BSI-Impact of Cloud Computing on Travel Industry

8/6/2019 BSI-Impact of Cloud Computing on Travel Industry

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Impact of cloud computingon Travel Industry

Somenath Nag

Abstract

The economic uncertainty, ever changing market dynamics, changingcompetition landscape, emergence of new channels of distribution, and

increasing costs has created new challenges for travel companies,

especially in the methods used to distribute travel products and still

achieve profitable growth. Travel companies are now realizing the

importance of adopting different strategies for effectively using multiple

channels of distribution in order to maximize sales and revenues. To

achieve the stated goal, companies need to manage the technology

disruptions well by using them to create competitive advantages.

This paper discusses how cloud computing, a disruptive force, has the

potential to change the face of travel distribution systems and be

leveraged for competitive advantage.



Introduction

The last decade has seen major changes in the travel distribution landscape. First, it was the Internet

that started a revolution and forever changed how the travel industry operates. This online boom

followed by subsequent economic slowdown has created new dynamics in travel distribution. The

proliferation of smart phones and social media has resulted in further creating both chaos as well as

new opportunities. While opening up new avenues for growth, these developments have also

created new operational challenges.

Challenges faced by travel distribution industry

Dynamic Demand

One key nature of the travel industry is that the demand for travel is highly seasonal and cyclic. This

creates a challenge for any operations manager in terms of capacity planning and right sizing of the

IT support infrastructure. Planning for peak size can result in underutilization and lead to higher

marginal cost. On the other hand, not planning for peak load runs the risk of lost transaction

opportunities, unsatisfied customers and finally business losses. This is one of the primary reasons

why most travel distribution players end up having higher IT infrastructure cost and lower operating

margins.

Increased Search Volume

Increased number of travel portals along with a changing pattern of travel booking behavior of the

travelers, has resulted in a huge surge in ‘look to book’ ratio. This increased number of availability

request per booking now runs into thousands from a mere single digit number few years back,

putting an enormous pressure on existing IT infrastructure. According to Pegasus Solutions, global

processor of hotel transactions through the GDS and ADS channels, the look-to-book ratio soared to

around +60% over 2009 levels and is expected to rise further . Today’s common look-to-book ratio is

almost at a 2,500 -3,000 to 1, –primarily due to growth of online reservation and the changing

consumer behavior who is now looking ‘value for money’ deals. For this, travel shoppers use

multiple avenues such as search engines, referral sites, websites, mobile applications, and social

media.

Business Disruptions

Just prior to the recession, online travel booking soared to all time highs attracting further

investments in IT infrastructure in demand anticipation. However, discretionary travel was one of

the first spends that was cut down during the slowdown. This caused a severe strain on financials

and travel companies had to rethink their models yet again.

Increase in number of sales channels

Popularity of smart phones has persuaded travel players to embrace mobility as a medium to

manage bookings and provide other experiences to increase customer stickiness. At the same time,

social media sites have also become very popular and travel portals are trying to utilize this trend by



integrating different social media components with their sites. Of course, more number of channels

also increases complexities in product management.

Cloud computing from a travel distribution perspective

The Cloud helps enterprises to have a dynamically scalable abstracted computing infrastructure that

is available on-demand and on a pay-per-use basis. This model not only saves the IT teams from

investing heavily on infrastructure, but also shields them from the intricacies involved in

infrastructure setup and management. Presently, apart from providing the on-demand IT

infrastructure, cloud service providers typically provide interfaces for other related IT managementservices.

To understand the application of Cloud computing to the travel industry, availability searching or

shopping is probably the best example; it is by and large the biggest resource consumer in a typical

travel process. In today’s circumstances, travel enterprises who run their entire travel application on

a single infrastructure platform put unnecessary stress on operational budgets. One of the probable

solutions to this problem is to decouple the availability search functionality from the traditional CRS

system transfer it on an infrastructure that can support flexible demand. At the onset, it seems to be

a complex and upheaval task, as it creates operational challenges such as latency. However, these

challenges can be handled through a cloud based solution which offers higher scalability by usingmodern architecture patterns.

On the other hand, mobility is witnessing an unprecedented growth in demand - this is another area

where a cloud strategy can bring in competitive advantages for travel organizations. The key

challenges that travel enterprises are facing today regarding mobile and social media channels are

manifold, viz.,

With the advancements of mobile devices such as iPhone, iPad, Android, Symbian, and

Blackberry, travel enterprises need to invest in leveraging these to further their distribution

and fulfillment channels.

Mobility, being a rapidly evolving technology, is difficult to predict in terms of short term aswell as long term demand. Due to this, travel enterprises are facing a challenge in scoping

the required infrastructure for supporting mobility channel.

Travel enterprises need to create a business model to measure increase in revenue and

profit against the costs incurred on mobility & social media investments.

Cloud based flexible and on-demand infrastructure enables a travel enterprise to offer mobility and

social media channels without incurring any fixed cost. Using a cloud infrastructure, a travel

enterprise can start in a small way and grow into these evolving markets with a lower risk and

financial strain.

A typical implementation of Cloud in a Travel Enterprise

The following diagram shows the typical implementation of a cloud based Travel Distribution system



and systems that interface with the core travel distribution system.

Key concerns in adopting cloud based system

Availability of a Service

Organizations worry about whether utility computing services will have adequate availability, andthis makes them wary of Cloud Computing. But in reality, cloud infrastructure providers such as

Amazon and Google have much lower outage compared to any internal IT system.

Data lock-in

The primary way to access the cloud platforms is through proprietary APIs. Thus, enterprises feel

that they cannot easily extract their data and programs from one site to run on another. But in

reality, all major service providers have an obligation in their contract to return the data to the

enterprise. These service providers also have data access APIs that can be used to extract data in

standard formats.



Data Confidentiality and Statutory Requirements

Many enterprises believe that their data will not be secure in the cloud, since current cloud offerings

are essentially public networks. However in reality most of these cloud service providers have better

data protection and security mechanism than most IT organizations. They achieve this through the

usage of audit trail, encrypted storage, and network middle-boxes. Service providers also comply

with various statutory and audit requirements related to enterprise and personal data security and

usage.

Integration with external systemsSince travel distribution systems interact with multiple external applications, travel enterprises

always have a concern about integrating the cloud based system with other external systems.

However, all major cloud service providers have web service interfaces that can be utilized to

integrate the cloud based system with other external systems.

Solution for the ‘long tail’

As we know, the travel industry comprises of many small to mid-sized companies. A large majority

of which are very entrepreneurial and niche in terms of the products and services they offer.

Companies in this ‘long tail’ have little or limited IT knowledge or support and rely on numerous

third parties for IT. Such companies always find it difficult to balance their IT spending between IT

upgrades and innovating on their solutions, and this tends to become a barrier for business growth.

Even today, many small time travel enterprises do not even have an IT system, because they cannot

afford to setup an IT operation in-house. Economics of Cloud environment can change this basic

premise and make it both affordable and beneficial for travel enterprises of any size who can use

this service to derive a competitive advantage. Such an environment brings tremendous advantages

to such companies because it also helps them to manage their cash flow better.

At the other end of the horizon, start-ups are finding it easier to build and offer products like CRSs,

tour operating systems, distribution systems or basic inventory systems on a SaaS model, which is a

stronger value proposition and provides a competitive edge to their offerings.

Business outcomes of using cloud based systems

From the above discussion we can conclude that travel enterprise can achieve business growth by

leveraging the power of cloud computing:

A cloud-based solution reduces the total cost of IT ownership for the travel enterprises and

offers performance, reliability, security, and flexible scalability advantages

Travel enterprises are able to increase customer base due to higher availability, lowcongestion, and additional sales channels

Competitive advantage to the small and mid-sized enterprise in the form of lower fixed or



upfront capital cost

Improved operational efficiency due to low marginal cost

Ability to manage risks better by reducing fixed investment on any new initiative

About Blue Star Infotech Ltd.

Blue Star Infotech (BSI) helps global mid-market enterprises derive measurable business outcomes through

the use of IT. BSI partners with its clients to understand the business pain points, arrive at the appropriate ITled interventions and manage successful implementation. Using its deep understanding of the mid-market

segment, and drawing upon its long standing track record in creating IT solutions, BSI is able to deliver

affordable and relevant solutions through client-friendly flexible engagement models.

Blue Star Infotech’s dual expertise in building software products for industry -leading Independent Software

Vendors and IT solutions for enterprises provides it with a unique advantage to cross-leverage experiences increating solutions for enterprises- both custom and products – across domains and technology platforms.

Blue Star Infotech is a domain and technology expert in the travel industry. BSI enables travel companies toleverage technology to reach out to their target customers in multiple ways to gain market share, competitive

advantage and accelerate their time to market. BSI has a proven track record in providing travel distribution

solutions, mobility solutions, and other technology-based solutions to improve business outcomes of travelcompanies. Some of BSI’s clients are Costco Travel, Auto Clubs of America, Cleartrip, Groople, and Trisept.

BSI, an ISO & CMMi certified company, also has technology partnerships with companies like Microsoft,Oracle, Hewlett Packard, SAS, Kentico, Sitecore, and Platform Lab.

In addition, BSI is backed by the reputed Blue Star Group, ranked among Asia’s best sub billion businesses by

Forbes.

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For more information: visit us at www.bsil.com or contact: [email protected]

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BSI-Impact of Cloud Computing on Travel Industry