Article: IT now in Qantas crosshairs

[Yada Yada]

IT now in Qantas crosshairs
By Scott Rochfort - December 17, 2005

UP TO 350 Qantas IT staff might be forced to follow the airline's chief information officer, Fiona Balfour, out the door early next year.

Qantas is considering whether to outsource its "information technology application, maintenance and support services" by mid-2006 within its overall bid to slash costs.

The review comes as Qantas faces possible strike action next month over its push to cut overtime and shift allowances of 2100 maintenance workers and over its possible intention to shift thousands of maintenance jobs to Asia.

<snip>

Qantas declined to give any reason for Ms Balfour's resignation. An airline spokeswoman would say only that the 47-year-old would leave her $1.2 million a year job in March. Qantas's lack of clarity on the issue has raised speculation Ms Balfour was pushed. Her contract was to expire next November.

Ouch! Cuts to shift and overtime allowances for maintenance workers mentioned alongside Fiona's salary.

 

[QF WP]

Maybe QF lurkers were really taking heed of our complaints , but it's a little far guys to get rid of the IT department over a couple of weeks of looping , surely :shock: ....

(Funny how this happened during the middle of the QF website problems...pure coincidence, of course).

 

[shillard]

Makes no sense for an operation (non-IT operation, that is) the size of QF to operate IT in house.

 

[Mal]

Makes no sense for an operation (non-IT operation, that is) the size of QF to operate IT in house.

You sure about that?

Outsourcing has it's documented failures (as well as documented sucesses). I've been to enough <insert IT trend organisation> (et.al) conferences to know that outsourcing can either be ok for your organisation or very bad.

The key seems to be to outsource certain functions, not the entire IT. Failing that, you need to keep a very sharp eye on both what you write in your contract and how you wield the big stick to keep the contractor behaving.

 

[Guest]

Makes no sense for an operation (non-IT operation, that is) the size of QF to operate IT in house.

You sure about that?

Outsourcing has it's documented failures (as well as documented sucesses). I've been to enough <insert IT trend organisation> (et.al) conferences to know that outsourcing can either be ok for your organisation or very bad.

The key seems to be to outsource certain functions, not the entire IT. Failing that, you need to keep a very sharp eye on both what you write in your contract and how you wield the big stick to keep the contractor behaving.

the man has spoken.... very wise words Mal!

 

[BlacKnox]

Outsourcing has it's documented failures (as well as documented sucesses). I've been to enough <insert IT trend organisation> (et.al) conferences to know that outsourcing can either be ok for your organisation or very bad.

The key seems to be to outsource certain functions, not the entire IT. Failing that, you need to keep a very sharp eye on both what you write in your contract and how you wield the big stick to keep the contractor behaving.

Looks like QF may follow NZ re: outsourcing maintenance.

Qantas set to follow AirNZ

By Steve Creedy
20-12-2005
From: The Australian
From: http://finance.news.com.au/story/0,10166,17615733-462,00.html

QANTAS yesterday seized on an Air New Zealand decision to axe 110 jobs and send its widebody aircraft engine maintenance overseas as another example of why its Australian operations must significantly reduce engineering costs.

Qantas executive general manager (engineering) David Cox pointed to the AirNZ decision as another example of major carriers using overseas providers for maintenance, repair and overhaul, with rates 20 per cent below those in Australia.
"These providers offer a global reach and scale that individual airlines struggle to achieve," he said. "This is creating a new competitive dynamic in a major part of our business that we have to respond to."

While Qantas recently decided to keep maintenance of Rolls Royce engines in Australia, more than 3000 other jobs could head overseas after February, unless management and unions agree on significant cost cuts.

The Air NZ decision gives Qantas officials additional ammunition as they pursue cutbacks in overtime and shift allowances that would amount to a pay cut of 15-20 per cent, by union estimates.

The New Zealand decision was a concern for Australian workers, said Australian Licensed Aircraft Engineers Association president Michael O'Rance.

He said Australians were being asked to compete with Asian and Chinese markets, where wages and skill levels of some workers were low.

Mr Cox said the airline's preference was to fund enough productivity improvements to keep the work in Australia.

But he warned: "If this proves to be impossible, we will have to look at offshore alternatives."

The Qantas manager said enterprise bargaining talks with the Australian Workers Union and the Australian Manufacturing Workers Union, due to resume in mid-January, had been productive, but unions should be in no doubt about the global issues driving Qantas.

Air NZ unions and its engineering division went through a similar process, but were unable to deliver a viable case for keeping the engine work in-house.

Air NZ chief executive Rob Fyfe said an "extremely bleak" analysis showed that volumes in the business were low and falling, with no sign of sustainable third-party work or identifiable joint venture partners.

However, a decision on whether to outsource a further 507 Air NZ widebody airframe maintenance jobs has been deferred until February, to allow for further negotiations.

Mr Fyfe said some work could stay in New Zealand, if the unions and their members were able to commit to "extensive across-the-board" labour reform.

The reforms could include suggestions already made by the unions, such as flexible shifts, time off in lieu and fixed-hour employee arrangements.

He estimated that the airline would need to make $NZ48 million ($44.6 million) in cost savings over five years to keep widebody airframe maintenance in-house.

 

[Yada Yada]

Looks like QF may follow NZ re: outsourcing maintenance.

Qantas set to follow AirNZ

By Steve Creedy
20-12-2005
From: The Australian
From: http://finance.news.com.au/story/0,10166,17615733-462,00.html

QANTAS yesterday seized on an Air New Zealand decision to axe 110 jobs and send its widebody aircraft engine maintenance overseas as another example of why its Australian operations must significantly reduce engineering costs.

I'm starting to feel that QF have already made their decision to do this and that the current "dance" is all about avoiding an industrial dispute. With plenty of availability on O7 at good pricing, a strike may give them the short-term boost that they need.

 

[albatross710]

Already well on the way

My understanding was that they had already outsourced infrastructure to IBM and telecommunications to Telstra so this would be a natural extension of the same strategy.

The error I believe corproations make with outsourcing is that they give away their strategy decisions and responsibility. I suggest that a Qantas CIO and other executives know more about the required IT strategy that Qantas needs moreso than a Bombay sweatshop. Conversly the people in Puna would churn out programming code much faster than the Qantas IT staff. A case of an organisation searching for worlds best practice at each level of the corporation.

The major concern is that the CIO leaves at a time when they would need her experience to be developing new market leading strategy.

As a side note, I always smile at how Qantas are now doing self-checkin yet Ansett (RIP) rolled this out successfully 5+ years ago. Ansett may have done plenty of things wrong but they had that project on track.

 

[oz_mark]

Re: Already well on the way

The error I believe corproations make with outsourcing is that they give away their strategy decisions and responsibility. I suggest that a Qantas CIO and other executives know more about the required IT strategy that Qantas needs moreso than a Bombay sweatshop. Conversly the people in Puna would churn out programming code much faster than the Qantas IT staff. A case of an organisation searching for worlds best practice at each level of the corporation.

I agree with this. I know of one largish compnay that has outsourced various IT components to different companies - infrastructure to one, applictaion development to another, project management to another, but really doesn't have the IT governance in place to effectively deal with issues that arise, let alone have a coherent strategy.

 

[tuapekastar]

Outsourcing of selected smallish functions can work, but frankly, I think the overall concept is not a winner. And this applies to QF as much as anyone else.

Typically, when a large IT area is outsourced, the majority of the general staff move over to the outsourcing company, and are managed by that company. Nett result (that is expected to make the difference) is, same staff, different management. What does that say about the management capabilities of the original management that made the decision to outsource?

I read not too long ago where Telstra had to employ around (I think) 80 mid-level IT managers, just to manage the outsourcing relationships. That is efficiency...NOT.

 

[serfty]

Re: Already well on the way

... As a side note, I always smile at how Qantas are now doing self-checkin yet Ansett (RIP) rolled this out successfully 5+ years ago. Ansett may have done plenty of things wrong but they had that project on track.

FWIW, AN did have self service check in before QF; I remeber the advrtisement ; where the subordinate checked in and seated himself some rows in font of his self absorbed, talkative Boss! :twisted:

However, IIRC, QF's "Quick Check" has been around for 4+ years.

 

[262sammy]

Re: Already well on the way

The error I believe corproations make with outsourcing is that they give away their strategy decisions and responsibility. I suggest that a Qantas CIO and other executives know more about the required IT strategy that Qantas needs moreso than a Bombay sweatshop. Conversly the people in Puna would churn out programming code much faster than the Qantas IT staff. A case of an organisation searching for worlds best practice at each level of the corporation.

QF are indeed on the outsource track, and yes there are always posatives and negatives for each. What QF is faced with is a NUMBER of aging and legacy systems that are approaching (some might say well past) their used by date. This may have something to do with their larger (than a number of competitors, not just low cost) % IT spend.

I just hope that the move to outsource isn't just because of the need to rationalise and update, outsourcing may be a good short term solution but IT governance may suffer long term, especially as IT becomes more and more intergal to the airline business, it is after all one of the primary distribution channels.