chain systems. During the next three years, the IT department will change the way Royal Caribbean does business with its workers, its customers, and its suppliers--and the decisions the department makes will determine how successful the company is.

Although Royal Caribbean president Jack Williams handpicked Murphy, he didn't hand him the power to initiate change. Rather, Murphy grabbed it, says Juan Delacruz, principal in the IBM Global Transportation unit that served as consultants on the modernization project. "I don't know how much free rein Tom was given, as opposed to what he earned," Delacruz says. "Internally, he's seen as a visionary--but many CIOs who are visionaries lack the boldness to take real leaps as Tom has done." Murphy's staff says he has provided a clear focus and energized the IT company by upgrading skills, changing the measurements used to determine success, and improving the compensation offered as a reward.

"I didn't have any more or less opportunity than any other officer to be a major influencer of strategic decisions," Murphy says from his office overlooking the Port of Miami. "My job is to establish relationships, build trust, apply a business-value filter to everything, and then sell it to the business units that are our customers."

Still, he acknowledges that the 2000 IT operating budget, approved in October 1999, is the biggest in Royal Caribbean's history--44% higher than last year's budget. Furthermore, Murphy's team will get $150 million to $200 million in capital funding for the three-year transformation project now under way. Roughly 20% will go toward a human-resources upgrade, 50% will be spent on customer initiatives, and 30% will be used for supply-chain improvements. The time is ripe for Royal Caribbean to make such an investment.

It recently reported record third-quarter results, with net income increasing 18.5% to $201.5 million.

The bigger IT budget resulted from a presentation Murphy made at a capital planning meeting. "I said that I've heard from the day I walked in here about how much we waste on IT, and basically that's true," he says. IT systems were so convoluted that upgrades had to be replicated numerous times, for example. He continued: "How you choose to invest your money is up to you, and if you choose to invest it in IT projects that have no value, that's your fault. An IT budget is about the business' appetite for technical work, and how strategically or tactically this business intends to approach it. My job is to be as productive as possible with the investment." Now all Murphy has to do is deliver.

Murphy began in April 1999 by reorganizing the IT department. For years, the group had been split into two separate organizations: one working on shipboard technology and one on shoreside systems, each with its own application development and no common process. By making everyone part of a single group, he eliminated the differences between them and focused on rebuilding at every customer point--pre-cruise, during the cruise, and post-cruise.

At the same time, he tackled the breach between the IT and business staffs. Where before the two groups rarely communicated, Murphy mandated that every IT project have a business sponsor at the director level or above who identifies the expected return on investment.

The IT department also added a director of business solutions and relationships, a position held by Julie Ponder. Her job, she says, is to find the middle ground between business needs and reality by helping everyone understand the trade-off between "keeping the fleet running today and building a new infrastructure for tomorrow."

Cross-functional IT groups, rather than individuals, now make decisions, says director of IT enterprise architecture Chris Harrison. Instead of slowing the process, the new system has served to make it possible to get more done. The fact that no one person is solely responsible for problems has empowered IT to take some calculated risks. "It's no longer about accepting what someone else tells us to do, but about IT driving the business side and educating it," Harrison says. "That sends a signal that we'll present ideas and then fight to see them accomplished."

Even the age-old IT issue of coming up with cost and date estimates has been turned on its head, says Perry Sandburg, director of Newbuild Solutions IT, an IT division dedicated to focusing on ships under construction. Whereas IT managers once were pressed for exact cost estimates that might let quality slip for years, now "we say, here's our best guess at this point in time, and it's X% accurate. We redefine our delivery dates and costs as we go along," Sandburg says.

Murphy is the primary link between the business and IT organizations. Like many CIOs, he didn't set out to work in the technology field. With a bachelor's degree in English from the University of Richmond, he describes himself as "a business person in technologist's clothes."

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Photo of Tom Murphy by Tom Salyer
Photo of Julie Ponder by Tom Salyer
Illustration by Jeff Jackson

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