1. Cathay Pacific Doing More with Less
Lecture 16
Cathay Pacific
Doing More with Less

2. 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%

3. 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, 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)

4. 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

5. 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
Continued migration from homegrown to package software.

6. 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 stationsin 47 parts of world where IBM doesn’t operate
Providing hand-holding to ten most senior people in company and their assistants!
HP manages website

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