Cathay Pacific

Group 10, Section G

Evaluate the progress Cathay pacific has made on

outsourcing their IT activities. Do their actions make
sense to you? Why?
Outsourcing Pre 2002
Outsourced network to SITA which helped in establishing global
linkages. It also provided Cathay access to SITAs huge network
of 740 members and 1800 customers
A shift in IT strategy from own development to acquiring and
managing. It helped in bridging the gap between IM and
business.
Decision to adopt smartsourcing of IT in a bid to move from
Fixed costs to variable costs. The idea was to follow a best of
breed approach in solutions and technology.
IBM Best industry practices in Infrastructure management.
Sabre Airline solutions - Best Software application portfolio
Focus on contract management with quarterly reviews and
review boards
Desktop outsourcing to IBM , a relatively new phenomena
Outsourcing post 2002
Webhosting outsourced to HP.
IMExcellence Urgency, transparency and simplicity

 IM Fit - Focus on tackling high IT expenditures. Move from

proprietary systems to IP based systems. Elimination of less
important services.
EVOLVE IT Strategy

Sourcing model more focused on competition.

All sourcing activities had to follow a corporate purchasing
process
IT strategy was designed to contribute to business strategy
An integrated suite of solutions

Do their outsourcing actions make sense to you?

Why?
IT outsourcing helped Cathay in its goal of being a global airline
IT infrastructure entails high fixed costs which Cathay was able to
save
Cathay could focus on its core competency which was aviation
and not IT
Strategic vendor relations helped in reducing fee structure by 1015% while providing better services
IM could focus more on delivery than development
Communications cost reduced by a move to IP based system

What advice would you like to give to them in 2006,

particularly in light of their desire to reopen air service
to china? What are the risks involved in outsourcing to
china?
Chinese aviation industry is expected to grow at a rapid
pace.
China has a highly improved IT infrastructure with talented IT
engineers
Cathay must exploit this IT infrastructure and Human
resource by exploring outsourcing opportunities
Cathay must enter into JVs with local carries to understand
the Chinese market first and later can move ahead with M&A
It should also explore the feasibility of starting services on
Taiwan- Beijing route in addition to other routes
It should focus on Integrated IT solutions rather than Legacy
based systems so that integrating with regional partners is
easy
Could explore the feasibility of moving the data center to
China from Australia

The risks involved

Creating business synergies with low cost carriers
might prove to be difficult for Cathay, it being a
full service airline
There is a risk of new entrants looking to exploit
Chinas huge IT infrastructure and HR potential
Rising fuel costs and government regulations may
nullify the cost savings achieved through IT