Is Travel and Hospitality Industry Already Up In The Cloud?
As all enterprises are talking about the cloud infrastructure and making their IT solutions on cloud, I was wondering if the travel industry is already more mature in terms of cloud computing. The commercial model of pay per use has been in ages since GDS started evolving. Most of the off-the-shelf products available in market already have a pay per use model. Is cloud the new form of ASP model? Is provision of web-services equal to cloud?
The concept of Service Bureau originated between 1960-70s. Computing as a utility for service bureau was first proposed by John McCarthy in a speech at MIT in 1961 (Source: Wiki). ASP models originated from service bureau models and now it is better called as Software-as-a-Service. Global Distribution Services (GDS) are providing distribution services since the 1960’s and charge transaction based fees. So all these services started to co-exist over a period of time. Then we saw the emergence of the term ‘Cloud Computing’. The word was derived from ‘telephony’, and Mr. Ramanth Chellapa used the term ‘Cloud Computing’ in his lecture in the year 1997 (Source: Wiki).
Cloud as a metaphor of internet, is aggregation of
– Infrastructure as a Service (IaaS Infrastructure)
– Platform as a Service (PaaS Middleware)
– Software as a Service (SaaS Application)
Application Service Provider (ASP) or SaaS is a subset of cloud.
When dividing the travel related applications in the cloud landscape, we can illustrate them as below:
There are some service providers with a thin line of difference in terms of service provided; like Pegasus™ have an application in SaaS platform as well as middleware switch. So I tried my best to depict the differentiation on the major services provided. There are many more service providers in each of the platforms.
Using TripIt or Yahoo! Travel, complete travel planning can be done by the end consumer. Some well known middleware companies like Pegasus™ act as a switch in between and distribute the inventory of hotels to GDS. GroundRez is the switch for ground transportation companies. They charge a per transaction fee along with other contractual obligations. The entire social medium platform can be developed using Pluck™ or KickApps™. Force.com from Salesforce.com™ is a well known platform for the enterprises to build their own customized solution for the CRM activities.
Vax Vacation Access™ is a dynamic packaging booking, based on this platform. There are third party content providers like Whatsonwhen and VFM Leonardo hosting the content and it is accessible through Web services. The main advantage for an enterprise is the time saved to go online or start the business without re-inventing the wheel. There are services like Translation services, which facilitate internationalization (i18n), which are available through Web services. These kinds of services reduce the operational cost and open up new channels of distribution.
All the mentioned solutions may be transaction or usage based rather than the conventional model i.e. license based. For example, another way for an enterprise is to maintain their own content management system, employ a few data entry operators, ensure data quality, etc. This will not only increase the capital expenditure (CapEx) but there will be considerable money invested into operations. The main advantage for an enterprise in cloud is that companies can concentrate on their core businesses and with a reduced CapEx model, cloud computing enables them to “go-to” market efficiently and effectively.
All major GDS provides the aggregation of majority of the services in-house. New business models have emerged over a period. Due to the technology platforms available, solution providers are able to come out with tailor made solutions. In my opinion, companies focusing on corporate travel are able to benefit the most, since they are able to provide the enterprises with more number of tools to facilitate the travel of their executives. Most of these tools are provided in a SaaS model.
Though we can claim that travel and hospitality systems are already in the cloud, there are many areas, which are not in the cloud yet. These areas can be divided as per their functional areas as below:
There are a number of Airlines, Travel and Tour Agencies, hotels and resorts in the mid tier segment. They are not able to go into transaction based model with some of the existing vendors. This is mainly due to the CapEx as well as OpEx investments involved or even the contractual obligations they need to sign up. Some do have bad experiences in signing with vendors since they are not able to match their expectations. The majority of software products in this segment are based on transaction based models rather than license based. Some of them even have a combination of both. More solution providers in these areas are required for the industry so that ‘ideally’ CapEx is removed and OpEx becomes more reasonable. This is possible with the advent of emerging technologies like SOA, Virtualization, Grid computing, etc..
Other main challenges in implementation are,
– Tailoring the solution to meet the business needs of the enterprise leading to expectations mismatch.
– Upgrading the solution to keep pace with technology
– Data security and sensitivity especially if the provider is servicing two competitors
– Risks involved in business continuity for both the vendor and the enterprises.
The business continuity risk weighs more if the enterprise is big and the decision is taken based on the nature of the service provided. Amazon and Google are the first few who exposed Web services.
When compared to other segments of industries such as financials and manufacturing, does travel and hospitality industry stand at a higher end of the cloud maturity curve?
I think the answer is “Yes.”
However, there are solutions available in SaaS platform in other industry segments though the amount of penetration in Travel and Hospitality segments “seems” to be high due to the nature of business models involved.