The Comair Information Systems and the Gaps between the IT Strategy and Business Strategy - Essay Example

1.0 Introduction 1 Company Structure Comair, a regional airline carrier with a market cap of approx $800 million, owned by Delta Airlines, was started as a small airline company with three propeller planes in year 1977. Delta partnered with Comair in year 1984 when Comair was having 25 Propeller planes and the flight crew schedule was managed using pen and paper. Later in 1986, Comair leased the software system from SBS international to track and schedule the crew for the airlines. As a wholly owned subsidiary of Delta airlines Comair was widely appreciated for its track record of its profitability, management, time keeping, cancellation and lost luggage statistics. 1.2 Analysis and Objectives In spite of maintaining a high performance on the business parameters, Comair was simply grounded for a full 3 days during the peak holiday season because it faced a highly damaging IT risk issue on December 24, 2004, when the company’s Information system for managing the scheduling of the crew and flights crashed. It is impossible for an airline to fly when its mission critical crew scheduling system fails. In case of Comair, this IT failure resulted in a loss of approx $20 million which was actually wiping out it previous quarter earning of $25.7 million. This report is a study in the Comair Information systems and highlights the gaps between the IT strategy and business strategy. The report also attempts to suggest an information system which can take care of the gaps between business and IT strategy so that such failures as mentioned above are prevented as much as possible as well as identifies the people, technology and organization issues which Comair must take into account before building a resilient information system. 1.3 Information Systems and database structure Comair information system was purchased from SBS international in the year 1986 after union and federal regulations forced Comair to meet higher standards in its management procedures. To comply with the regulations, Comair leased software from SBS International to track & schedule its flight crews. The system worked admirably and was a welcome relief for the staff who were managing the schedule using the pen & paper until then. As the business started growing, Comair felt a need to upgrade its information system as the existing system was written in FORTRAN for which there was no in-house expertise available. Moreover it was the only system using old IBM AIX platform compared to current HP UNIX. Following table lists down the milestones in Comair’s IT journey until Dec 24, 2004 against their business strategy. Year Milestone IT Strategy for Crew scheduling software Business Strategy 1977 Comair started None. Crew was scheduled using pen & paper To be the regional airline 1984 Alliance with Delta ---- do ---- DELTA connection program 1986 Federal Aviation Administration safety regulations for effective management of Crew time in the 24 hour window SBS international legacy system purchased To march towards the top of the industry 1996 Other airlines started adding jets to their fleet and hence blunting the advantage Comair gained by adding Bombardier regional jet, two years earlier. Need felt to upgrade the Crew scheduling system but nothing was done on the face of various people issues To gain a competitive edge by improving identified bottlenecks like SBS legacy system 2004 Comair’s crew scheduling software crashed ---- do--- ---- do --- 2.0 SWOT Analysis As can be clearly seen from the comparative table in the previous section esp. the events in 1996 and 2004, there were huge gaps in translation of Comair’s business strategy into the IT strategy. Following is the SWOT analysis for Comair during 2004 – Strength 1.0 Maintaining a high performance on the business parameters: Comair had very good track record efficient business operations which was visible from the consistent high parameters. Its business metrics were excellent and commanded a lot of respect from business rivals. It was one reason why Comair was acquired by Delta Airlines. Weakness 1.0 Lack of knowledge on Software maintenance: Comair was aware that the SBS international’s software was written in FORTRAN; still they did not have the relevant technical support. In spite of constant pressure from business to make IT a competitive weapon, the IT strategist of Comair chose to look in other direction. This resulted in IT losing its edge to support the business strategy which was to enhance the revenue which means more crew, more aircrafts, more scheduling and hence more scheduling changes. Thus dangerously lurking towards the impending disaster of reaching the software limit sooner or later! 2.0 Lack of awareness on System limitation: On the business strategy Comair wanted to compete with the other regional airlines while on the IT Strategy no body was aware about the critical system limitation that the software can not handle more than a fixed number of schedule changes. 3.0 Lack of Initiative and Complacency: Comair’s operations was brought to a complete halt due to breakdown of Business software on December 24, 2004 . It was during that fateful period that Comair realized that they do not have any backup recovery plan. Although this reasoning dawned upon them in late 2004, but still they did not take any concrete action to fill this essential gap. Neither the IT wing nor the business management strategist showed any initiative to come out with a sound IT risk management policy. This issue was always put on backburner sometimes due to strikes ,sometimes due to change in leadership and sometimes out of sheer passing on the buck habit on part of both IT Department and Business strategist as to who is required to do such activities. 4.0 Opportunity 1.0 Create business continuity plan for any IT breakdown: Comair wanted to become highly competitive in the area of their operations without really having a BCP for information systems. This oversight came back to haunt them on the fateful day when their mission critical system failed leaving their operation paralysed because of lack of any backup system. Hence a business continuity plan created in this time can be helpful during crisis. 2.0 Key IT inputs should be taken to define business strategy: This is quite evident from the case that even though IT had become key business driver to enhance various parameters of business success in the twenty years of purchasing SBS international package but Comair did not suitably modify the decision making processes so as to ensure participation and key inputs from IT and IT risks. Threats 1.0 Unforeseen circumstances like strikes, people movements: Even though in some situations business leaders of Comair tried to bridge the gaps between the business and IT strategy, they couldn’t succeed because of unforeseen situations like Delta acquiring Comair, Director of Risk & IT left the organisation, pilots strike etc. This essentially portrays the low priority business leaders of Comair gave to managing the risks associated with the IT systems they were using. 2.0 Competition closing in: In early ‘90s, Comair was first among its competitors to add Bombardier regional jet to its fleet. However, the advantages gained from that transaction lasted only a few years. By 1996, other regional airlines had added jets to their rosters of planes. Comair then had to look for a new ways to gain a Competitive edge. Value Chain Analysis: The following diagram illustrates the Comair’s Value Chain pictorially. All the nine aspects of value chain are represented in the diagram. The company is an Airline Service and uses Technology in its various operations to manage and monitor the processes related to crew and flight scheduling, passenger reservation. Comair Value Chain Analysis Inbound Logistics : Route Selection , Passenger Service , Fuel Maintenance Flight Scheduling , Crew Selection , Aircraft Acquisition , Price Regulation Operations : Ticket Counter Operations , Gate operations ,Aircraft Operations , On-board Service ,baggage service, Ticketing offices Out-bound Logistics: Baggage collection, Hotel Reservation and Car rental, Flight connecting. Marketing and sales : Promotion ,Advertising , Travel Agent programs , group sales Services: Loss baggage service and complaints follow-ups. Porter Five Forces Analysis Bargaining Power of Suppliers Aircraft Manufacturers Aircraft Leasing Companies Labour Unions Food Service Companies Fuel Companies Airports Local Transportation Service FAA Hotels Potential New Entrants Foreign Carriers Regional Carrier Start ups Cargo Carrier Business Strategy Change Bargaining Power of Buyers Travel Agents Business Travellers Federal Government Pleasure Travellers Charter Service U.S. Military Cargo and Mail Substitute Products and Services Alternate Travel Services Fast Trains Boats Private Transportation Videoconferencing Groupware Intra-Industry Rivalry Other domestic and international airlines 2.1 Objective for Comair To develop robust and efficient Information System which is available 24*7*365 and ensure a good Business Continuity plan in case of breakdown of Information systems. 3.0 Information systems 3.1 Current System at Comair Comair is currently using the IBM-AIX based flight scheduling software from SBS .The software is developed in FORTRAN. It handles all the operations like crew management, flight scheduling, reservation management etc. The software has not had a single up-gradation since its purchase almost two decades back. It still functions with a limitation of a maximum of approximately thirty two thousand schedule changes in a month. 3.2 Proposed System at Comair A computer based information system refers to an application package which provides the facility to store and retrieve data along with automating some of the information processing tasks in an organisation. There are various types of information systems as give below – TPS or transaction processing systems: The purpose of these is to provide a quick data access and retrieval mechanism to the users. These are generally designed for multi-user environments where millions or billions of transactions are needed to be performed in a second. They are generally used in banking and other online transactional environments like reservation systems and library management systems MIS or Management information systems : The MIS are typically deployed to generate reports that help business executives to take strategic business decisions .The essential features of these software’s are collating of data and advanced reporting and presentation functionalities DSS or Decision support systems : DSS provide highly advanced business reporting features by processing highly complex data using sophisticated queries. The objective is to aid management in making projections based on limited information. The airlines industry can be broadly classified into Transaction processing systems. The following sections talks about the process involved in the development of Information systems as well as the scalability, risk management and organisational aspects of the suggested information system. 3.2.1 Developing the new information system The diagram on the next page represents the process involved to develop a system to take care of existing flaws in it. The system would be developed considering the following parameters - 1. Scalability: How many users or transactions can be supported by the system and to what capacity can it be scaled. 2. Ease of Maintenance: The design of Information System should be such that it is easier to maintain and operate. The platform and the language used should be such that trained manpower is easy to obtain. 3. Integration with the other mission critical application: The application should be designed in such a way that it can be seamlessly integrated into other mission critical applications of the organization. 4. Warning to the operator on the impending limitation: All the limitations, bugs and short-comings of the application package should be known to the operating staff prior and management prior to deployment of new system. 5. Reporting of scenarios that might arise out of failure: The knowledge regarding the scenarios that might arise due to failure in patching or modification of application package should be transferred to the management Diagram 1: Process to develop new Information system The above diagram lays the process which can be utilised to develop an Information System which not only takes care of the exposed breakdown issue but also it can identify more items which might be hidden somewhere in the package waiting to be discovered on another fateful day. The model in the above diagram addresses the requirement to develop the system matching the current needs along with the future scalability option by selecting the performance goals and consistent improvement focus with a feedback loop in place to point the gaps between the goals and results. 3.2.2 Selecting the right technology After identifying the software specification through the diagram 1, the next step is to identify the technology which can deliver the expected system. In case of Comair, they were still operating on FORTRAN and old IBM AIX platform. This resulted in a gap where it was difficult to find out the programmers of FORTRAN within the organisation when it was needed the most. Following diagram is useful in identifying the right technology for the right specification. Diagram 2: Selecting the right technology 3.2.3 Organisational aspects of Information technology Management Developing the right Information technology package for the business is not the end of the process. The system developed must be neatly tied up with the organisation management and business strategy development. Information technology strategy must be derived from the business strategy and the business strategy must be developed in consultation and awareness of the limitation of system in place. If the business needs to scale up, the Information systems must also be upgraded to keep pace with the higher volumes of growth. The organisation should be structured in a way that CIO (Chief Information officer) of the company is part of the meeting where the business strategy is being formulated, results are being discussed and enhancement to volume is being discussed. His advice must be sought on whether the Information system would be able to take the additional burden due to expected increase in transaction volume. If the CIO raises a red flag over a certain proposal then either the systems must be upgraded to manage the additional volumes or the proposal must be held until CIO approves. CIO on his part must answer following questions before accepting any new proposal which results in additional transaction volumes on the Information systems on following aspects: 1. Whether the systems would be able to absorb the additional data generated 2. Will the additional volume result in slowdown of the response time to the GUI user 3. Will the suggested business strategy compromise with the existing architecture of the Systems 4. Is the BCP plan in place and regularly visited to ensure that people are aware of their responsibilities during the breakdowns 5. On a proactive basis CIO should survey the market to identify any gaps between the platforms being used in the organisation and the ones available in market 4.1 People, organisation and Technology issues There are several people, organisation and technology issues which Comair must consider if it chooses to develop an Information system. 4.1.1 People issues in developing a new IT system at Comair Thorough internal analysis to identify Core strength e.g. quality and quantity of resources available and the distinctive competencies. In case of Comair, they had very good business metrics which were widely appreciated by trade magazines. In addition to above it is also important to identify the weaknesses i.e. In-adequate resources, managerial and organisational deficiencies etc. Comair failed to take note of the inadequacy of people in the organisation to support the archaic legacy system and hence nobody could sense the impending disaster. Comair should also focus on building an effective knowledge management system so that IT support staff and others are aware about the system they are supporting and the kind of limitation or dependencies it has. The KM system may look like below diagram – Diagram 3: Proposed EL (Employees learning) System at Comair 4.1.2 Organisational issues in developing a new IT system at Comair Following aspects must be kept in mind regarding the organisational issues in developing a new IT system at Comair – Business strategy and technology strategy must be integrated and developed in coherence. In fact, the highest decision making body of the organisation must consist of people drawn from all areas but representation from IT department must be mandatory. Any IT development must be a justified expense while no business area must be developed with cascading development in IT. One of the well researched Harvard study in the subject notes that the most Information Technology risks in an organisation arise from the failure of the enterprise’s IT governance processes and not because of any on-the-ground worker issues or any complex technical phenomenon. Any IT governance failure results in a cascading effect of not-so-good decisions. Hence organisations having a dependency on IT must ensure that they have effective IT governance, controlled complexity in the system, and full exposure to the risks with a relevant mitigation plan. Ignored IT risk, over a passage of time results in various risk-blinded actions which cumulatively create the conditions for chaos and potential of a runaway risk incidents increase. This is exactly what happened with Comair where a disaster was waiting to be happening. Two more aspects which need to be taken care are attention to risk and controlled complexity. Lack of attention to risk increases chances of operational failure. Everyone involved in managing IT risk must think differently. It the job of CIO (Chief Information Officer) to make the business results of IT risk apparent to business executives. The CIO should provide an environment where such discussion can take place executives can brainstorm on the IT risk in terms of business impact. Business executives on their part give a full visibility to CIO of the business strategy and any changes therein. 4.1.3 Technology issues in developing a new IT system at Comair It is important to note that the IT risk to an organisation increases simultaneously with the investment in the high end IT product. A firm becomes dependent on the smooth functioning of a sophisticated IT system by utilising it for its key processes, competitive efficiency thereby increasing their vulnerability to external threats. Following diagram illustrates the process of integrating the business strategy and the Information systems strategy of an organisation. Diagram 4: Process to integrate business strategy with IT to tackle organisational issues Bibliography: Nah, F. F.-H. (2002). Enterprise resource planning solutions and management. Hershey, PA: IRM Press. Wagner, B., & Monk, E. (2008). Enterprise Resource Planning. Boston, USA: Course Technology. Rockart et. Al (1996) Eight imperatives for the new IT organization, Sloan Management review. Trcek, D., Trobec, R., Pavesic, N., & Tasic, J.F. (2007). Information systems security and human behavior. Behavior & Information Technology,113-118 Turban, Efraim & Leidner, Dorothy & McLean, Ephraim & Wetherbe, James (2008) Information Technology For Management 6th Edn., John Wiley and sons. Read More