15 OCT, 2013
Over the last 10 years, the travel business scenario has changed significantly. Today selling travel products is all about ‘best’ rates. To sustain in the battle to offer the ‘best deal’ and ‘best fare’ to the consumers, travel business owners have been forced to reduce almost all of their possible profit margins.
I still remember when a service fee of $6 was a norm across online sales of air tickets. Commissions and contracts were available to travel agents. Cancellation fee on hotels were healthy.
The emergence of large online travel agencies changed the rules of the business across the globe. Fuel prices and global economic conditions added to the challenges of earning healthy margins. Travel became the most competitive business. Commissions dried up, segment fees reduced and “no fee” became the new best seller.
On the Travel Technology side, along with successful implementations, I have heard stories of many failures where travel businesses were not able to derive what they wanted from technology. Most of the time the key reasons for failure has been:
- Over ambitious technology goal on a constrained budget
- Lack of ‘competitive’ Travel Technology expertise
- Poor IT team and management, suffering from ‘over promise’ and ‘under deliver’
In this ecosystem, how could a travel business set about defining an effective Technology Strategy for itself?
As a travel technologist, I have many motivations to say “buy my software”, but in my experience that’s not a good pitch. After carefully analyzing various successes and failures in the industry, here is what I feel I have learned:
3 steps to define an effective technology strategy
Step 1: Identify what Travel Technology you need
Well, it is easier said than done. Most of the time not articulating the technology needs well is the biggest hurdle in Technology Strategy. As a travel business, here is what you could do to clearly articulate the need for technology.
- Pen down the technology needs of the organization as envisioned by the business owner / key management personnel
- Consult with people external to the organization such as technology consultants, Travel Technology companies, GDS account managers, CRS / Suppliers and Travel Technology bloggers
- Let a technology company interview you and recommend a solution. This is generally free most of the times.
Pursuing one or more of these three exercises diligently will build enough knowledge base about what your internal Technology Strategy should be. Identify and validate these thoughts with inputs from internal operations and marketing teams.
Step 2: Build vs. Buy?
This is considered the most complex question. The answer lies in dividing Travel Technology needs in three buckets.
- Out of the Box
What is proprietary?
It is important to identify your differentiator as a travel business. Most of the time , proprietary defines a piece of technology which reduces OPEX corresponding to your business operations or is the biggest revenue generator corresponding to your business model.
What is a customized need?
Is there any part of your technology needs that could be sourced through an existing technology solution, customized per your need?
What can be out of the box?
This might be the most effort intensive part of your technology needs and may require tremendous investment to build. Getting an out of the box solution that meets majority of your requirements and configuring it as per your needs, is the ideal way. How to evaluate an out of the box solution is in itself a comprehensive process.
And now we come to the next complex part of this exercise.
Step 3: Identify the right budget and vendor
Identifying the right budget and vendor is the most common shopping problem in every business sector. It takes a lot of time and energy to reach to a decision.
Let’s compare technology acquisition to the decision of buying a laptop. There are many vendors to choose from. There are laptops priced from $300 to $3000. Your decision to buy would be shaped by the life of the laptop and the continuity of business (your work) it will guarantee.
Similarly the continuity of your travel business would significantly depend on the Travel Technology you choose. That is why identifying the right budget and the vendor is a complex decision.
I would attempt to breakdown the process of identifying a vendor into simpler steps, since just asking a vendor for a quote would not necessarily help find the right one.
Simple Steps to Identify Travel Technology Vendor
- Expertise – Does the vendor have expertise in travel business?
- Support & Servicing – Travel is a service business. Irrespective of whether the product is ‘off the shelf’ or is being built for you, longevity and promptness of support is critically important to maintain a personalized quality of service to your customers.
- Customization needed vs. Customizability –What is the future customizability of the software? (Applicable to both out of the box or custom built software) Whether customization done today decrease future cost of changing the technology ? This is an important question to ask and seek answers to.
- Value Add – Another important evaluation parameter for selecting a vendor is to check what part /component of the software is available free of cost and would remain so in the future.
- Stability – Your guarantee of service to your customers depends on the stability of your vendor. It is important to seek answers to questions such as is the vendor going to be in business for long ? How are you safeguarded if a vendor goes out of business?
- References – Who are the customers of the vendor? Can the vendor provide references?
- Maturity – Is the vendor’s organization a product oriented and innovation driven institution or do they survive by making money from one gig to another?
- Empathy – Does the vendor consider your business as their own? How willing is the vendor to empathize with your business challenges?
Budgeting for technology is also a little challenging. It may be worthwhile to look beyond the onetime fee and understand all cost factors, including the cost of extended support the vendor may provide during your business life-cycle.
Cost should also include additional overheads of implementing technology, especially when you are dealing with GDS or CRS / Consolidators. Budgeting done in partnership with a selected vendor often yields the best results.
I have attempted to lay out a model that would help travel businesses shape their Technology Strategy.
As always, I would happy to hear your experiences and views.
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