Week 1 Monday, August 29

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Week 1Monday, August 29

• Business and IT

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Major Changes in Business Due to IT

• Globalization of business
• E-enablement
• e-Business
• e-Commerce
• Knowledge sharing and knowledge management

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IT as an Equalizer
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IT as an Enabler of Global Commerce
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From Automation to Integration
MIS Reporting
Decision Support
Enterprise Systems
EDP
Automation
Organization Integration
25 years
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Changes in the External Environment

• Internet economy
• Global marketplaces

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IT Resources
Strategic IT
IT to Remain Competitive
Basic IT(Automation)
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Model of Strategic IT Planning
High
Strategic Strategic IT plan, initiatives
Factory Operational IT
Impact of Existing IT applications
Support Basic elements
Turnaround Gradual adoption
Low
High
Low
Impact of Future IT applications
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Goals for the New Environment

• Leverage knowledge globally
• Leverage and exploit knowledge to gain a
  competitive advantage (e.g., customer
  relationship management)
• Organize for complexity
• Alliances and partnerships (e.g., supply chain
  management)
• Global marketplaces (i.e., government
  regulations, culture)
• Work electronically
• IT as the integrator (e.g., enterprise resource
  planning)
• Handle continuous and discontinuous change
• Necessity is the Mother of Invention (i.e.,
  innovation)

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AmericanAirlines and SABREUsing IT to Gain a
Competitive Advantage
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American Airlines and SABRE

• After World War II, air travel in America became
  very popular
• Large jetliners were soon to replace
  propeller-driven airplanes
• A large number of passengers could be carried
  with one flight
• The current method of processing passenger
  reservations needed to be changed to accommodate
  greater demands

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American Airlines and SABRE Passenger
Reservations
Sacramento
New York
Dallas
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American Airlines and SABRE Passenger
Reservations
Sacramento
New York
Dallas
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American Airlines and SABRE Passenger
Reservations
Sacramento
New York
Dallas
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American Airlines and SABRE Passenger
Reservations
Sacramento
New York
Dallas
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Problem with Matching Passenger Names to Seats
Reservation List Passenger Flight Date
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Problems with Manual Passenger Reservations

• Difficult to match passenger names to seats
• Resulted in poorly managed inventory (i.e., seats
  on a flight)
• Overbooking Dissatisfied customers
• Underbooking Lost revenue
• Aircraft with greater seating capacity and
  greater frequency of use on the horizon
• More inventory and passengers to keep track of

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Capacity Shifts
48-105 passengers
Douglas DC-7
Cruising speed 365 mph
Greater number of passengers
?
114-149 passengers
Greater utilization of resources
Boeing 707
Cruising speed 550-600 mph
?
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American Airlines and SABRE

• In 1953, C.R. Smith, president of American
  Airlines initiated a five-year study with IBM to
  assess the technical feasibility of an automated
  and integrated passenger name reservation system.
• In 1958, American and IBM sign an agreement to
  develop and implement Americas first automated
  passenger reservation system
• The system is named SABER (Semi Automated
  Business Environment Research)

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American Airlines and SABRE System Objectives

• Match passenger to seats
• Contain seat availability on all the carriers
  schedules
• Print passenger itineraries
• Issue boarding passes
• Perform all of the above in a travel agents
  office

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American Airlines and SABRE Initial System

• Installation begins 1961
• System comprised of
• Two IBM 7090 mainframe computers
• Six magnetic drums with 7.2 megabytes of storage
• Records of seat inventory
• Flight schedules
• Application programs
• Memory to handle 1,100 concurrent customers

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American Airlines and SABRE Initial System

• Cont.
• Sixteen disk storage units with 800 megabytes of
  storage
• Passenger reservations
• Duplicate copies of all information stored on the
  drums
• The system was fully operational by 1964

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American Airlines and SABRE Upgraded System

• Subsequent upgrades included
• Fare quotation
• Advance check-in
• Boarding pass issuance
• Stand-by passenger handling
• Itinerary generation

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Retail Automation and theAirline Deregulation
Act of 1978

• Retail automation
• Objective Extend the reach of the reservations
  system beyond the airline's organizational
  boundaries to the industry's distribution system
• OperationalizePlaced reservation system
  terminals in travel agencies and in large
  corporate offices
• CooperationFormed a joint task force with
  travel agencies and hardware vendors to solicit
  further specifications of the system (1974)
• Use the system to exploit the deregulated market

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Retail Automation

• American installs SABRE terminals with
  specifications made by the joint task force in
  travel agencies
• Reservations centralized in Tulsa, Oklahoma

Tulsa, Oklahoma
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American Airlines and SABRE Retail Automation
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Co-Host Programs

• American would display the schedules of other
  airlines on SABRE for a fee
• Intended to increase SABREs presence in markets
  American did not service
• Extended Americans reach to markets served by
  rival United

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Anti-Trust Law Suit

• In 1984, eleven domestic airlines filed a suit
  against American and United claiming they
  possessed a monopoly in the electronic booking of
  seat reservations
• Involved anti-trust violations
• No carrier could afford to give up the chance to
  sell tickets to customers of travel agents
  booking a large portion of its revenues in the
  region it serves

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Anti-Trust Law Suit (Cont.)

• Both American and United required travel agents
  using their systems to become franchised dealers,
  selling tickets on other carriers only to the
  extent the host permitted
• The systems were powerful, anti-competitive
  weapons

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Anti-Trust Law Suit (Cont.)

• The government ruled
• When a vertically integrated monopolist controls
  a non-duplicable resource at one level that is
  essential to competition at a second level, it
  must offer the resource to all on the same terms

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American Airlines and SABRESummary

• Competitive Advantages
• Accurate passenger inventories allowed American
  to manage under/overbookings to jointly optimize
  passenger service and capacity utilization levels
• Reduced labor content in the reservations process
  while increasing the productivity of the
  remaining reservation personnel (efficiency)
• Increased their presence in current markets
• Increased their presence in markets not served

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