Etihad Airways: Information Technology Outsourcing Category of Spend Analysis - Case Study Example

ETIHAD AIRWAYS: INFORMATION TECHNOLOGY OUTSOURCING CATEGORY OF SPEND ANALYSIS Student’s Name University Name Course Date (Words: 2955) Executive Summary Etihad Airways has engaged in outsourcing of IT-related services from two major word class companies; Cognizant and Accenture. The contract is focused on these two companies providing software solutions as well as develops web applications that would seek to maximize on customer experiences. The firm is set to benefit from this outsourcing contract in a number of ways that include; ability to make available capital funds to be used for other purposes; easier access to world class capacities from this two IT firms; free resources that could then be used for other functions; as well as access resources that could not be accomplished internally. It is thus suggested that Etihad Airways; i) Continue with the contracts with the two IT firms as a way of making sure that their respective operations remain top of the world class and competitive with those offered by its immediate competitors like Emirates Airways. ii) Develop a rapport with these two IT firms for the purpose of establishing a relationship that would foster share of knowledge with the internal IT staffing personnel in order to maximise the gains that relate to the outsourcing contracts in place. Table of Contents Executive Summary……………………………………………………………………………………………………………………… …2 A. Importance of IT Software & Hardware Outsourcing for Etihad Airways……………………….4 B. Impact to Etihad’s Stakeholders...………………………………………………………………………………….5 C. Etihad Airways Marketing Analysis………………………………………………………………………………..7 D. Value for Money related to Outsourcing of IT Services For Etihad..……………………………..10 E. Conclusion & Recommendation………….……………………………………………………………………....11 References …………………………………………………………………………………………………………………………………….13 A. Importance of IT Software & Hardware Outsourcing for Etihad Airways The organisation of choice is Etihad Airways and the service of spend for this case is software and hardware IT consultant to the company. For the recent past, Etihad Airways has engaged two distinctive outsourcing firms to manage its IT platforms. The two firms are Cognizant and Accenture. Under the deal related to Cognizant, it is expected that will assist Etihad Airways to define its overall digital strategy while still re-imaging the guest experience along their travel journeys. It is important to note that Cognizant focuses on conducting a study on the organisation’s underlying business operations as well as technology platform for the purpose of formulating and operationalizing a fundamental digital ecosystem (Flinders, 2015). This is set to enable Etihad Airways achieve high efficiency in adopting a multi-channel distribution framework, customer segmentation as well as a personalized marketing efficiency. As a result of this service spend, the airline is set to be fairly-positioned to avail guests with tailored service offerings, customised travel solutions as well as ensure that the customers have access to top notch experiences throughout their journey that is based upon their loyalty statuses as well as a personalised preferences like the extended service features; preferred seating, meals; preferred holiday destinations and far much more that will ensure customers are satisfied with the service provided (Flinders, 2015). For Etihad Airways, this has translated to the possibility of unlocking new revenue streams as well as developing and implementing new commercial models. In general, the airline’s contract with IT Services Company; Cognizant, is focused on providing assistance to a specific strategy in order to improve on its overall customer’s digital experiences. Cognizant will manage the airline’s current web applications and portals while still making sure to incorporate them into a rather newer digital platform (The Economics Times, 2015). In fact, the established Digital Centre of Excellence is set to promote the aspects related to innovation with the organisation’s fundamental technology partners. In a collaboration deal signed between the airline and Accenture, the IT consultant company is focused on developing Etihad overall corporate processes as well as staff in relation to the industry best practices (Consultancy UK, 2015). To achieve this, Accenture has made sure to deliver on strategy and management consulting services in areas related to HR, finance as well as procurement and supply management, which will focus on ensuring a definite business transformation that has propelled the organisations towards top notch productivity and efficiency levels (Consultancy UK, 2015). The deal has successfully ensured the creation of a positive working relationship with Etihad’s technology partner; SAP, for purposes of assisting with the implementation of Enterprise Resource Planning (ERP) software solutions as well as the capacity to test these solutions at an immediate newer Testing Centre of Excellence that is situated in Abu Dhabi as a way of enhancing Etihad’s overall existing operations. B. Impact to Etihad’s Stakeholders Directors/ Managers; impact on directors and managers is set to be positive. Considering the fact that all of these activities conducted by the two consultant firms are aimed at improving customer experience, managers and directors will be able to achieve set revenue goals and overall objective of maximised shareholder’s wealth as well as minimisation of operational costs. The adoption of the IT consultancy service will ensure to promote operational and organisational-based efficiency levels by way of creating an incorporated model to business processes as a result of a common adoption of technological platform. These stakeholders would also benefit greatly by increased number of guests or rather customers hence boost their bonuses and compensation packages. Staff/ Team Members; this set of stakeholders will benefit from improved working conditions. They will now be guided by efficient technological platforms on how to maximise their services to guests within any given travel journey hence build on their reputation and experiences. Accounting & Finance Function; will also be affected by this development in IT outsourcing aspect. The impacts will relate to how they engage in budget preparation for top notch customer services like improved and preferred meal choices; preferred seating and budgeting for the newly-created loyalty status of customers. Sales & Marketing Function; will now be required to readjust their communication strategies with customers given their segmentation statuses. They will also be required to acquire new knowledge on how to meet new guests’ expectations in relation to preferred destination holidays, preferred seating and impacting the underlying management of cycle times especially in seasons when travel journeys are conducted mostly. Customers; will definitely have a positive experience with this new IT dealing. Their experiences with Etihad Airways will be impacted positively given that they will now be able to only enjoy preferred seating, meal choices; customised service offerings that relates to their loyalty statuses as well as a tailored travel solution. Certainly, customers are also set to enjoy the benefits that emanate from a personalised marketing function, which is one of the key objectives of the IT dealing with Cognizant and Accenture. Pressure groups; will now ease their standings on the way the company conduct their consumer associations. The improved IT dealing is set to improve on customer’s travel experiences with the airline so that they get their value for money. Given that most of the services offered will focus on an improved and digitalised platform, it thus goes without saying that the employees’ working conditions will now be fair hence little or no pressure from such other stakeholders as trade unions. Community & Society at large; this stakeholder will be impacted positively with the spend unit related to IT consultancy offered by the two notable firms. It is clear that given the statuses of these two firms in the market, they are set to develop and operationalize a digital ecosystem that is environmental friendly and one that promotes efficient working standards at the firm. The community will benefit greatly from employment opportunities that are now offered within the newly established digital centres. They are also set to enjoy more resources being offered under corporate social responsibility as a result of improved revenue streams that is associated with improved customer service and loyalty numbers. C. Etihad Airways Marketing Analysis The firm’s marketing process is initiated by way of segmenting the underlying market, selecting or even ensuring all factors are adhered to target only the most profitable section of the segments and thereafter, placing the service offered on the minds of the consumers within this pre-determined market segment. This is then followed by provision and communication of the service offered. It is important to understand that for purposes of succeeding in the modern airline industry, which is extremely competitive in nature; an organisation should devise a need for adopting an efficient and effective marketing strategy together with positioning the right set of principles. In fact, this forms the current position of Etihad Airways that is driven by four fundamental principles related to undifferentiated superiority, a market that is inspirational to a person- for which the airline tries as much as possible to operate as a small airline in order to offer customised service to all of its underlying customer-base, and, also to act like luxury brad while still maintaining focus on the overall spectrum. An incorporated marketing mix for services offered at Etihad Airways can be summarised using the 4Ps. Each of these sections is expounded as below in relation to aspects of segmentation; targeting and positioning (STP). Product: The airline has successfully distinguished its product into Etihad Diamond First Class and Etihad Pearl Business Class. In this regards, the airline has incorporated with the provision of actual staff provisions as well as availability of multi-cuisine offerings. The airline’s augmented products allow it to achieve a rather top notch competitive advantage. Price: Etihad’s pricing strategy is focused on a market penetration for purposes of expounding its market share within the United Arab Emirates. The firm has managed to formulate and maintain a pricing strategy similar to Emirates Airlines thereby positioning it fairly to break-even on its overall operations. Place: The airline ensures to capitalise on its physical presence within the Asian region as well as corporate website where easy ticket-booking is made easier and a fundamental aspect of boosting sales. The website application allows the customers to customise on their travel preparations. Promotion; Etihad Airways rely on a great number of promotional strategies to market its service offerings to customers. It engages in sales promotion; sponsorship; direct market and intense newspaper and travel magazines advertising. PESTEL Analysis Political: the current political environment is characterised by liberal government. The Sheikh provides intense level of support to the airline industry for the purpose of making it the best within the world. However, the current instabilities being experienced in the overall Middle East region have prevented possible penetration of its operations to those markets. Economic Environment; the operational environment at Abu Dhabi is characterised by an established middle-class economy that can afford premium ticket pricing. The Dirham, which is the country’s operational currency, is strongly positioned in relation to such major world currencies like the US dollars and GBP. There are also free-trade agreements that the airline can effectively use to its advantage to expound on its business operations within the region. Social-cultural environment; UAE’s social environment is characterised by an enormous cosmopolitan workforce as well as population thereby allowing for major international flights. Most of the Emirati’s are wealthy people that have a liking for comfortable lifestyles hence they can easily purchase the airline services. Technological environment; UAE’s has adopted and embraced technological platforms in a clear and successful manner. The current level of internet speeds and expertise in matters technology has ensured that the airline industry could now digitise their operations. As a result of favourable technological advancements in the country, the airline has been able to actualise the online bookings that have translated to extensive revenue streams. Legal environment; UAE business environment is characterised by a rather low tax regime especially for the flag carrier of the country. However, the country exercises a high level of costs in relation to VISA, which has prevented travel journeys to the country. Porter’s Five Model The bargaining power of suppliers; given the fact that only Boeing and Airbus are the two suppliers within the business level, their bargaining power is high. As a result of this, there is a low chance that the companies will be able to negotiate prices with these suppliers hence making Etihad’s market penetration abilities highly challenging. This is due to inability to purchase a good number of fleets that can successfully service different routes across the globe. Threat of New Entrants; there is likelihood that the possibility of new entrants penetrating the market is low. This is especially due to the high capital costs related to the purchase of new fleets and administrative functions among many other costs. Threat of Substitute Products; there are quite a good number of rivals within this industry with major ones being Malaysian Airlines and Emirates Airways. There are also small airline carriers that service domestic routes. This means that the threat of substitutes is somehow high hence passengers are likely to switch service providers at any given moment. Threat of Rivalry; major competitors within this industry include; Emirates Airways, Saudi Arabia and Qatar Airlines that possess a great chunk of the existing market share. This poses a great deal of competition to Etihad Airways in relation to market penetration. To curb this level of threat, most of the airlines are engaged in increasing the number of their fleets in order to service a great deal of routes. In this regards, these carriers are able to sustain enough market share at any given moment. Bargaining Power of Customers; their bargaining power is considered to be somehow low in the overall airline industry. Customers are left with no choice of negotiating ticket prices hence they are only allowed to part with the predetermined pricing model. Thus, it is notably clear that Etihad Airways can engage in price reduction strategies as a way of ensuring efficient market penetration within the domestic and the international market as a whole. D. Value for Money related to Outsourcing of IT Services For Etihad In the decision to outsource Cognizant and Accenture IT related services, Etihad Airways sets to benefit a lot. It is set to enjoy easier access to world class capacities from this two IT firms. It is important to note that Cognizant has also been contracted by such major airlines as Malaysian Airways as Emirates Airways for a similar purpose. Thus, it means that these two outsourcing firms are fairly-positioned to execute tasks in a quality way hence help Etihad achieve its overall business goals of high revenue streams. Certainly, the outsourcing of IT would help Etihad free resources that could then be used for other functions. For instance, it is quite clear that the human resource personnel can now have an easier way of readjusting and realigning employees previously working within the IT department to conduct other useful functions within the firm. It thus goes without saying that the use of personnel efficiently to maximise gains and achieve organisational goals would now be possible. Following this line of reasoning, it can be said that outsourcing the IT service would result for focused investment of immediate staffing personnel as well as other set of underlying resources on its fundamental activities and competencies. In addition to this, the firm is likely to enjoy a great deal of risk level reduction that relates to operating IT services that could otherwise result to immense level of losses. A good example is when inexperienced internal IT personnel are used for the purpose of developing web applications aimed at increasing customer efficiency. Due to their inexperience, they are likely to formulate and implement an inefficient application that would even result to losses on the resources used in developing it. Notably, the decision to outsource only means that Etihad Airways would enjoy from capital funds being made available to be used for other more important and profitable ventures. For instance, as a result of the outsourcing, Etihad Airways would now focus on using the readily-available funds to increase the number of its fleets hence expands its revenue streams in the long-term period. The fact that Cognizant engaged in creating a Digital Centre of Excellence for Etihad Airways could be a result of resources not being made available by the company. In fact, the development of this centre results to more efficient and effective functioning of the IT department like it was never seen before. The impact of market change on the procurement of the IT service would best be explained using the demand and supply function. In the event that the level of quantity demanded in relation to changes in prices, it means that the overall supply for the IT service would increase tremendously due to more customers being interested in enjoying the easy and effective ways of booking tickets and enjoying their respective loyalty statuses. Conclusion & Recommendation To sum up, Etihad Airways has engaged two companies; Cognizant and Accenture, which are both IT-related companies to ensure that they both develop web applications and manage software solutions for its fleets. This category of spend that the airline has managed to contract has resulted from its efforts to improve its current customer experiences as well as develop definite revenue streams. In doing so, the company is set to enjoy lots of benefits that include; ability to make available capital funds to be used for other purposes; easier access to world class capacities from this two IT firms; free resources that could then be used for other functions; as well as access resources that could not be accomplished internally. In the event that the level of quantity demanded in relation to changes in prices, it means that the overall supply for the IT service would increase tremendously due to more customers being interested in enjoying the easy and effective ways of booking tickets and enjoying their respective loyalty statuses. It is thus suggested that Etihad Airways; i) Continue with the contracts with the two IT firms as a way of making sure that their respective operations remain top of the world class and competitive with those offered by its immediate competitors like Emirates Airways. ii) Develop a rapport with these two IT firms for the purpose of establishing a relationship that would foster share of knowledge with the internal IT staffing personnel in order to maximise the gains that relate to the outsourcing contracts in place. References Consultancy UK. (2015). ‘Accenture Supports Etihad Airways with Transformation’. Accessed from http://www.consultancy.uk/news/2250/accenture-supports-etihad-airways-with-transformation Flinders, K. (2015). ‘Etihad Airways chooses Cognizant to Support Digital Transformation’. Computer Weekly. Accessed from http://www.computerweekly.com/news/4500260772/Etihad-Airways-chooses-Cognizant-to-support-digital-transformation The Economics Times. (2015). ‘Cognizant Bags Etihad Airway’s IT Contract’. Accessed from http://economictimes.indiatimes.com/tech/ites/cognizant-bags-etihad-airways-it-contract/articleshow/50172876.cms Read More