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The Digital Revolution

Speaker Transcripts

A New Look For Old Systems
Roger Willcox, Intelligent Environments

You probably say, who are Intelligent Environments and I ask that question too. If I can show you a video to kick off. I feel a little bit like Michael Owen because 1½ years ago nobody had heard of Michael Owen. He's a footballer, plays for Liverpool and now he's a saviour and so on! We don't know anything about the travel industry and what we do know, we've learnt in the past year or so. We've found out a huge amount about your industry and I get to stand up and tell you about all we've found out. What we are trying to do now is to help travel companies take advantage of the Internet which I regard as one of the most exciting distribution channels in the world for any industry. So what I want to talk to you about is how to wire up your back end systems, core selling systems and so on.

A bit more about us. We've grown quite quickly, we have a piece of software called Amazon which is almost like a server engine integrated with lots of different back end systems. With respect to the travel industry, we have done some other work. We are now building it up as a practice in other sectors and the area we're most interested in is servicing and selling systems for agents and, in some cases, direct, and call centre replacements and so on. We are working with BT and I'll tell you a bit more about that and they are very interested to move the travel industry from X25 viewdata based networks onto IP browser based networks, along with other people.

Here's a map of London. It's the wrong part of town but never mind. Here's the stone age and here's where we are after the stone age. Paper and information systems. Typical people off to book their holiday with their brochures. People want front office and back office effectiveness, start putting in PCs and networks and so on. You've got people here moving towards full electronic commerce, exploiting IP technology. Here's some stuff that's going on in your industry. You've heard about all these things. Single currency, Euro prices, brochures, vertical integration, viewdata and so on. Lots of fantastic digital TV just around the corner. You've got a huge amount of change and I, as a complete outsider, finding myself in the middle of this, it's just so exciting and you guys must be incredibly excited as well. There has been so much change and I'm an outsider and I work in fast changing industries like telecoms, but your industry right now is on the brink of the biggest changes over the next 6 to 24 months imaginable. There are fantastic opportunities for you, both for individuals and organisations, to take advantage of all these changes and they're not just technology changes. There are new channels, new ways of doing things, all the integration stuff. Phenomenally exciting. It's great, I love it. So you know what it's all about. These are all the forces going on in your industry.

There are lots of cost pressures. The commissions they pay you, they are always moaning about them. The amount of money that goes in brochuring is astonishing. I can't think of any other industry like it. The commercial ratios on brochures, 10 or 20 to 1. You're looking at fabulous luxury, high margins, lots of very expensive networks costs. People moan about it don't they. Hands up who doesn't moan about their costs. Lots of people worrying at Board level about the new line ups, acquisitions, Airtours buying up a company a week, that sort of thing. What do you think they are going to do with all these things? How are you best going to service your customers etc. Lots of new competition. You've got Microsoft just coming in and they're doing a million dollars a day. That's not bad for a complete new entrant, from scratch. That's in the United States. More choice. Supermarkets will be selling these things soon then there'll be the ultimate travel agent for you.

New technologies. You are all getting very excited about digital TV .You do the Internet stuff and you'll be OK for digital TV. The same technology by and large. Some aspects may be slightly different but it's fundamentally the sort of investment that delivers stuff over the Internet and is very similar with cable and digital TV. Mobility - a big issue - with remote working, agents walking into your house doing a booking for you with a web browser on a PDA. He could have been scribbling away on a PDA next to the mobile phone and do a booking for you.

So there's this happy guy with a great big pile of brochures. I pick up about 10 every time I go to a travel agent, just to find out what people are doing, to see what words they use to describe their business. And I'm not a customer. He goes off with all these brochures. Then he goes back into the agent, in the back office. The agent does some searches and then makes a booking. More video time.

So this is my ultimate vision. I'm a technology person and I'm learning travel industry speak. This screen is a web browser and with all this information that you have which is actually quite useful to all sorts of people in your supply chains. For example, you can search around to find out about holidays in Capri. What do the other operators offer for an agent for the same locations, same hotels. I can also look at servicing options, the side-trip to Pompeii, car rental, all the people you need to know about, whether that's on the customer side, the agent side or the operator side. Tailored information. I'm very interested in the idea of customer relationship management where you know what the person likes. I'm only interested in about three types of holiday. Personally speaking, I like to be told about these three types. I'm not interested in the rest. I want to be selective. For example, resorts have an appeal automatically so I'm not going to be interested in white water rafting for example. I'm off to Japan next week. I'm worrying about visas, papers, injections and things like that. These are all trivial examples but this information is in your supply chain sitting around there and with this Internet technology, you have the ability to bring it all together from different databases, different applications and consolidate it at the point of sale. Wherever it is. That's what I see and we're not just talking about pages for booking, what about the people in the resorts? We allow a holiday person pax, that's what they are called, so you arrive as paxes in these distant locations and all they know is our booking number and the number of people in our party and that's all. What a great welcome on your week's holiday. With a Web browser or even a PDA you could get hold of all this information from your supply chain, dead easy. And think of the service. You're an operator and you want to communicate your brand and the value of your services as opposed to everybody elses. Customer retention. How do you know they will come back and buy your holiday next year. These are things that you can be doing to make sure that happens. From the agency point of view, you can do this across operators. Some people might not want to do this, some people might want to. I don't want to tell you the business decisions that your organisations need to make, and it depends on what your strategy is. If you talk to people who own agency chains and they say, we really want to have everybody's information coming in. We want it looking exactly the same. Other people who have a strong brand might want to have their brand, their service, their approach and processes in these systems and are not interested in playing off a level playing field where products get commoditised. On the other hand you get a volume if all the agents like your products. So these are business issues but you could do it across operators.

Let's look at the financial benefits. The obvious is contact with the consumer across the agents or direct contact from the operator's point of view. Fantastic savings just sitting up there, a very strong story to your financial director. Commissions, roughly about 10%, might be more, might be less, depending. Say you did £250 million turnover, cost of money going in the brochures, that's your profit right there. You're doing a little bit of your servicing and selling on the Web directly through agencies, low cost transactions, you can save brochuring costs, to simplify it you can have a personalised brochure. The system knows what you like and you only get the things that are relevant to you. It stores it so you don't have to do all these searches. Mr Willcox, I know you like white water rafting and holidays with your two young kids. People talk about standing fees, about network charges, call centre costs etc. It costs about £45,000 to run a 200 person call centre etc They are tiny little numbers but they add up because you are big companies and I think if you do that sort of thing you can demonstrate tangible ROI very quickly. It's not fair if you sit there and say it's all rubbish because one of those bullets will be appropriate to your business and even if only one is you are talking about big savings. In many cases it will be a lot.

The question you all want answered is how's it all done? There are some exciting graphics on this one for you. I'll talk you through it. You are sitting there at your browser and you press to show to and from date where you want to go from, where you want to go roughly, the brochure code, IP connections. Then you have your servers Pentium probe sitting there and can go off into different systems. There's a whole load of different systems that you want to integrate. You've got your core reservation system, selling systems, computing transactions all in the form of screens. That's the raw information that comes with the booking system. But then at the same time you think what is the point of delivering this fantastic user interface unless I can bring in other data sources which gives more value added because why can't you have pictures and the text and information about all the other things that are ancillary to the raw booking activity. And you can do that with a web browser, bring it all in at the same time. To me that's real value added. No matter who's using the browser to get this much information, appertaining to the booking process or searching process, it's much better than what you have today. We've all seen the little blue and yellow palm tree. Now you can have all sorts of things. You can have videos of Michael Owen for example! Then you can consolidate the information and then you have to make it into Web pages and send it back out over the Internet with a browser to the person sitting at the desk. This is what we do. I think it's simple but the other part is more complicated. There are three basic ways of doing it. I don't think there's much point in taking a viewdata interface and slapping a browser on there. You might as well stick with what you've got. That's not progress. I'm interested in doing something better and making it easier to use. You can probably get that just by buying a viewdata interface, buttons and things like that. You are putting a lot more intelligence into it and so why not bring in extra information. You are going to have to do that anyway because nobody understands those funny little codes. Nobody understands LHR. You do but I've only just recently found out and there are all the other funny codes that you have and the operator specific funny codes etc. and this is years of training to figure this all out. That's why most agents only deal with one operator. That's the real reason. It's because they can't learn all the codes! (That's a joke.)

There are three basic technical ways of doing this and I'm going to talk about each one of them in a little bit more detail. Firstly, you've got the basic screens that you might use if you have a direct business - your call centre. In the vast majority of cases there's digital fax computers with VT terminals. There are one or two others, ICL, IBM mainframe. So you're taking these screens and making them better. The second way, if you're lucky enough to have callable programmes without going through screens. There's the screen, there's all the adding up, the processing, the data access and so on. If you are fortunate to have that bit separate then you're in very good shape because I think that's much better. It's a bigger investment. When we achieve nirvana and everybody has an industry standard, an EDI sort of thing.

A bit more detail about each thing and how to do them. The idea here is really simple. There's a screen that a human operator sits at like the guy on the video. You're typing in things, making mistakes, pressing buttons, go to your next menu, logging out and logging back in again. So instead you create a server that does all that for you and interprets what the browser wants with what it knows the screens have to have. Typically, you want to combine the screens because if you get this many holidays they won't fit on a single page but they can with a Web browser so you have the opportunity to make screens a lot better. Use access to databases at the same time, the Oracle, whatever you want, databases to bring in additional content - pictures, text, extra information, selling hints and tips, whatever is appropriate to your business needs. You could just re-engineer the screens but I think the real value is in bringing extra data in at the same time. Technically, very quickly because you are using a system that works, is completely reliable. However, if you change that system on a regular basis, you will need to keep the front end and back end in sync. For some people that might be a cost, for other people it might be a minor inconvenience and for other people again it might not even matter because somebody else takes care of that and you never change it anyway. So you need to be aware of that if you go down this particular path. But it is quick to get a result. Some people have loads and loads of screens but by and large the average is between 20 and 50, key search availability and booking screens. In many cases, it's a darn sight less than that again. So the programming effort with our tools and so on to make one of those screens is around three-quarters of a day just to generate the programme. That's outside the testing and so on. Contrast that with writing a few mainframe or transactions to service the information that you want and you have to ask for data. I've given you the holiday and you have to create a specific transaction to feed you that information back. If you haven't done this yet, it's a good thing to do, if you don't, you need to build them which is a big investment. So it's good, quite resilient, very maintainable but it does require reprogramming of your selling systems if you haven't already done it.

Finally, when you guys all agree on the standard message that this is what a passenger looks like, this is what holidays look like and so on then you could move to this sort of thing, standard messaging which works on all main systems. That's a strategic issue and some of you might not want that to happen, other people might welcome it. I know there are one or two things knocking around in this domain, people, talking about common standards and so on. I don't think they are widely adopted anywhere. In any event this will require host system changes of some description and also send out information to the standard messages. That's how you get hold of the data. Then in the travel industry there's a particular issue which I'll just highlight very briefly. It is about the large volumes of data. If you count the number of viewdata goes they have that they have to service from their agency chains, we're talking about millions a day, certainly in the high hundreds of thousands and with Web technology there's a particular issue here because browsers have to handle all this. You have memory, you can press the back button, go to the Coca Cola sign, download something from Netscape and your backing system knows nothing about what the browser's up to. Of course they don't, why should they. Something has to remember what they've already typed in this, this is their name, their security ID and they've been through these things - where is that being held? Not in the browser. It's not being held on the back end system. Something has to memorise this and so there's this issue of "state". Memorising things and content and so on. So there's that first. You've got to remember everything. This is even more complicated to explain. Imagine you are an agent doing a search, you go through some back end systems and it comes back with the information. That's just one person. It might take 2-5 seconds to do that but if you are a large operator, you might have several thousand agents doing this a few hundreds of times a day, all at the same time and as each one takes 2-5 seconds, you can imagine all these people pressing "submit" saying go find me a holiday all at the same time, creates lots of these things going at one time so it's got to remember everything you've done and handle lots of them going on at the same time and that's quite tricky. It's alright if it's just one database, one user, because there's nobody else messing with it. So bear that in mind and you're probably going to want 24 hour day every week availability. There's a particular challenge here of course. You have to work with all the old systems and all the new stuff and position yourself for the future which may well be some general messaging standard, to keep your front end whilst migrating your back end so you definitely have to have something that's quite flexible in the middle.

That's a bit of background and there's some very exciting stuff underway. You'll know that Thomson has announced the Top 2 for its agents. Most people we talk to have some sort of Internet strategy, or are developing their Internet strategy, and feel it is important in some way or other. You know this because you're having these conversations internally and in places like this which is all about the digital revolution. We're working with BT on an initiative which we're hoping to unveil at ABTA in conjunction with several major players to combine the various skills of IT with networking and electronic business and come up with a business proposition which will help people move gradually in an acceptable kind of way from the old style networks to the new style networks.

As a summary, I am completely convinced that there's a strong business case for doing these sort of things but this business case is going to be different for every single organisation. I don't know if you are familiar with things like game theory. Everybody goes to work on the Underground and then somebody builds a bridge and you think that on the first day that bridge is available, are you going to go on that bridge. Maybe all the people who went on the Underground are now going to go on the bridge, in which case you could go on the Underground and get there first. This is a game theory. That's where you are at the moment. As organisations, you need to figure out which of the bullets on this fit your industry or your business and where you want to take it. You are all completely different. You have different opportunities and issues. Some people have their own agency chains and there are other people who don't so they're a bit worried about racking space. Worried about vertically integrated organisations only selling their holidays because it's cheaper and more cost effective etc. That's why they bought them in the first place. So you need to think, what is my competitive strategy in that context and when you figure that out you'll then realise how you can deploy this technology. I think there's a fantastic opportunity for specialist operators. This gives them a huge reach for their products and services. There are always going to be specialist holidays like the white water rafting in Colorado. They can't invest in developing agent relationships but this means they can do that so it's a completely different strategy for them.

This enables you to do new things, to look at new channels. Brand new distribution mechanism. I think it is very easy to integrate and bolt on new things and dramatically reduce time to market new products and services much more quickly than you can, say, by changing all the existing systems. You incorporate new things. I genuinely believe you can improve the selling process very significantly, adding more information, making it smoother, making it easier, whether it is a direct channel or indirect channel. This is a global reach issue. You don't have to think UK. Your reps for example know all about you and the history of your needs and requirements. You can cut some costs. You are quite cost sensitive. I think the training costs would be dramatically reduced. People say it takes 2-3 weeks to get an agent operator fully up to speed. Whether it is 7 days or 4 weeks, it's a big sum of money in down time. It's an opportunity to save brochuring costs by personalised agents who know who you are, the sorts of holidays you like.

This is for people who wish to establish a direct channel. You can transfer booking costs to the customer. I know that certain operators have an issue with late bookings for example which are zero margin in some cases and they take up an inordinate amount of time. In a direct selling context, having something like this means you can soak up all that time, no problem, on a low margin business so you improve profit straight away. I believe that there are also some opportunities for reducing capital investment here. If you can build things very quickly, you can reduce the networking costs. If you already have systems that work, ie legacy systems, you don't need to throw them away, you can capitalise on your investments without throwing them away. It's not even clear to me that the ongoing costs of going through this channel would be any greater so you're just capitalising on what's already there.

If you want to know more about us or me, please contact me but here's a few summary points. I genuinely think that it's so exciting being in this industry at this moment in time for the next 2 years. There's a huge amount of change at this technology level and technology background is changing. I do believe that IP will be the platform in future in your industry, one way or another. So you need to be doing something because it will be the future. Even if you're not doing anything, you should be thinking about it or planning for it because by the time somebody else does it you could be gone! New channels are available so you don't necessarily have to get rid of your existing channels. That's a business decision. I do think that early adopters will do well and this is true of any industry. For example, amazon.com. Ironically, amazon.com sells books and is now buying book stores. It's going to be on a physical book shelf as opposed to a virtual one. Everybody's heard of them, it's where you go. Things like Expedia in the United States. They have a very strong brand presence, it is the Internet site where you buy holidays. People have the opportunity to establish a brand and customer loyalty. Do you want to be left behind?

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