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What image does British Midland conjure up? (It's an airline, by the way.) Boring? A country cousin of BA's?

What image does British Midland conjure up? (It's an airline, by the way.) Boring? A country cousin of BA's?

When your department is putting the business at risk, radical solutions are needed. Interview by Rod Sweet

Well, not any longer. British Midland is taking off from beige English skies and into a new blue yonder. Last month it changed its name to British Midland International, joined Lufthansa and other European carriers, and launched a new service to Washington DC and Chicago.

The company is to buy 12 new Airbuses and create a new class - 'new economy' - complete with PC points and lumbar rolls for those cross an ocean to go to work. This sexy, new BMI comes to you thanks to sexy, new IT. And very little of it is BMI's own.

Richard Dawson became the new IT director at the old BM in July 1999, at a time when IT had become a big potential liability for the airline. Dawson's ear was sore with people constantly calling him to complain about IT. "Just about every night there'd be some failure," he said. "People were reactive, almost to the point where they accepted failure was going to occur. This had been going on for a long, long time."

Poor IT is a massive risk for an airline. Crew scheduling systems have to work or the airline may find its planes grounded. And without yield management software an airline would have to stick a finger in the wind to judge how to make a profit.

Dawson had worked with BM before as a consultant and then as interim IT director before joining the board. He knew large-scale outsourcing was the first and crucial step: the IT department was putting the business at risk and changing its culture was too big a job. IT whizzkids were going to dot-coms, not staid firms like BM, stuck out in the East Midlands.

"I could have spent time and money, or gone to someone who could do it standing on their head," he said.

A year ago in a deal worth up to £30m, he hired ICL to manage BM's infrastructure (mainframes and helpdesk first, desktop and midrange computers to follow). The IT department shrank from 97 people to 43. Dawson said it would shrink further.

"The Americans call it headroom," he said. "Get rid of the day-to-day reactive stuff, provide a good service so the business can operate without fear of the systems falling down all the time, and free up some brain to use IT effectively."

The headroom came at the right time because BM was negotiating an alliance with Lufthansa and others that opened big new markets but meant the reservations system had to be harmonised with those of its allies. A massive system upgrade was needed, but couldn't be achieved by the deadline with the in-house IT department.

The solution was even more radical outsourcing. Lufthansa had great reservations software. Why not let it host the service for BM? It already did for Austrian Airlines. Yep, said the BM board, so Dawson pushed further. Why not let Lufthansa host all the value-optimisation software BM relies on? Sure, said the board.

Lufthansa now hosts BMI's network planning and management, pricing, accounting, weight and balance, sales and marketing and decision support systems. Now, Dawson wants in on whatever else Lufthansa is developing, like CRM and e-commerce.

Dawson says IT is as key to the new BMI as anything else in the business. "It's no good having a low-tech organisation for a modern, high-tech brand," he said.

The beauty, though, is that BMI has found a way of having sexy IT without breaking the bank to get it. Now that's what we call new-economy class.

Face to Face: the Key Questions

Who? Richard Dawson
Job? IT director, British Midland International
So? He cut his department in half and got Lufthansa to host a lot of crucial systems

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