Cathay Pacific
Cathay Pacific
1. Case Summary
I. Problem Statement (briefly discuss the main decision, problem or opportunity that management is faced with in this case)
Cathay Pacific Airways, founded in 1946, is a multibillion dollar company headquartered in Hong Kong. Between 1946 and the late 1970s Cathay Pacific developed in house cutting edge IT systems such as flight simulators and a reservation system. During the 1980s when deregulation caused a highly competitive environment, cutting costs became a major focus of all airlines to remain competitive.
In 1992 Cathay initiated “Operation Better Shape” to review all areas in the company and determine where costs could be reduced or eliminated. Outsourcing of nonstrategic functions was one area this review identified as a critical area of focus for costs cutting. This caused a change in the old business model of building and operating IT infrastructure to a new model of acquiring and managing IT functions.
By the mid-nineties Cathay Pacific outsourced their networks to SITA, Data Center to IBM and IT applications to Sabre Sirline Solutions through its coined term “Smartsourcing”.
At the beginning of 2000 Cathay issues with outsourcing led to internal initiatives to review the present IT landscape. In 2002 is was IMExcellence lasting one year and led to an improvement in IT stability, in 2003 IMEit was successful in decreasing both fixed and variable costs, and in 2004 EVOLVE which reviewed Cathay’s overall IT strategy which led to more competitive vendor quotes for services.
II. Analysis of Alternative Courses of Action (list as many alternatives as you can think of and justify their pros and cons) * Not outsourcing at all: Although an alternative this is not a recommended alternative because outsourcing at least those efforts that are nonstrategic and redundant help cut costs when done correctly.
* Outsourcing everything: Also and alternative but not recommended because you want to keep your core
1. Case Summary
I. Problem Statement (briefly discuss the main decision, problem or opportunity that management is faced with in this case)
Cathay Pacific Airways, founded in 1946, is a multibillion dollar company headquartered in Hong Kong. Between 1946 and the late 1970s Cathay Pacific developed in house cutting edge IT systems such as flight simulators and a reservation system. During the 1980s when deregulation caused a highly competitive environment, cutting costs became a major focus of all airlines to remain competitive.
In 1992 Cathay initiated “Operation Better Shape” to review all areas in the company and determine where costs could be reduced or eliminated. Outsourcing of nonstrategic functions was one area this review identified as a critical area of focus for costs cutting. This caused a change in the old business model of building and operating IT infrastructure to a new model of acquiring and managing IT functions.
By the mid-nineties Cathay Pacific outsourced their networks to SITA, Data Center to IBM and IT applications to Sabre Sirline Solutions through its coined term “Smartsourcing”.
At the beginning of 2000 Cathay issues with outsourcing led to internal initiatives to review the present IT landscape. In 2002 is was IMExcellence lasting one year and led to an improvement in IT stability, in 2003 IMEit was successful in decreasing both fixed and variable costs, and in 2004 EVOLVE which reviewed Cathay’s overall IT strategy which led to more competitive vendor quotes for services.
II. Analysis of Alternative Courses of Action (list as many alternatives as you can think of and justify their pros and cons) * Not outsourcing at all: Although an alternative this is not a recommended alternative because outsourcing at least those efforts that are nonstrategic and redundant help cut costs when done correctly.
* Outsourcing everything: Also and alternative but not recommended because you want to keep your core