news Embattled airline Qantas has flagged plans to cut $200 million out of its technology budget over the next three years and undertake reviews of its major technology supplier contracts, as part of a company-wide cost-cutting initiative that will see a total 5,000 staff leave the company and some $2 billion in total costs cut.
When it comes to its technology operations, Qantas might well be described as having been in a continuous state of upheaval for much of the past half-decade, with a continual cost-cutting program having been in place over that time and half a dozen chief information officers having come to lead its IT operation for a brief time, before quickly departing.
In mid-2009, the organisation’s then-executive manager of corporate services and technology David Hall told a business lunch in Sydney that the airline could cut its IT costs by $100 million over the succeeding year.
Steps taken since that time include a major outsourcing initiative which saw some 200 Qantas IT staff offered positions at IBM; its desktop services contract switched from Telstra to Fujitsu and a new application support deal inked with Perth-based IT services group ASG. Qantas has also taken other major steps such as deploying Microsoft’s cost-effective Office 365 suite, replacing corporate BlackBerrys with Apple iPhones, implementing Bring Your Own Device programs and shifting off IBM’s Lotus Notes/Domino platform.
Subsidiary Jetstar too, has been cutting IT costs, handing an outsourcing contract to Mahindra Satyam in September 2012, shifting most staff onto Google Apps and shifting away from desktop phones for its staff. The organisation’s chief information officer Stephen Tame has tried to run its technology operation on a ‘light’ basis, trying to avoid investing in heavy IT infrastructure.
However, the steps have appeared to have only a limited effect on the airline’s IT spending, and Qantas is still struggling with a legacy application portfolio. In December last year, for example, it was reported by the Sydney Morning Herald newspaper that the airline had abandoned a project to replace a 26-year-old IT system that supported some 10 million Qantas frequent flyer members, because the airline couldn’t afford the $40 million it would cost to upgrade the system.
In addition, over that time Qantas’ IT management has been in a constant state of flux. Its current chief information officer, Luc Hennekens, has only been in the role for a few months, after previous CIO Paul Jones as promoted in September that year. Other senior executives to have held top IT roles at Qantas over the past half-decade include Hall, former NSW Education Department CIO Stephen Wilson, group executive of strategy and technology Jayne Hrdlicka, CIO Jamila Gordon, and others. Several of the executives had only short-lived stints at Qantas before leaving the business for greener pastures.
As part of a high-profile and controversial financial results session this morning, Qantas revealed that the chaos in its IT division was set to continue, with some $200 million worth of cost savings needing to be found by its IT division over the next three years, as part of an overall $2 billion cost savings drive to keep the airline afloat.
Programs of work under that cost-savings program include supply chain transformation and a terminal improvement program, application rationalisation, and the creation of next-generation check-in facilities. Qantas will re-negotiate commercial contracts across its business and cut its IT support and infrastructure costs, as well as taking a stricter approach to vendor management.
In addition, it will cut some 5,000 staff out of its business over the next three years, including 4,000 over the next year, with the company’s technology division being specifically flagged as an area where cuts need to occur.
I suspect it has long been obvious to Qantas’ IT department that IT workers at the company are not precisely valued members of the business; Qantas has been doing everything it can to take costs out of its IT area over the past half-decade. I really have no idea how it is going to find an extra $200 million in costs, but I’m sure it will manage somehow.
To me, this kind of massive cost-cutting really bites into the credibility of the airline. If I could avoid it, from here, I would not be flying Qantas. I don’t like seeing cost-cutting of this magnitude in any business, but when we’re talking about airlines, where safety is critical, and we’re talking about IT, which plays a critical role in ensuring safety at airlines, I start to get nervous. Perhaps that’s a bit of an extremist statement to make, but what are we supposed to think when Qantas flags plans to chop another $200 million out of an already thin IT budget, and when its IT management structure appears to change every year or so? It doesn’t precisely inspire confidence.
Image credit: Qantas