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United IT Employs "Strategic Themes" To Cut Cost, Enable Collaboration

United's IT Department devised a seven-tiered approach to bringing its business units together with each other - and IT - and managed to save money and create new opportunities in the process.

InformationWeek Staff

November 9, 2005

6 Min Read

A closer look at CIO Nirup Krishnamurthy's Strategic Themes reveals how United was able to re-conceptualize IT's relationship to the business units in a way that integrated the disparate entities' business units making them more collaborative.

Cost Leadership " ensuring a low-cost structure " had been an ongoing effort for two years prior to the IT Transformation project, but it had previously been thought about in silos. So while cost-cutting activities were not new, this theme brought together different business units to identify new ways to work together to cut costs. Business units were able to share ideas more effectively. For example, several resource planning initiatives had developed independently across business units. Flight dispatch and aircraft maintenance, for instance had each developed manpower planning processes that were redundant. Through Theme Management, these redundancies were identified and eliminated, and cost-cutting initiatives are now weighted by how broadly they can be applied across the organization.

The Customer Experience theme has brought together the customer-facing divisions of Marketing, Sales, Airport Operations and Onboard Operations. New initiatives for United.com, for instance, reflect how IT and the business units have closely aligned their efforts. Over the next 12 months, United.com will be enhanced with a new booking engine and customer user interface that will improve the customer buying experience. These technological improvements will implement features that customers have been asking for, such as improved calendar capability and ease of use. Today, more than 13% of United's tickets are booked on United.com, and the site serves more than 7 million customers every month. Both of these numbers are anticipated to grow as a result of the enhancements to United.com.

United IT is also engaged in a budding effort to ensure consistent customer treatment " whether through Easy Check-in kiosks, online check-in, telephone reservations, or an airport check-in desk " for travelers of the 16 airline partners that make up the Star Alliance partnership for United's elite travelers. As part of this, IT signed a common platform contract with Lufthansa and Amadeus as a provider to put all reservations systems into one platform, replacing its own legacy systems in the process. The new system offers enhanced customer service for both sales and airport environments, and includes functionality such as schedule, availability, inventory, reservations, fare quote and ticketing, as well as passenger check-in.

The technology implications of the customer service initiative are numerous, and have become a long-term focus for Krishnamurthy and his team. For instance, United has been a leader in utilizing Computer Telephony Integration (CTI). Using this technology, a customer who has filled in a significant portion of his reservation, but for some reason cannot complete it online (due to personal preference or due to a technology error), can call a sales agent, who will be able to access all of the information input to that point, so that it does not have to be re-entered. Therefore, United's IT has taken a strong role in integrating technology and human interfaces.

Just as the Customer Experience theme brings together the customer-facing divisions, the Revenue Optimization theme brings together United's revenue-focused divisions " Marketing, Sales, and Planning. Through IT's own research and statistical modeling, and that of an external consulting firm, IT has developed a technology-based solution that both maximizes United's passenger yield and provides the pricing flexibility that United needs to compete with low-cost carriers.

The complexity arises from the fact that United's network is constructed in such a way that benefits both point-to-point customers (e.g., San Francisco to Los Angeles) and connecting customers (e.g., Tokyo to San Francisco to Los Angeles), each of which have very different profiles and needs. The technology solution maximizes overall revenue by forecasting and optimizing both kinds of traffic. "This technology will truly be a game changing one for United by providing us the ability to profitably compete in a marketplace with different segments of customers with varying needs, expectations and revenue potential," says Raj Sivakumar, United's Managing Director for Business Technology Consulting.

Once the above themes were under way by second quarter of 2004, the IT leadership team had a better idea of how to efficiently coordinate its efforts with the business units. The IT Infrastructure theme enabled the department to do this while addressing the need to reduce IT's complexity and risk. One of the problems they faced is that the industry is notorious for its legacy technologies - decades-old systems that are maintained by cobbling together upgrades over the years, ever increasing IT's complexity in the process. And then there were upgrades done on an as-needed basis - such as United's desktop upgrades - instead of as part of a coordinated, standardized plan. "This behavior created a nightmare IT environment " with 15-plus hardware types, seven operating systems, and 100-plus system images," said Krishnamurthy.

To address this, the IT Infrastructure effort is undertaking a broad initiative to appropriately source (be it outsource, insource, or whatever is most appropriate) its commoditized functions, and to facilitate the development of more common platforms across the business units.

If IT was going to push the business to think creatively about increasing efficiency, it needed to lead by example. Thus, IT is evaluating creative partnerships with external vendors to have these third parties maintain certain portions of United's IT infrastructure. IT would benefit by virtue of the fact that these vendors would have the incentive to both improve, and run more efficiently, the infrastructure under their purview. "This initiative will ultimately address technology obsolescence management in an environment where capital and cost are severely constrained," says Krishnamurthy.

United IT has benefited from the Shared Services Optimization theme with the assistance of SkyTECH Solutions, LLC, a U.S.-based software company that provides consulting and customized IT solutions and products for the global travel and transportation, logistics and retail industries. United has a 49.9% stake in the company, and Krishnamurthy sits on its board. The partnership with SkyTECH, was originally thought of solely in terms of staff augmentation. Given how much United IT's staff has been cut in recent years, Krishnamurthy began leveraging SkyTECH's services for fixed-bid application management and long-term contracts, as well as other development activities. This has enabled him to manage more smoothly the increased demand for IT services even with the reductions in his staff.

Investments under the Safety and Compliance theme are directed toward a safer, more compliant environment through the use of technology. The technology investments pertain to areas where regulatory compliance and internal controls are key drivers. For example, a technology refresh process in the area of document management and delivery of technical manuals enables a new more efficient way for mechanics to access key compliance documentation. This project was driven by a need to replace older obsolete technology and processes, and was enabled by better safety and compliance idea generation across business units.

Finally, Employee Engagement deals with technology investments that enable and promote employee communication, engagement and union relations. This theme has resulted in an overhaul of the HR, E-Mail and technology platforms that enable a host of employee self-sufficiency efforts.

Peter High is president and founder of Metis Strategy, Inc., a Washington, D.C.-based consulting firm specializing in the intersection of business strategy and IT. He can be reached at [email protected].

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