IT transformation propels travel firm back to profitability
Turning around a company with a radical change in IT and an overhaul of business processes is one of the greatest challenges an IT chief can face, but for those that succeed, the results can be massively rewarding, as Thomas Cook's Mario Trecroce has found.
In mid-2001 Thomas Cook was in the red, and some parts of the firm had been sold off. The company had recently been taken over by a German organisation which was less than happy with its performance figures. What followed was a watershed moment in the travel firm's long history.
"We were under immense pressure for a while," said Trecroce, Thomas Cook's group business transformation and operations director. "The margins are very low in the travel business and the market is very competitive. Our cost base was too high. We needed to transform the business and structure all the operations."
In July 2001, under the watchful eye of Trecroce, who had been brought in earlier that year, the company began a massive, four-year IT and business transformation project. Over the following 20 months the project would cut £140m of costs from the business and help the company record an £80m turnaround in net revenue and return to profitability.
The transformation programme has three stages. The first, restructuring and cost reduction, has been completed and the second, performance enhancement, is underway. The third stage will be growth. "That is where we will differentiate ourselves from our competitors," said Trecroce.
The company is now committed to improving processes, driving efficiencies and adding value both to the business and its customers. "We are not as customer-focused as we could be," he said.
In March 2002, Thomas Cook signed a 10-year, £120m deal with Accenture for a centralised IT services centre to manage its dispersed finance, human resources and IT functions. Some 400 Thomas Cook employees moved to Accenture in the deal. The centre is based at Thomas Cook's head office in Peterborough, Cambridgeshire, and Accenture is "very integrated into the business".
Prior to this the company was divided into three distinct businesses - airline, travel agency and tour operator divisions - each with its own unique systems for functions such as human resources, financials and payroll. As a result, everything was being done in triplicate.
The new centre runs mySAP software on Sun servers - part of a drive to standardise on SAP internationally and strip out legacy applications. Thomas Cook's £1.7m deal with SAP involves human resources, financials and business intelligence software for 11,000 employees across its three divisions.
The combination of the SAP project and property consolidation resulting from the centralising move, which has enabled Thomas Cook to cut the number of its UK offices from 24 to seven, has saved £19m.
The roll out of the mySAP modules began in August 2002 with Financials. Thomas Cook has now merged its human resources and payroll functions into a single entity across its 1,000 branches, resulting in better decision making by staff and more accurate data.
Later this year the company plans to roll out SAP's datawarehouse software, Business Information Warehouse, to help it generate better business intelligence. It will also implement SAP Materials Management for procurement. A future customer relationship management roll-out is planned, but first the company is focusing on getting the culture and business model right. "Otherwise you do not get the benefit," Trecroce said.
Trecroce also highlighted "softer" benefits. Thomas Cook has implemented employee self-service software that gives staff access to their own personal information. It is also standardising on mySAP.com as a corporate portal and "the primary interface" for its staff, helping it to provide common services and build a corporate identity. "It is a big win," he said.
Trecroce anticipates further savings by continuing to strip out legacy applications, improving business processes and consolidating further on SAP. "We are still very fragmented," he said. "We still have a long way to go."
How the savings were made
- Thomas Cook has invested in a centralised IT centre run by Accenture. Previously the company had three distinct businesses, each with their own systems for functions such as finance and human resources
- It cut the number of its UK offices from 24 to seven
- It is replacing legacy applications and standardising on SAP
- It has outsourced the management of 50 legacy applications to India
- It conducted SAP development work in Spain, where it is cheaper than the UK
- It has moved its head office out of London to Peterborough
- The firm has cut its wage bill dramatically. The number of IT staff has dropped by 53%, finance staff by 55% and human resources staff by 17% since the transformation drive began in July 2001.