Jetstar CIO: Stephen Tame

Host: We'd like to welcome Jetstar CIO Stephen Tame, and to say thank you for being part of our CIO Vision Series. The question that we would like to start today's interview with is this: What are the main areas of technology that you are excited about, and what will you be investing in over the coming year?

Stephen Tame: We've been spending a lot of time and effort looking at how we are going to be deploying and managing our systems moving forward, and a lot of that is around virtualization technologies.

Virtualization of the applications, virtualization of the servers and the systems. That provides us with the flexibility to deliver those applications outside of the Jetstar world to those areas that we need to do business. So I don't know whether airlines are somewhat unique in this, but we need to deal with a lot of common user, or non-Jetstar equipped locations. Airports for example, or ground handlers officers, or line engineering, where we need to deploy what can be complex applications, but we need to do so outside of our world.

So we've spent a lot of time doing it, we've actually taken a significant architectural step, in that Jetstar has only been in business for two years, and when we started we deployed what was the traditional airline IT. Big PCs, servers around all the airports around the world. We've actually come back from that, and I've actually recalled all those assets, and we're now looking at rolling out thin client machines, again virtualizing the applications, and I've found that it's significantly assisted my bottom line. It's actually dropped my maintenance and management costs down by about 60%. So it's a very interesting technology, it's developing and maturing, and it's something we're investing in now, but that we'll continue to look at investing in in the future.

Host: Is there one specific project over the last year that you can point to, that has been driven by technology, and has resulted in significant cost savings?

Stephen: Again, I'll talk about the work that we've been doing with our airports. One of the major issues that airlines have, and again I'm not trying to be specific to the industry. Is that we're forced in to using other people's equipment at airports. So again, I'll look at the international airport. So if you're at the international terminal right now, and this is true for most countries, you'll be using common user equipment, and you'll be looking at using the reservation systems there.

Well, most businesses need more than that. They actually need some access in to their back office, it could be a bag management system, it could be a sales or a retail application, or it could just be that they need access to their email. Most other organizations or airlines actually have two links going in there, so they double up on that. One of the things that Jetstar has done is again virtualization products, a product from a supplier called Citrix. We've actually got that certified by CETA, who is one of the common user providers in the world, and also by Arink, who is also the other common user provider on the world.

So that means on the common user equipment now, I can actually deploy any common user back office application I wish, including if I wish to email, or Microsoft Word, or access to any of the other applications. That's contributed significantly to the way I manage the IT at the airports.

It also means that as Jetstar is moving towards our international business that we are launching in November this year, I don't have the same complications that other organizations will have. So I can deliver my Back office in to Denpasar, or in to Ho Chi Minh city, which is the old Saigon, with relative ease.

We went on sale in June-July for our international business and, of course, the business said to me, "Well, the first thing we need to do is be able to have a sales call center in Ho Chi Minh City to have access to the Jetstar system so that they can do sales." Now a lot of organizations will panic about that, and think, "Well, I have to get IT in there, I have to get equipment in there, I have to get access in there."

Again, with virtualization, I have set up an access to Jetstar through a secure access gateway, which means I can deploy my business systems over the public Internet, through a secure access method. So that means that I was able to deploy a sales application to an office in HCM City using their equipment on their Internet connection in a day. So the cost savings for that sort of deployment with that technology is immense, and the returns that we're getting is quite significant.

Host: How much do you plan to spend on IT in 2007, and will that be more or less than you've spent in the current year.

Stephen: It depends on how you phrase that question. In real terms, I am proposing to spend more, I am proposing to increase my spend by about 40-50% over last year. However, in percentage terms, which is one of my KPI's, I'm actually reducing my IT spend. In that currently, when Jetstar first started business two years ago, for example, my IT spend was 1.6% of total revenue. Last year it was 1.4%. This year, 2007, I was projecting 1.2%. With the beginning of this international business, it adds significant revenues to the organization, and you would normally think adds significant IT cost. Well, that's true, but by actually holding that cost down, and holding the growth down proportional to overall revenue growth, I can actually decrease my overall IT spend as a percentage of total revenue.

Host: What do you feel would be the sweet spot in terms of IT spending as a percentage of revenue?

Stephen: It depends on the culture of the company. If I was to look at the airline industry, the average is about 3.8% worldwide, most of the mainline carriers. Some get up to five, but they then pride themselves on being the technologically advanced airline. So they spend in IT to be able to get that sort of advertising bloom. The Jetstar model is low cost. If I was to compare myself against who is ultimately the low-cost airline, Ryan air, who a lot of people try to emulate against, they spend about 0.5%. But then again, I think their view is not to have IT deployed outside of Ireland and mainland UK. Jetstar adopts some of their practice.

So, for example we have IT at the checking gates, but we don't have IT at the departure gates. A lot of airlines do, most you will see have scanners or boarding card readers and so on. In Jetstar we've got a bingo ticket with the numbers one to 200 on it, and as you come through we cross it off. And it's compliant, it meets the regulation. You don't necessarily need IT.

Host: You stated in the past that a very important philosophy for you was to always have that manual process in place, no matter what IT solutions you implement.

Stephen: It's built in to my agreement, and it's continually voiced by me to the organization. Success is not just delivering, success is also in managing expectation. So Jetstar, for example, is a 97.5% airline. And I continue to say that right throughout the organization with regard to IT and IT delivery.

That doesn't mean I don't have some high availability systems, I do. What that means is that I could lose an airport for a day, and I can go manual at that airport, and I can survive. Keeping in mind that the IT at the airport is meant to enhance the efficiencies, it's not mandated. So I can actually fax out the passenger manifests, and you can come up to the counter and show your ID, they can cross your name off, and we've complied with the regulation.

So an interesting role for an IT person at Jetstar, is that as well as delivering the IT and being the IT evangelist, I'm also the first person to turn around to the business and say that in this particular case the piece of technology you need is a pen. To try and question the organisation and say to them that in some cases IT is the last thing you want. It adds complexity, it adds cost, and it doesn't contribute to the success. Only where we find that we do get some significant synergies and efficiencies, will we look to go down this IT route. But I still hold back on the foundation. We've still got to have a manual solution if we have to.

That comes to its own actually. Melbourne Airport, about September last year, had some significant problems. Essentially some airport works dug up networks, and the Internal networks for all airlines operating out of Melbourne was up and down for about three days. Most of the other airlines had delays or stops or cancellations. Jetstar went manual for three days and went on time. So it's not just to save money, it's also the backstop to our business practice.

Host: You mentioned KPI's earlier, what are the key measures of success you use as a CIO?

Stephen: It's balancing the demands of IT against the demands of the business. It's making sure that I can deliver to the business initiatives. If you want to ask me about the five year IT strategy plan at Jetstar, well there isn't one. The reason that there isn't one is because the business is saying, "Well, we'll look at what we're doing next year and the year after". We've got some long term visions about growing and developing, but we don't know what we're going to be doing yet. So I've got to build rather than what would be a mature organization, business as usual IT strategy, I've got to build a strategy that says what I will try and do is develop the toolsets, the kits, the options. I will give you all of the business opportunities and options you can have. In this case, you can pick option one and two and three. For this one you can pick something else. So it's actually ensuring that I can deliver the flexibility to the business, so we can operate cheaply in to a location, but also get out cheaply as well.

Host: What are your views on outsourcing IT?

Stephen: Everything that Jetstar does is actually outsourced. My IT organization is based on a very small headcount. The expectation I've got is that I can continue to run the business on that. The risk that I'm facing at the moment is that as this organization grows in general terms, you find that your headcount grows to meet that.

So across the deck I am assisting in looking at strategies, electronic document management systems, other types of solutions for operations, maintenance and engineering, to try and provide them with a solution that lines up with their anticipated growth so that they can minimize their headcount. So that's a KPI I share in with the rest of the organization. Yes, we want to grow, yes we want to grow our revenues, but we don't want to grow our heads at the same rate. It's a big balancing act.

Host: How do you decide specifically what to outsource?

Stephen: One of the things that I say to my team is that I actually go out seeking to buy managed services. I don't go out and buy service management, because that is the job of my team. So we will provide the service management layer, but we'll outsource all of that managed services to the various third parties. So you know we outsource our payroll HR system, it's an Internet based solution, so much per person per month. We outsource our email platform. The engineering system is supported by a supplier out of the US, our airline information management system is supported by a supplier in Greece.

What we do in the IT department is make sure that we deliver to the business by taking these server management, network management, system management, the database management, the applications management, and make sure that these things work together. So that's essentially the job description for each one of my guys, and I've set up some specialties well, not specialties but clear accountabilities. So I've got a guy who's in charge of everything network, so I've got a guy who's in charge of everything infrastructure, so I've got a guy who's in charge of everything operational. I have some healthy debate, everybody's got their own input, but ultimately the man who's in charge of infrastructure better stand up and make his call, because in the end he's accountable for that part of it.

We get a lot of respect from the business for that, primarily because they see that this is where the responsibility and accountability is. We also have a very good alignment with our business, because my guys are actually part of the organizational structure.

Host: You mentioned virtualization as an area that's very exciting to you right now. Any particular technologies you're anxious to implement in the future?

Stephen: We're looking at some of the problem areas within the business. I'm looking at extending electronic document management systems further. We currently use it for our crew records. We've implemented what I think is a fairly innovative solution for our invoice and payment processing, that works extremely well for us. We are now looking to the same thing for HR and customer records, where you manage those huge volumes of paper. We just need to look at how we're going to manage those better. So I see that as something that we'll be extending next year.

I also believe we'll be looking at some sort of solution around the development of a lot of our internal manuals. A lot of that is done manually, we use frame maker or some other types of tools. But the actual overheads on managing compliant publications is quite significant. We've got procedures on everything, we've got procedures on how to close a door and how to lift up a wheelchair, and all of these have to be documented and certified and verified by the airport regulators and so on. So we put a lot of effort in to doing that, and I feel that there's a systems solution out there that we need to look at to make that life a bit easier for us.

Host: Going back to the philosophy of always ensuring that there's a manual backup plan for business processes, do you think this has helped you get the nod for expansion of long haul routes in to Asia?

Stephen: Well, otherwise, to be honest with you, I'd be needing a team of 100, and I wouldn't be able to cope with the demands. With the business, we went to the board in February of this year to reach an agreement. The board said, "Yes, this is a good idea, Jetstar should move in to International business." The board allocated funding to Jetstar, about AU $2billion, to start that business over a ten year period. They then said "We'd like you to go on sale in July and fly in November", which you start thinking about...

Well, that means I've got to put some sort of Airport infrastructure, at this stage anyway for our launch, in to Bali, in to Ho Chi Minh City in Vietnam, in to Bangkok, in to Phuket, in to Kansai or Osaka in Japan and also in to Honolulu. And you look at those and say, "Gee, that's a bit of a challenge."

And then you look at some of the other complexities. So, for example, Honolulu. Depending on which ground handler we select, half the airport is common user and half is not. Now the business is saying they don't want to be locked in by an IT question as to which ground handler they're going to pick, so how are you going to manage that?

Another complicated area is Ho Chi Minh city, which is the old Saigon. Great holiday destination, but the technology over there is a bit ordinary, and it's a BYO airport, so you have to bring your own gear. When I say BYO airport, there is IT at the airport, but it's what you call a passenger name list drop. It's not a real-time solution. Therefore you have issues about how you validate electronic authorities to enter Australia, in real-time. Which you have to do! It's mandated! How do you manage bags and bag reconciliations and weight? So even though you can use the old P&L drops, the requirements of the regulators have moved to where that's no longer an applicable solution. So I need to put my own equipment out there, how do I do that?

And the last area of complication is Bangkok. Bangkok is a common user airport, but the new Bangkok Airport is a common user Airport as well. One's two hours left of the city, the other's two hours right of the city. Now the airports and the Thai governments have been arguing over this airport for two years. Now they've announced they're going to start operating in September. I don't necessarily believe them, so what airport do I put my infrastructure in?

So in those cases there, looking at how we would do it, we've actually built ourselves some mobile technology. To give you some example, we're talking about a laptop that's three years old. We buy they second hand, take the HDD out of it, put the HDD in the bin, we put a one gig memory card inside this thing, running an operating system, Windows in this case. We make the memory card read only, so this thing can't be infected by viruses, it can't be broken, every time you press the button you get a fresh copy. I build a briefcase in to which I put bag tag printers and boarding pass printers, the whole thing is powered off one power supply, so I need to buy one power cord for the US. Plug this thing in, plug it in to the case, and run that check-in counter.

We've actually been testing this at the moment, and we can actually run the whole thing off wireless CDMA networks, which is the mobile phone system. So we're building the flexibility to be able to deploy to meet the demands, and what that means is that in BKK for example, our policy is that if there's common user equipment in there, we will use it, it makes sense. So I don't have to manage anything locally. But the insurance policy I've built for the business says, "Well, I don't care if we operate from the old airport on day one, or the new airport on day one, or half and half." We can actually do something without having to worry about that infrastructure.

Host: Running on such a tight budget, how do you test some of the solutions that you've developed?

Stephen: We've been developing these strategies over the last 18 months, two years. So this is proven technology, we've been running some regional Australian airports off no-network CDMA connections since August last year, and we're comfortable with that. The reason I can do that sort of thing, and going back to expectations, is because I continually advise the business on a 97.5% airline. So if for whatever reason it doesn't work, for a day, I can go manual.

It means I can experiment with DSL connections, CDMA connections. I can experiment with all of these technologies that you might argue is not a 99.9% solution, but I don't have to achieve that result. So as well as giving me the flexibility to give the business their tools, and saving me cost, I'm achieving some results. That 2.5%, you'd be surprising how much that locks you in, and how much that costs. That last 2.5% is really where the big dollars are, where the big resourcing requirements are, and it's like a ball and chain.