Six questions every executive in Airlines, Freight and Travel Services should ask about cloud computingAirline, Freight and Travel Services executives need to evaluate what cloud computing can do for their business. Asking the right questions is the place to start.

By Robert Zippel, Christian Tueffers and Alan Healey

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Given the momentum behind cloud computing across so many industries, it is not surprising that Airline, Freight & Travel Services companies are beginning to evaluate its potential and to capitalize on the benefits it offers. When assessing what cloud can do for their businesses, Airline, Freight and Travel Services leaders need to take into account the distinct and rapidly-evolving challenges that their sector faces today, as an era of restricted access to capital and volatile energy prices coincides with sharply-rising expectations on the part of customers.

While the airline industry is expanding with traffic driven from a multi polar world, it also faces a need to adopt multiple and more complex business models while improving cost and profitability. The freight and logistics sector is increasingly driven by customers’ demand for higher speed and lower cost. And travel services companies face a pressing need to expand their reach and become more customer-centric.

Against this background, Airline, Freight & Travel Services companies need to rethink the way they manage their operations, workforces and relationships. For example, airlines are facing a dramatic widening in their circle of contact, as they try to manage a huge number of direct touchpoints with their customers. Similarly, travel service providers like hotels and casinos are facing the challenges of selling more offerings direct to customers while handling peaks and troughs in demand. And, in an era of high fuel prices, freight and logistics companies are wrestling with how to make their overall cost base lower and more variable.

Cloud computing solutions could undoubtedly help Airline, Freight & Travel Services companies to address these challenges, as well as opening up opportunities to work in new ways, align IT more effectively with business need, and reduce operating costs. But questions remain about issues such as the security of customer data and the reliability of cloud offerings. Also, while cloud computing promises to deliver a wide and powerful range of capabilities, this emerging technology’s relative lack of settled infrastructures, operating models and service providers makes it hard to evaluate its longer-term costs and risks.

What is clear is that, in the years to come, cloud will reshape how computing strategies are developed and managed, how information is controlled, and how the economics of business technology are applied in the Airline, Freight & Travel Services. Experience shows that the effects of the cloud vary widely between different industries, and even different companies in the same industry. Faced with such uncertainty, it is all too easy for decision makers to succumb to “analysis paralysis” or to leave all decisions to the IT department. Cloud computing is too important for such a hands-off approach.

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The Airline, Freight & Travel Services sector is a diverse global industry that is currently facing widely differing market conditions, pressures and opportunities in its various markets. Here are four pressing issues for each sector of the industry.

Airlines1. A rapidly-expanding ‘circle of contact’With broadband penetration rising, airlines are facing a shift towards conducting their entire value chain over the Internet — not just selling tickets direct to customers over the web, but also taking additional service elements online such as check-in, loyalty programs and real time flight information. In turn, this move to online channels is driving rapid expansion in airlines’ ‘circle of contact’ with customers—who are also becoming increasingly savvy and demanding. As Figure 1 shows, airlines are now more likely to cite improving passenger operations as their top IT

investment priority, ahead of other IT investments such as flight and aircraft operations.

2. Intensifying competitionAcross all markets, low-cost carriers (LCC’s) have proved that lower fares universally stimulate air travel growth. Particularly in Europe, the rise of the LCCs is just one element of an increasingly competitive landscape, with high-speed trains and video conferencing also challenging for travel spend. The competitive pressure has already led to a number of airline mergers and code-sharing alliances.

3. Margin pressures High and volatile fuel prices are creating pressure and uncertainty around airlines’ cost bases and margins, driving them to target ‘auxiliary’ revenue streams such as booking fees and selling goods on board. In the future, additional revenues will come from an expanded range of on-board activities and communication services.

4. Security risks and regulationSecurity risks and regulation are on the rise globally, imposing overheads such as new safety reporting requirements, longer processing times, bio-metric screening and advanced scanners at gates.

Figure 1. Airlines’ IT investment – priority areas

Source: SITA Airline IT Trends Survey – 20101

Priority 5 Priority 4

Passenger operations

Flight operations

Aircraft operations

Passenger security

Distribution & CRM

IT Infrastructure Upgrades

Employee security

Business support functions

44 35

37 46

35 41

33 35

27 41

21 34

21 33

15 31

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Freight and logistics1. Advancing globalization and customer demands drive integrated modelsSince the 1980s, ongoing globalization and rising customer expectations have seen the freight and logistics industry‘s offering advance from contract distribution via logistics outsourcing to today’s integrated supply chain management. Companies now need to follow their customers and expand their skills base and geographic footprint, leveraging value-added services and increasingly global coverage to drive growth.

2. Ongoing consolidation into “one-stop shops”Customers’ growing preference for one-stop integrated logistics service providers offering supply chain integration has played to the major 3PL providers’ economies of scale, and is driving significant M&A activity.

3. Technology renewal is imperativeThe average age of core systems in the freight and logistics sector has been on a steady upward path, and is now approaching 20 years in many cases. As a result, there is an increasingly urgent need to modernize and renew core systems. However—other than in the passenger-facing areas of the business—there is also a lack of established packaged IT service providers on a par with the likes of Amadeus and Sabre. Freight and logistics companies need to upgrade and renew their IT to expand core processing power, capitalize on web enablement, and harness distributed technology tools such as RFID and GPS.

4. Fuel prices and economic cycles demand lower and more variable costs Freight and logistics providers’ margins are being squeezed between rising fuel prices and customers’ demand for more cost-effective logistics

solutions. Also, business volumes in freight and logistics closely reflect economic cycles, meaning the industry experiences pronounced peaks and troughs. These factors mean companies need to move away from high fixed costs to a more variable cost base.

Glo

baliz

atio

n

1985-1995 1995-2000 2000+

Integrated Supply Chain Management

Contract Transportation/Distribution

Logistics Outsourcing

Single function

Transactional

Asset heavy, process execution

Local, regional

Integrated multi-functions

Strategic partnerships

Information/knowledge focus, integrated IT solutions

Global, door-to-door coverage

Figure 2. Evolution of freight and logistics services, 1985-present

Source: Accenture analysis

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Current Future

Level of Integration with Suppliers

Business Model

Not Integrated Integrated Packaged Offers Flexible and Dynamic Packaging

Customer-Centric

Transaction Based

TraditionalTour Operator

Integrated TourOperator

FlexibleCustomer-CentricTour Operator

Figure 3. Travel companies’ increasing customer-centricity

Source: Accenture analysis

Travel services1. Disintermediation drives the direct ‘circle of contact’ and dynamic packagingLike airlines, travel companies are experiencing a dramatic widening in their circle of contact, as the boom in direct online sales drives disintermediation and creates more direct interaction with more and more consumers. Consumers are also demanding accurate, unbiased and personalized information, and want dynamic, personalized packaging that enables them to choose the service elements from multiple providers. In response, the industry is moving from the traditional transaction-based model to become truly customer-centric, more closely integrated with suppliers and in direct contact with customers (see Figure 4).

2. Increasing distribution complexityTravel service companies’ direct contact with customers is taking place via an ever-widening array of channels including smartphones and tablets,

driving a need for effective multi-channel management. Combined with customers’ rising expectations, this trend is also increasing the scope of services that travel services companies must provide, including location-based, just-in-time and mobile services. And they are facing a dramatic increase in volume search and pricing activity.

3. Moving from ‘knowing your inventory’ to ‘knowing your customer’All these trends mean travel service companies are shifting from a position where their core differentiation lies in knowing their inventory, to one where it is based on knowing their customers. This demands the ability to capture and analyze massive volumes of data across a fragmented customer base, and to shift from transaction-based models (based on booking/reference number) to client centric models (based on a unique customer reference number).

4. Standardized IT solutions gain tractionThe travel services industry’s need for lower and more variable costs is accelerating companies’ migration to standardized, off-the-shelf applications. These are increasingly being accessed and used on a cloud-style software-as-a-service (SaaS) basis, a trend reinforced by the increasing maturity of the SaaS offerings available to the industry.

Six key questionsAs with most technologies, the significance of cloud computing differs widely from industry to industry. Accenture has identified six key questions that Airline, Freight & Travel Services decision makers should ask about this still-new phenomenon. By focusing on these questions, executives can narrow their inquiries and start to identify opportunities and risks that will impact their own companies. We will now examine each of these questions in turn.

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While each of the three segments of Airline, Freight and Travel Services face distinct challenges, there are several common themes. Cloud computing’s characteristics in terms of lower cost, higher flexibility and speed could help companies across all segments to address many major industry issues:

1. Increasing circle of contact — The flexibility, interconnectivity and effectively unlimited processing power offered by cloud computing could make it ideally suited to managing and optimizing the interactions with this widening circle of contact across multiple platforms.

2. Globalization and the shift to the East— As Airline, Freight and Travel Services companies shift their activities towards new and emerging markets, cloud could support the operational flexibility, agility and fast integration needed to create and incorporate new operations and offerings.

3. Enhanced customer focus and responsiveness — Cloud’s scalability and flexibility can help to provide companies with a cost-effective way to source and manage the storage, processing and analytics capacity needed to segment and target customers more effectively, while dialing the service up and down with their business needs.

4. More competitive cost base — Cloud can enable and support the blend of low and more variable costs, innovation and rapid responsiveness to customer needs required for all Airline, Freight and Travel Services companies to differentiate themselves in an increasingly competitive environment.

5. Greater integration throughout supply chains — Cloud’s embedded interoperability and use of web interfaces facilitates integration and data sharing with business partners and customers, supporting closer integration and better visibility along Airline, Freight and Travel Services supply chains.

6. Consolidation — Similarly, cloud computing’s embedded interoperability and use of web interfaces can make post-merger integration and the creation of strategic alliances quicker and less costly.

7. Tapping into new and auxiliary revenue streams — Cloud’s flexibility and faster development time for new applications could help Airline, Freight and Travel Services companies reconcile the conflicting pressures to achieve lower and more variable costs while managing an increasingly complex and expanding range of revenue streams.

8. Security and regulation — These issues create a need for accurate, distributed tracking and monitoring combined with robust centralized reporting and analytics, playing to the strengths of cloud computing.

How cloud could help Airline, Freight & Travel Services companies address their industry issues

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At its most basic level, cloud computing allows users to obtain computing capabilities through the Internet, regardless of their physical location. Computing clouds are in essence online, supersized data centers containing hundreds of thousands of servers hosting web applications. Cloud services from raw infrastructure to complete business processes can be purchased through web interfaces and turned on and off as they are needed.

The characteristics of cloud services include:

• Little or no capital investment

• Variable pricing based on consumption; buyers ‘pay per use’

• Rapid acquisition and deployment

• Infinitely scalable

• Lower ongoing operating costs

For businesspeople, cloud computing can seem too good to be true: plenty of computing power, no expensive IT infrastructure. Cloud computing lets organizations bypass the expense and lead time of buying, installing, operating, maintaining and upgrading the networks and computers found in data centers. Instead of licensing software, users tap into a service when it’s needed for as long as it’s needed. All that is required is a broadband Internet connection and a mobile device or personal computer with a browser to access and activate the cloud service. As with most utilities, organizations pay by the kind and amount of services used, plus any additional fees.

Different forms of cloudThe basic technologies that underpin cloud computing are well established and can be duplicated by any organization. This makes it possible for companies to potentially build “private clouds” — restricted infrastructure that uses cloud computing technologies but is only shared by approved organizations. Private clouds can be used within single companies or possibly be shared with business partners. “Public” clouds the size of those run by Microsoft, Amazon and Google require additional technologies so they can support many millions of users around the world without becoming sluggish.2

Both public and private clouds can be broadly categorized into four levels. At the infrastructure level, companies are sourcing raw computing resources, processing power, network bandwidth and storage from the outside on an on-demand basis. These resources are also known as infrastructure-as-a-service, or IaaS. At the platform level, cloud-based platform-as-a-service (PaaS) environments provide application developers with similar functionalities to those available in traditional desktop, including tools for development, testing, deployment, runtime libraries, and hosting.

At the application level, cloud-based application-as-a-service offerings, also known as software-as-a-service or SaaS, are available via standard browsers, supporting device independence and anywhere access. And at the business process level, cloud-based solutions, also known

platform-based business process outsourcing (BPO), offer an Internet-enabled, externally provisioned service for managing an entire business process. This differs from application clouds in that it provides end-to-end process support, covering not just software but also people processes such as contact centers.

1. What is cloud computing, and how does it work?

Figure 4. Initial opportunities for using clouds

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The three top benefits of cloud computing talked about today are cost, flexibility and speed to market. However, forward-looking companies are thinking about how cloud technologies will change the face of their operations (see question 5).

Cost Low prices on cloud services are a big part of their allure. For example, a major pharmaceuticals group was reported to have paid Amazon Web Services only $89 to analyze data on a drug under development — a job that would have required its researchers to buy 25 servers to perform in-house.3 Add the savings from eliminating the cost of servers, software licenses, maintenance fees, data center space, electricity and IT labor, and the benefits of replacing a large up-front capital expense with a low, pay-for-use operating expense, and the financial appeal of cloud computing is obvious. These cost benefits can extend to companies’ own business processes, since cloud computing offerings can be used to optimize processes both for quality and cost.

FlexibilityClouds offer extraordinarily flexible resources because of their technical design. Clouds can be summoned quickly when needed, grow by assigning more servers to a job, then shrink or disappear when no longer needed. That makes clouds well suited for sporadic, seasonal or temporary work, for finishing tasks at lightning speed and processing vast amounts of data, and for software development and testing projects. Clouds can also supplement conventional systems when demand for computing exceeds supply. And since they are an operational expense, cloud services can often bypass the capital-expense approval process, and thus be quicker to procure than conventional systems. In the case of the pharmaceuticals company mentioned above, using clouds shaved three months off the IT budget and approval process, resulting in faster time to market and $1 billion in opportunity costs avoided. Also, cloud will facilitate the move from the current generally fixed cost base of IT,

to more variable costs that are more closely aligned with the day-to-day needs of the business.

SpeedCloud technology has the potential to empower a programmer to create a software service using free or low-cost development tools, and quickly make it available to all—thus bringing innovations to market faster and at lower cost. This capability can help organizations to become more agile and responsive, and to deliver innovative business approaches such as offering their key capabilities as a service, as well as increasing their ability to impose a standard set of applications or processes enterprise-wide. For those applications that require a great deal of IT infrastructure (servers and storage), cloud can significantly shorten the lead time to procure, deliver, and install the service. Overall, a properly implemented cloud architecture can mean the time and costs of provisioning an innovative IT service have never been lower.

2. What benefits can cloud bring to my company?

Business Continuity (Storage)• Extensive storage• Backup and recovery

Legacy• Specific existing infrastructure• Complex legacy systems

Ease

of

Impl

emen

tatio

n

Value to the Enterprise

Batch and Data Intensive Applications• One-off applications that don’t rely on real-time response

• Data and high performance intensive applications (financial risk modeling, simulation, data compression, graphics rendering…) • New back-office applications

Software Development and Testing• Software development and testing environment • Performance Testing• Non production projects• R&D activities• Reduced time to market

Peak Load Demands• New business activities• Applications w/ peak-loads• Seasonal websites• Applications with scalability needs

Hard

Easy

Sensitive Applications• Regulation-protected data (HIPAA, SOX, PCI…)

Desktop Productivity• Web 2.0 applications • Workgroup applications• Office suites• Email and calendaring

High Value

New Businesses• Provide IT support for new ventures

Geographic Expansion• Replicate standard processes in new locations and branches.

Source: Accenture Technology Labs

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Alongside the potential benefits around cost, flexibility and seed, cloud computing has the potential to help address specific issues within each segment of Airline, Freight & Travel Services. As well as enabling more effective interaction direct with a wider circle of contact, cloud’s power, flexibility and scalability make it ideally suited to act as a service innovator engine for testing out and implementing new, higher-value services quickly and efficiently. It will also improve companies’ ability to integrate and capitalize on new technologies as they emerge. And cloud’s ability to scale IT capacity up and down with business need will lower costs and limit unnecessary emissions from IT, thereby reducing environmental impacts.

Challenges in the airline sectorFor airlines, cloud computing’s most significant impact may be in enabling them serve and interact with their new and wider ‘circle of contact’ quickly and cost-effectively across a variety of platforms, while also enabling companies to flex capacity and costs in line with peaks and troughs in activity. Many industry loyalty programs are already being outsourced or transferred into a separate entity to shift them from being a cost center to a profit center—and these analytics-heavy applications would be a natural fit for cloud solutions. The reach and power of cloud can also facilitate the collection and analysis of detailed aircraft performance and operations data, as well as a mass of personal biometric information, for regulatory and security purposes.

Challenges in freight and logisticsThe tendency for business activity in freight and logistics to follow economic cycles means the ability

to ‘dial’ cloud solutions up and down flexibly is ideally suited to this sector. Cloud services can also act as an enabler for industry consolidation, by making it quicker and easier to integrate acquisitions. It could also help companies meet the widespread requirement to renew existing technology assets, at the same time as lowering their cost base and making it more variable. Freight and logistics companies’ move to integrated supply chain management models demands a higher degree of collaboration and integration with suppliers and customers, which could be facilitated by the flexible power and connectivity of cloud services. And a vast array of fixed and mobile devices and sensors can be connected to the cloud-enabled platform to drive service insight and sophisticated analytics, optimizing both service to customers and revenues.

Challenges in travel servicesAs travel services’ companies circle of contact expands, cloud computing can help them bypass traditional intermediaries in the supply chain and interact directly with the customer via multiple channels, including Web 2.0 and mobile. The demands of the industry’s increasingly dynamic packaging and complex supply chain can be met by using cloud computing to source and integrate a wide range of services, which can be dialed up and down flexibly on an elastic basis to service peaks and troughs. The scale, capacity and power of cloud services make them ideally suited for supporting the data collection, storage and analytics capabilities that travel companies need to build deep customer understanding. With its growing usage of standardized SaaS applications, the industry is already moving towards a cloud-type model for many of its computing needs.

3. How can cloud computing help address the specific challenges my company faces?

KLM airline picks Google Apps for crew4

“ KLM Royal Dutch Airlines has moved 11,200 of their crew members to Gmail as part of their Google Apps Premier Edition deployment. KLM crew members will now be able to send and receive email effectively from any location and using any Internet connected device, including personal laptops, shared computers, BlackBerry devices, mobile phones, or PDA devices. The adoption of Gmail marks KLM's move to cloud computing. With 25 GB of storage per account, Gmail provides them with a powerful, intuitive and efficient messaging platform with integrated IM (Google Talk) and a series of additional features that facilitate communication.”

Caspio Announces Enterprise Agreement with U.S. Postal Service5

“ Caspio Inc…announced an enterprise customer relationship with the United States Postal Service (R). The federal agency joins a long list of other notable government agencies, Fortune-500, education, and media organizations that utilize Caspio's platform-as-a-service (PaaS) cloud computing technology. Leveraging Caspio's proven "no-programming" approach to building database-driven web applications, tech-savvy business users and IT professionals improve time-to-market while simultaneously reducing IT costs and project backlogs. The platform incorporates a built-in database, point-and-click tools, and a highly scalable hosted infrastructure.

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CIOs say they are finding real savings from cloud computing. Accenture estimates its own IT organization could save up to 50 percent of its hosting costs annually by transferring most of its applications to infrastructure clouds.6 Bechtel’s CIO benchmarked the company’s internal data center and storage against those of Google, Amazon and Salesforce.com, concluding he could greatly reduce his company’s per unit costs by creating an internal cloud.7

Clearly, executives should not take the promises and projections of cloud savings at face value. The articles about companies that have saved money rarely explain how these savings were calculated, and several apparently rigorous analyses of cloud savings have been attacked as unrealistic.8 In our experience, even where US-based firms move their internal applications to the cloud, they usually decide to retain a number of services in-house, because the costs of hosting a server internally—whether in an optimized data center located in the US or in a captive facility offshore—are lower than that of an external cloud service.

Executives therefore need to look closely into the costs of cloud computing for their organizations. They should seek rigorous ROI case studies based on actual cloud usage, rather than estimates of anticipated savings. Hardware, after all, is a relatively small component of data center costs. They need to uncover the hidden management, transition, and usage costs that reveal themselves only when organizations start to work with the technology. They need to evaluate the pricing models of different kinds of cloud services, as well as the potential costs of moving services back into the company or into another cloud. And

they need to work with the finance department to develop a consistent and acceptable approach to measuring the costs and return from clouds. Only then can they reliably estimate the savings.

This approach should apply in any industry. In addition, for Airline, Freight & Travel Services businesses, the following factors will be critical to realizing the greatest possible cost benefits from adopting cloud technologies:

• Adopting common standards that make sharing of knowledge and services easier

• Using standard, ‘fit for purpose’, and clearly-defined service levels as much as possible, geared to requirements of the specific service

• Applying standard security and data privacy restrictions appropriately, taking into account the fact that most services offered by cloud providers today are managed and provisioned on a cross-border rather than in-country basis

• Overcoming any departmental ‘ownership’ issues so as much work can be moved to the shared cloud as possible

• Taking care to maintain flexibility around procurement and not get too tied into specific suppliers.

4. Can I depend on clouds to save my organization money?

EasyJet flies into the clouds with Azure9

In July 2009, budget airline EasyJet became one of the early adopters of Microsoft’s Azure cloud computing platform. Azure offers a solution to a question EasyJet had been asking, said EasyJet enterprise architect Bert Craven - “How do we make our on-premises services available publicly but securely, and in a rich and flexible way?”. In later iterations of EasyJet’s new departure control system (DCS) Halo, Craven said that the airline might consider moving more of its back-end data into an SQL Azure cloud database.

“ At the moment, we’re still keeping a very centralized DCS and just exposing that publicly. (Does this make sense ?) Once we’re happy that the overall process in the airport works, we’ll look at that,” said Craven. “If you look at our network of airports – they are all over Europe with the information stored in UK databases. It would make much more sense for that data to reside in the cloud, and be modified in the cloud.”

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Companies that have built massive clouds are already transforming the nature of competition across various industries. Google’s advertising-supported search engine, workplace, collaboration and internet application tools, and Amazon’s online retail operations are all made possible by the vast computing clouds created by those companies. And cloud-based consumer applications such as Facebook and cloud-enabled iPhone apps are driving innovation in unpredictable ways.

In the future, we expect cloud to enable Airline, Freight & Travel Services companies to approach and operate many parts of their business in a radically different way. The areas where cloud computing is likely to have the greatest impact on industry operating models include:

• Dynamic, personalized packaging will become more viable. By helping to integrate, automate and support the individual steps, cloud will empower companies to manage the dynamic aggregation of individual components in line with individual customer requirements.

• Service management and collaboration across multiple partners in the Airline, Freight & Travel Services value chain will become more efficient, collaborative and flexible, further helping companies to meet customers’ growing demand for customized and personalized offerings.

• The need to develop and deliver service innovation will be supported and accelerated by cloud, enabling Airline, Freight & Travel Services companies to offer comprehensive, customized solutions supported by effective, efficient, and continuous processes.

• More effective and responsive interactions direct with customers will be enabled and supported by cloud’s combination of unrivalled distributed processing power, strong connectivity and effectively unlimited analytics potential.

• Boosting the value contribution from IT has been a long-standing challenge for Airline, Freight & Travel Services companies. Cloud will help them realize higher value than ever before from IT, by optimizing IT investments, reducing costs, and increasing process efficiency. Applications will be developed quickly and flexibly using pre-approved, cloud-based platforms and development toolkits, with hardware, security and other services built in as standard.

5. How will clouds affect the way my organization operates in the future?

IBS makes a mark in Russia10

“ S7 Cargo acting on behalf of S7 Airlines and GLOBUS airline, based in Russia, has signed up for iCargo, IBS’ new-generation cargo management solution. S7 Cargo has chosen iCargoNet, the SaaS offering of iCargo that will be hosted from IBS’ state-of-the-art data canters. The IBS solution was selected by S7 Cargo for its strong customer service and proven ability to help cargo carriers in significantly increasing both operational and cost efficiencies. iCargoNet, the hosted version of iCargo lowers the total cost of ownership and facilitates transaction-based pricing, whilst bringing new benefits such as ease of global distribution and ability to add new modules and system features as the business needs of airlines grow and change.

“ IBS officials said iCargo, developed by the company in association with six leading global airlines, had within a few years grown to be a leading air cargo management solution, with 19 customers including All Nippon Airways, Austrian Airlines, Qantas and Tokyo International Air Cargo Terminal using the solution.”

“ We decided to make social media an important component of our overall KLM customer service strategy after handling stranded customers via Facebook during the volcanic ash cloud that struck Europe in May, 2010. Leveraging the Service Cloud 3 is going to enable us to recognize patterns, handle cases via social media throughout different teams, and discover commercial opportunities. We believe this will allow us to pro-actively build a strong and loyal relationship with our customers and fans and enhance our service to them,” said Martijn van der Zee, vice president, E-Commerce of KLM Royal Dutch Airlines.

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Various surveys tell us that security and data privacy remain prime concerns for cloud implementers in all industries. CIOs are concerned that their data could be stolen or compromised by hackers, mixed with data from their cloud providers’ other customers, or released by mistake.

That said, many companies already face specific challenges in security and data privacy, compounded by a fragmented landscape of different approaches and policies across different departments. This in turn carries a lot of risk and cost. In such cases, the move to cloud computing may provide opportunities to drive more consistency and automation in data security and privacy while also reducing costs, through an approach that reflects each data item’s inherent sensitivity.

For example data with a low level of sensitivity may well be suitable to go onto a public cloud infrastructure service with simple password access, whereas ultra secure data may require dedicated secure servers housed in ultra secure data centers with strong authentication for access. There may be several different levels of security in between.

As companies choose cloud service providers, they should include security and data privacy capabilities as a major part of the selection criteria. The key to understanding security in cloud computing is to realize that the technology is not a break with the past. Instead it represents the logical ”next step” in the outsourcing of commodity services to many of the same trusted IT providers that have been leaders in the field for years.

We recommend that companies take the following into account:

• Work with your provider to determine its attention to security, privacy, and compliance with data laws in all relevant jurisdictions. Make sure the provider can achieve parity or better levels of security, privacy, and compliance with law than you have today.

• Remember that the security of the cloud should be equal to the most risky client that is serviced by the provider.

• Rigorous risk assessment is a complex undertaking that represents the key to effective security in the cloud. Require your cloud computing partner to provide you with its risk assessment and how it intends to mitigate any issues found.

• If the cloud provider does not have a seasoned Privacy Officer and a client-facing CSO, CISO, or equivalent security role, be very careful. It is a sign that the provider doesn’t take security seriously enough.

• Schedule mandatory monthly discussions with the cloud provider’s top privacy and security people. This discussion should flow both ways with no hidden items.

• The cloud provider should have the ability to map its policy and procedures to any security mandate or security/privacy/compliance driven contractual obligation you face.

• Pay attention to your cloud provider’s adherence to secure coding practices.

FCm Travel Solutions uses salesforce.com’s cloud CRM as its platform for delivering highly personal service to business travel customers11

FCm Travel Solutions has a Salesforce CRM implementation for 680 users within the Sales, Operations and Marketing departments across ten key global territories. It has integrated the CRM with its existing booking systems to allow clients to be matched against transactions for keeping the database true. It has also customised its implementation with a total of nine business applications and objects to date, creating an industry specific solution that best serves its business requirements – this includes Ideas, salesforce.com’s tool for capturing innovative ideas from employees.

6. What about assurance of security and data privacy?

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Airline, Freight and Travel Services companies need to consider how to take account of and plan for cloud computing services at each of the levels we have highlighted:

InfrastructureCPU, memory, and disk capacity available on demand, real time, and usage based will be a big driver of benefit

PlatformsThe technology architecture for the Airline, Freight and Travel Services IT organization can be evolved to take greater advantage of cloud-related services. This is an important step to taking advantage of emerging capabilities and services available in the cloud

ApplicationsCommercial cloud-based Airline, Freight and Travel Services applications that provide industrial-strength functionality are emerging and growing rapidly.

ServicesCloud services including new business processes such as analytical services are rapidly becoming available for Airline, Freight and Travel Services businesses to leverage. The ability to achieve a step-change in capability through these cloud services offerings enhances the competitiveness of Airline, Freight and Travel Services companies and enables more timely innovation.

As we pointed out at the start of this paper, cloud computing is too important a technology to leave entirely to technologists. While the work of migrating from conventional to cloud computing is likely to fall on the shoulders of the CIO, other senior executives have important roles to play.

To make sure an organization maximizes benefits and minimizes risks, executives must:

• Ask hard questions and demand data-based analyses regarding cost savings. Don’t assume automatic and substantive cost savings. Do an ROI analysis. Consider conversion and ongoing costs

as well as savings. Don’t be intimidated by the jargon. Experiment or pilot on low-hanging fruit such as workgroup applications, or on a non-mission critical, non-integrated application. Then be ready to scale once you’ve proven the benefits are worth it.

• Establish a clear governance structure for cloud computing. Many organizations have rules and structures in place that govern how IT decisions are shared between departmental leaders and IT executives. Use them (and if they don’t exist, create them) to decide who inside and outside the IT organization should be engaged in decisions on cloud computing, and what decision-making rights and responsibilities they have.

• Keep cloud efforts on track: Make sure cloud computing receives the focused thinking, planning and follow-up it requires. Use the answers to these six questions to identify and address both immediate and longer-term business needs and opportunities, develop a plan for using public and perhaps private clouds, and gain the capabilities the plan requires. Make sure the people in the organization understand the impact cloud is having on the way they work.

• Set the standards for success: Provide the necessary oversight to the IT organization. Make sure goals and deliverables are well understood, and projects are well aligned with business needs. Clarify how the value from cloud computing is to be determined: which quantitative and qualitative benefits are sought? And consider what else constitutes success besides value achieved and projects completed: skills developed, partnerships established, and risks addressed.

• Provide the necessary support: Besides financial resources and technical talent, support other activities that will underpin the success of cloud initiatives. For example, organizations may benefit from a community of practice or a cloud program office to develop the skills and share the experiences of people engaged in cloud projects.

• Buy cautiously, appraise frequently: It’s too early to predict who the major cloud providers will be in a few years, what capabilities they will deliver, when they will deliver them, and how well. So when selecting cloud providers, carefully consider whether they have the potential to be a desirable partner in the future. Even after they are chosen, evaluate your partners on their financial stability, as well as their ability to improve functionality and service levels, to integrate data across different technology platforms and cloud services, and to deliver on their promises.

The Airline, Freight and Travel Services industry’s migration to cloud: not a question of “if”, but “when” While it may take time for companies to transition to cloud computing, beginning the journey early can deliver some substantial financial benefits. Executives are still grappling with its risks, possibilities, and the cost of writing off current IT investments. However, for several companies the transition to a hybrid cloud environment is already under way. The capabilities and potential savings from clouds are too great to ignore.

In addition, software developers and venture capitalists will be drawn to this new market. The low development cost, short development cycle, and quick return on cloud services are irresistible. This means future IT advances and innovations are much more likely to be based on clouds than conventional computing. The critical issue isn’t whether cloud computing will become a fundamental technology in the next decade. It is how successfully companies will profit from the capabilities it offers.

Managing the new cloud capabilities with all the existing legacy systems in a way that is seamless to business units and users will be critical to achieving the benefits and managing the risks. However, the fact remains that — over time — cloud will reshape the way all companies do business. In our view, those that move early to embrace this future will position themselves to be tomorrow’s high performers.

Taking the first steps

15

1 ©Copyright Airline Business and SITA. Airline IT Trends Survey 2010. Full analysis available for purchase at http://www.flightglobalshop.com.

2 Luiz André Barroso and Urs Hölzle, The Datacenter as a Computer: An Introduction to the Design of Warehouse-Scale Machines (Morgan & Claypool Publishers, 2009).

3 Condon, ibid.

4 Source: http://googleenterprise.blogspot.com/2010/02/flying-into-cloud.html

5 “Caspio Announces Enterprise Agreement with U.S. Postal Service,” M2 Presswire, 24 September 2009, via Factiva, © M2 Communications.

6 “Pressure Performance: 2009 IT Report,” Accenture CIO Organization, November 2009.

7 “CTO Roundtable: Cloud Computing,” Communications of the ACM, Volume 52, Number 8 (2009), Pages 50-56 http://queue.acm.org; Gray Hall, “Bechtel Harnesses the Cloud: Case Study of an Enterprise Cloud,” Cloudstoragestrategy.com.

8 “Cloud Coockoo Land Computing,” dotfuturemanifesto.blogspot.com; Andy Greenberg, “Deflating the Cloud,” Forbes.com, April 15, 2009

9 Source: Computing, 15 July 2009http://www.computing.co.uk/ctg/news/1844351/easyjet-flies-clouds-azure

10 “IBS forays into Russian market,” The Economic Times, 20 August 2009, via Factiva, © The Times of India Group.

11 Source: http://www.salesforce.com/in/customers/travel-transportation/fcm_travel.jsp

Reference

About the Authors

Robert Zippel leads the network enabled solutions practice of Accenture in Austria, Switzerland and Germany. As Storage, Network and Compute Power in the Cloud stop being separate topics, the technology base for cloud computing within Accenture is located in his group. Robert is also the leading the global passenger service system implementation group in Accenture and is in this capacity supporting various Airlines in their PSS programs, moving them into service provider SaaS clouds. Robert’s roots however are in the data center, responsible for the ecommerce operations of a large media group before he joined Accenture 10 years ago, where he already built cloud like solutions based on the much less suitable infrastructures available at the time.

robert.zippel@accenture.com

Christian Tueffers is the Cloud Computing lead for Accenture in Austria, Switzerland and Germany. He has over 13 years of experience in IT architecture spanning several industries incl. airlines. His focus has been system integration in large and complex IT environments. Christian is based in Kronberg (Frankfurt), Germany.

christian.tueffers@accenture.com

Alan Healeyis the executive responsible for leading the Cloud Computing Program for the Products Operating Group within Accenture. Airline, Freight and Travel Services is an industry sector within the OG. Alan has 25 years’ experience in outsourcing and managing large programs of work. He has operated across multiple industry sectors, managing several of Accenture’s most significant long term contracts, covering also areas such as

transformation change, commercial management, and service management as well as technical delivery. He has held a variety of management roles within Accenture. He is based in London.

alan.healey@accenture.com

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Accenture is a global management consulting, technology services and outsourcing company, with more than 215,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.6 billion for the fiscal year ended Aug. 31, 2010. Its home page is www.accenture.com.

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About the Accenture Institute for High Performance

The Accenture Institute for High Performance creates strategic insights into key management issues and macroeconomic and political trends through original research and analysis. Its management researchers combine world-class reputations with Accenture’s extensive consulting, technology and outsourcing experience to conduct innovative research and analysis into how organizations become and remain high-performance businesses. Both research fellows at the Accenture Institute for High Performance, Jeanne G. Harris (jeanne.g.harris@accenture.com) and Allan E. Alter (allan.e.alter@accenture.com) led the Cloud Computing research that is referenced in this paper.