Now it’s just getting to be a masquerade … this “image” of getting an Off-the-Wall Comment(s) released by the end of the month. Maybe I should just go back to the random releases of the past. My concern though would be that “random” might become non-existent.
Here it is the 5th of March already and I’m just now getting around to February’s release. It’s late, so it will go out more “un-edited” than usual. I am in Honolulu this weekend … lounging on the 7th floor balcony of the Waikiki Sheraton watching the surfers surf, the kayakers kayak, and the swimmers swim … drinking my lilikoi (passion fruit) punch . It is, however, the first day of sun we’ve seen in a week.
Eastman's "Off-the-Wall Comment(s)"© …
Well, Sabre’s acquisition of TRAMS did stir up a bit of emotion. The two queries noted above were selected from more 11 … most reflecting significant emotion.
And I suspect that this is “on the record” … not “off the record” as Michelle suggested. What follows is a composite of my reaction to different questions that were posed to me.
As Bill Roebuck suggests above, Lee Rosen has been very successful in evolving TRAMS over the years. But I must go on record as one who has not experienced the success of others in working with Lee. In some ways that’s good … it eliminates a lot of emotion in my assessment of this transaction. In some ways, however, it may also influence my view of this acquisition. It is up to you, the reader, to sort that out.
TRAMS was designed to serve the smaller travel agency. By keeping its technology simple and well supported, TRAMS effectively out “low-costed” more complex or sophisticated solutions as small agency operators cut back on costs. TRAMS is a classic example of the “low cost” survivor in an eroding market – and as such, created enough “critical mass” to be an attractive low-end solution to Sabre.
To the extent that Sabre assumes control and management of the TRAMS solution, TRAMS will become an improved product. That is not to take anything away from the current TRAMS. Rather, it is to say that Sabre has added resources and proven solutions that it can incorporate into the TRAMS product that will upgrade and enhance its value for TRAMS users.
To the extent that TRAMS users are not Sabre based, TRAMS will evolve more slowly … but still improve.
The harder barrier to cross will be the cultural barrier! Established TRAMS users working in non-Sabre systems will be confronted with an entirely new Sabre culture, attitudes, and “self-serving” focus. And Sabre sales people can be unrelenting and unforgiving when they find themselves in a dominant position. Sabre sales people can be unrelenting and unforgiving as underdogs as well; but there is an attitudinal difference when Sabre sales people are “holding all the cards.” As a GDS, Sabre is institutionalized in its “Sabre way” -- but on balance, Sabre is a sound and well run business.
For non-Sabre agencies, adapting to the “Sabre way” (however soft it is in the beginning) will be an emotionally difficult challenge and it will create great angst. Many agents and agencies will simply not survive the transition … no matter how hard the TRAMS staff attempts to mediate or soften the message.
Equally emotional will be the perception of the increased costs for the use of TRAMS as Sabre “restructures” the cost base to fit its business model. In reality, the costs would increase in any case … but Sabre will be blamed for these cost increases in lieu of the increases being recognized as a necessity to provide a completive accounting solution. Had TRAMS remained independent, agents would have been confronted with a rapidly increasing cost base … because of the diminishing curve of small agencies having to respond to the rapidly expanding curve of Internet-driven agency alternatives.
In the “real world” … neither Apollo nor Galileo exist anymore; they have been inculcated into Cendant. Cendant’s focus is on evolving its franchise model; not on providing smaller Apollo/Galileo agencies with competitive front-line tools. To my knowledge, Apollo/Galileo no longer offers a low cost back office solution. Since Cendant is focused on its Internet franchise distribution model, it is unlikely that Cendant will evolve any tool that is not linked to their franchise effort (i.e. an independent alternative to TRAMS).
Worldspan has virtually abandoned the small agency outlets in favor of its Internet focused gateway solution. Amadeus has transformed its “back office” into online business management solutions; or secondary providers like Vacation.Com.
In the “evolving world” … technology for the smaller agency appears headed toward the self-service Internet sourced business solutions; away from each agency hosting their own resource. Unlike the GDS hosted platforms, these solutions will be private user-owned tools hosted on major platforms (not unlike Microsoft Office Live < http://office.microsoft.com/en-us/FX010908711033.aspx >).
But these solutions don’t exist yet. But the small retail agency is headed in that direction very rapidly. If I were a betting man, I suspect that is where Sabre is headed with its TRAMS acquisition – to an expanded hosted platform using its new open systems architectures. It’s sort of a toss-up between whether the Sabre travel industry brand can outweigh a software brand like Microsoft Office Live among small travel agents. That may be a factor of how quickly small agencies owners come to recognize that the travel industry is transitioning to conventional business processes; that it is no longer dependent on the traditional GDS for distribution or ATC/BSP for settlement.
Not unlike Amazon.Com or eBay.Com, technology solutions must become intertwined with business solutions; they can not be kept separate as they are today. This puts many agency owners between a rock-and-a-hard-place. They can’t survive with out Sabre/TRAMS and they don’t think they can survive with Sabre/TRAMS.
The common threat that ran through most TRAMS agency users that wrote to me was the fear that their core business information would be compromised; that Sabre would use this information to pirate their customers to the Sabre-direct alternatives; and as noted above, costs would begin immediately to escalate.
One of the major reasons that agencies feel threatened is that technology is not well understood by small agency owners; it’s always been “provided” (by Apollo, Sabre, TRAMS, etc.) in the past. In these agency owner’s minds, technology remains now, as it was has been in the past, nothing more than a data processing tool.
But because of the commoditization of virtually all travel products, this is no longer true. I address the commoditization of travel in the next snippet of this OTWC. But the result of commoditization of travel products means that technology must be used to integrate the component parts of a travel nee in the context of the demand for the product. The only way to do this is digitally and in real-time. The old-rule of going to content providers for pre-packaged or possible availability is rapidly becoming outmoded.
In the back office scenario, commoditization of travel product has virtually eliminated the margins to fund manual or human-intervention driven data management. More importantly, there is no longer any real need!
Technology has transformed the old paper-driven accounting systems in general business – to e-business. The standardization of accounting processes has enabled the development of easy-to-use bookkeeping and other accounting software for the general mass market. Those solutions have driven the margins out of manual accounting practices. But the airline legacy ticket settlement process has yet to make the transition to banking-link digital interactive settlement. The industry is still dependent on ARC (BSP) settlement processes. And the ARC/BSP processes are still dependent on accounting human intervention – but for product sold that no longer has the margins necessary to support the work. Accordingly, the industry is stuck with the old and dying systems left over from an era now disappeared.
What has to happen is that agencies must shed themselves of the ARC/BSP settlement process and begin using conventional accounting and banking transaction processes.They must move to interactive Internet enabled CRM systems that provide access in real-time from virtually any laptop, PDA, cell-phone or i-Pod.
Sabre recognizes this … as do Cendant, Amadeus, American Airlines, United Airlines, JetBlue, Southwest, MaxJet, etc. The cruise companies are moving this direction; as are hotels and virtually all other travel vendor providers. These technology changes are driving social, cultural, and business process changes in all aspects of society. The pace of change is different in different parts of the world … but the change is ongoing and encompassing all of mankind. As a result, data and information is creating its own new dimension of management – both with respect to privacy and openness. These two virtually opposite paradigms will continue to “ying and yang” with each other for the foreseeable future.
Still, in today’s world of travel, agency owners concerned over the potential of data being compromised by Sabre have little to fear during the initial 12 to 18 months of the transition. First of all, there is no possible way for Sabre to recover its investment in TRAMS (or for that matter, maintain its integrity within the industry) were it to violate the sanctity of the data. In addition, it would seem to me that Sabre will want to use the TRAMS acquisition as a leverage to entice more of the smaller agencies currently served by other GDSs into their domain. To violate the TRAMS trust would virtually eliminate that possibility.
It is possible that data protection will become a problem over time as (a) Sabre people move to-and-from other business units in the company, (b) Sabre evolves its data mining platforms to convert agent-dependent customers into online users (a natural and on-going occurrence that nothing will stop), and (c) Sabre converts TRAMS agencies into using other Sabre online tools more effectively. And there will be “data seepage” over time … as the different Sabre data management tools become increasingly integrated.
The integration will happen because technology has transformed the old paper-driven accounting systems formerly used general business – to e-business processes (on-line banking, electronic funds transfers, fully automated tax filings, etc., etc. etc.). The standardization and on-line automation of accounting processes has enabled the development of easy-to-use bookkeeping and other accounting software for the general mass market. Those solutions have driven the margins out of manual accounting practices.
But the airline legacy ticket settlement process has yet to make the transition to banking-linked digital interactive settlement and processing. The industry is still dependent on content derived distribution of product and ARC (BSP) settlement processes. And for the most part, these legacy business distribution processes and ARC/BSP settlement solutions remain dependent on human intervention for management and accounting. But the margins that once funded these people-processes are no longer there. Accordingly, the industry is stuck with the old and dying systems left over from an era now disappeared. The transition to technology-driven solutions must happen; and the acquisition of TRAMS by Sabre is only another step in that process.
That said, the small travel agents served by Sabre will NOT collapse as a function of this exposure; rather, these agencies (or their replacements) will transform the way they do business. As noted in the last paragraph, this transformation is necessarily going to happen in any case! I repeat, this transformation is going to happen in any case! However, whether the same owners of these agencies make the transition or not is a legitimate question. And the answer to that question almost lies in the demographic age profiles of these owners.
The great bulk of the “Baby Boomer” agency owners will opt out of ownership over the near term for brand or failed “company loyalty” reasons (see below). Maybe half of the “Gen-Xer” owned agencies will seek other roles in travel or elsewhere; largely those that can’t adapt to the “new team” rules or feel that cannot “justify” pricing to enable the margins needed to sustain their business (i.e. the low cost syndrome).
On the other hand, most agencies owned or run by “Gamers” will adapt and grow in the new environment; in part because they are more digitally astute and also because “Gamers” understand how to function in a “just in time” product packaging environment. In some recent talks, I’ve used the following graphic to address some of the drivers that influence these kinds of decisions.
v Culture Transformation …
Baby Boomers Gen-Xer’s Gamers
50 – 65 35 - 50 20 – 35
Remember TVs Remember Computers Remember Cell Phones
Person-to-Person Phone-to-Phone Digital-to-Digital
Follow-the-Leader Team is Right I’m always Right
Brand is Best Low Cost is Best What Fits the Need
Right for Company “In it” for Me Right for Me
Warehouse Inventory Retail Inventory Just in Time
For additional thinking on these age demographics in the travel indusry, visit < http://www.eastmangroup.com/otwc/otwc~feb2005.html >, last February’s OTWC.
Eastman's "Off-the-Wall Comment(s)"© …
A review of this book was the second snippet in OTWC last month. I promised then to comment on whether the book met the reviewer’s claims. The book more than meets Irving Wladawski-Berger accolades.
In my comment’s last months, I focused on how culture inhibits our ability to even recognize the change that is taking place around us … let alone, adapt to it. In “Let Go to Grow”, Linda Sanford not only addresses the issues of culture … but provides an insightful view of why and how the high speed digital information of this century is driving all business processes to commoditization; and why componentization becomes the ensuring path toward off-setting the declining margins in our businesses.
In the above snippet, I’ve summarized the first chapter. Subsequent chapters deal with and supplement the bullet points.