The Hindu Business Line : Flying high on software

THE Thiruvananthapuram-based IBS Software Services Pvt Ltd is one of Kerala's premier information technology firms. IBS focuses on the travel, transportation and logistics sectors, but what really separates the company from its peers is that it is passionately building a host of software products. IBS believes that its products will pitchfork it into the league of global players in the years to come. One such product in which IBS is investing a great deal of money and resources is `aiRES', which is a passenger-reservation system for airlines.

Recently, IBS won its first customer for aiRES in WestJet, a Canadian low-cost airline. (IBS has struck a strategic partnership with Cendant Travel Distribution Services, one of the world's largest brands in the travel business, to develop and market aiRES). The IBS Chairman and Managing Director, V.K. Mathews, spoke to eWorld on aiRES' potential after announcing the order from WestJet. Excerpts from the interview:

You are building aiRES at significant investments with the premise that sooner than later airlines will need to replace their existing computing systems. If these systems can work all these years, why won't they work anymore? Why should airlines go for a disruptive change of their systems now?

The airline industry, from a business point of view, has been undergoing tremendous changes in the past five years. Originally the industry was, by and large, government-owned because of geopolitical reasons. Then liberalisation came and airlines got privatised, leading to competition in the sector. Because of the competition, airlines have to look at new operational areas and new customer segments.

The industry has to take out roughly about 20 per cent of its cost, if it has to remain in business. Because of that kind of a scenario, airlines have been trying to reinvent, re-engineer, and rediscover themselves.One of the things that would facilitate that, considering the complexity of the airline business, is a system that will support any such change.

Airlines have typically, say, 5,000 to 40,000 employees, operating from different parts of the world. They also have distinctly different functions — from engineering to sales to cabin service to flying. So if you really want to change the business models to survive, you need to have systems that are amenable to such changes.

One of the inhibitors of the change now is the system they operate. These systems were built in the 60's, and enhanced through the 70's, 80's and 90's. Those applications are difficult for making changes.

Another reason is that the industry has been looking to build a new-generation system for the past 15 years. But nobody had ventured out.

Yet another reason was that the new generation-technologies had not matured to give that kind of performance throughput. The criticality of the system is such that once you switch it on, you cannot switch it off. These systems are designed to operate 24 hours, 365 days.

For the investors of the original, IBM and Unisys, the existing systems were cash cow. There is no motivation for them to encourage any change. Or the people who could have done this did not find an economic reason for them to change.

And why we are undertaking this? There is a clear industry need, the technologies have now become mature, and we have the experience of building large and complex applications.

The most important aspect is that we have now processes to develop very large applications. All of those inhibitors are now seemingly removed. The only issue is to have the guts to get on with it. It was a risk and that's why we wanted to have a strategic partner.

If the market for such systems has such large potential, why wouldn't larger players such as IBM get in there and give you tough competition? For those companies, the budget for building this kind of a system could run into hundreds of millions.

One of our competitors is developing (such a system). I know that their budget initially was $150 million, which was increased to $300 million. In the case of IBM, it has, over the years, moved out of the application space. So IBM is no longer interested in developing the applications, though it is very much interested in providing the service, using the best of the applications. In fact, IBM could be one of the hosting providers of aiRES, working with Cendant. Unisys, of course, is attempting to build one, and they have a competing product in that.

How do you go about rolling out aiRES, now that you have its first customer?

We are absolutely geared up to tap this market. By 2013, we are expecting a good share of this huge market. That's because the core responsibility of selling (aiRES) is with Cendant. Cendant owns Galileo, which is one of world's largest distributed travel agency systems. They have people and offices all around the world.

And they are able to promote it through their network. Our responsibility is product development, support, implementation and all that. This is a powerful combination. The companies have a 50:50 investment in the product. We also own the business rights 50:50. The IPR is with us, but Cendant has exclusive sales and marketing rights worldwide.

How critical is aiRES for IBS? Isn't it a risk investing such significant resources in one product?

aiRES is one of the most important products for us, but we are not putting all our eggs in one basket. In fact, we have 14 baskets! Apart for aiRES, we have a range of products such as iCargo, iLogistics, iPort, iFly, TopAir, etc. As for the risk associated with aiRES, the risk is almost over.

We have got the launch customer, and more customers are lined up and there is huge demand. We have another two more years to go before the product evolves.We are still investing. A team of 175 people are working on this, which will be ramped up to 250. It's absolutely expensive, but yes, the revenue stream is coming.

vipin@thehindu.co.in

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