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Sun 26 Nov 2000 04:00 AM

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Going global

Mercator, the IT services operation of Emirates Group, has gone from IT department to global software business in five years. ACN speaks to Hugh Pride, IT director of the Emirates Group.

Mercator, the IT services operation of Emirates Group, has gone from IT department to global software business in five years. ACN speaks to Hugh Pride, IT director of the Emirates Group.

A dusty, unassuming building, tucked away behind the Dnata Airline Centre isn’t the place where you expect to find one of the region’s least known, home grown IT success stories.

No this company isn’t the latest big dot-com and you’re not about to starting buying their stock on NASDAQ — well not in the immediate future anyway.

But what effectively started out life as the IT department of the Emirates Group with a reservations & departure control system from Swiss Air has evolved into a global software and consulting organisation for the airline industry within just five years.

Mercator, the IT service provider to Emirates Group, has built a strong user base on five continents, including customers as big as British Airways and Quantas and as small as Air Zimbabwe.

Mercator’s star performers in its dynamic growth has been its portfolio of Oracle based financial accounting software including RAPID, COMET and the most recent addition PROFIT.

But Mercator isn’t just selling software solutions that it initially developed for Emirates Airlines — the IT services organisation is finding a growing demand for its team of technical experts to deliver consulting services on everything from best business practices to the complex migration to IP-based networks.

Although highly technical people, a string of successful development projects and awareness to the business issues have all attributed to Meractor’s growth, it was the decision five years to establish a separate business unit within the Emirates Group, which has proved critical.

The formation of Mercator changed the mindset from the traditional IT department to one of a commercially aware business unit, with its own project deadlines, the need to control and plan its own resources, and deliver finished products.

“Previously, we were a typical IT organisation, which was within the line management of Dnata and the airline,” says Hugh Pride, director information technology, for Emirates Group, a seven year veteran with Emirates Group, and chief architect of Mercator’s success.

“But we found that by establishing ourselves as a separate business unit we were able to take a contractual approach to the services that we were providing. Instead of just being available to do work at the risk of being very unresponsive to the needs of the business, we actually started to develop five year plans with the airline and Dnata,” explains Pride.

In short, the formation of Mercator enabled the IT department to treat the Emirates organisation as a customer. “[Consequently], we became a commercially aware organisation. We were then able to impose some kind of discipline in terms of establishing a real business case within the whole [Emirates Group], which specified exactly what they wanted to do in terms of investing in IT,” says Pride.

“We didn’t simply spend money — we looked at what the business would be able to do in terms of generating more revenues or becoming more productive and reducing costs.”

After developing a number of successful packages for Emirates Airlines, such as RAPID, an accounting application specifically designed for the airline environment and COMET, a similar outstation accounting package, the commercial possibilities of selling these packages were becoming obvious.

By ‘productising,’ the internal development software the company then started to actively market its internal software to other airlines.

Commercial involvement with other airlines over the last five years is now generating further business.

Where previous development work has been conducted under the sponsorship of Emirates Airlines or the Dnata, now funds are being made available from Emirates Group for Mercator to design and develop software to suit the needs of other airline customers.

“Now we’re not just looking at what Emirates [Airlines] or Dnata want — we looking at what the market wants and acquiring funds,” says Pride.

“We have just done some projects where we acquired some funds from Emirates Group, without the use of sponsorship of users within Emirates [Airlines.] We’re building an IT business — still in the airline world — but instead of always relying on the requirements coming out of the business, we’re recognising there is a hole in the market. We’re using the investments from the Emirates Group to build a product or a service, which will generate more profits that can be ploughed back into the Emirates Group.”

Building on its success with its financial accounting software, Mercator is gearing its product suite for the Web; opening up the information contained in the backend systems to front end Web interfaces.

Mercator is already pushing its loyalty card programme, decision support and air cargo systems into the market place. Mercator is also investigating the possibilities of extending Web interfaces to hand devices and other thin clients in the near future.

“Something like 50% of our applications are already Web enabled,” says Pride. “We have enabled our internal systems, we can generate most of our information through the Web.”

To ensure that the company has sufficient development resources ‘on tap,’ to deliver the applications both to the Emirates Group and other customers, Mercator has contracted a number of development houses around the globe to do the actual coding.

“We hold on to the business knowledge and design work, but we [outsource] the production work,” comments Pride. “Currently something like 60% of our production is done by [outsourcing partners] and 40% is still done by our own staff,” he says.

Mercator expects this ratio to grow to around 70-30 within the coming months. Why? Simply put the business benefits are too strong for Mercator to ignore. The outsourcing of physical coding to a third party enables Mercator to side step the costs of recruiting, and training in-house staff, whilst also ensuring the quality of the work.

“If you’re developing yourself there is always the temptation to cut corners. You don’t go through the procedures of somebody else testing or somebody else quality ensuring the work. With the [outsourced] relationship we can now ensure that when that product comes to us it’s virtually bug free.”

With its strong growth over the last five years, Mercator, like Emirates Airline itself, is entering a transitional phase. As the airline grows in size, with more aircraft, routes, staff, passengers and cargo, the business demand for IT solutions is increasing exponentially. To fulfil those demands Mercator itself must reach some degree of critical mass.

In a move that mirrors strategic direction taken by the likes of a American Airlines, Lufthansa and Swiss Air, Mercator within the next five years is likely to pull away from Emirates Group and stand alone as a separate IT services business in its own right. How that is achieved is still being planned, says Pride.

But essentially he adds, “We will service the Emirates Group better by becoming bigger and having more resources than is generated within the company rather than having to ask the airline to fill that investment. I think we will serve the Emirates Group much better if we become a global IT business serving the airline industry,” predicts Pride.

“We will still be a service provider to the Emirates Group. As Emirates [Airlines] grows the kind of resources, the kinds of products and services, which are going to be required and not going to be provided by an internal department. They are going to have to be provided by a professional, very much bigger unit, who can get the right products at the right price and get the right people to do the actual service. To do that I believe we have to become globally based,” explains Pride.

By forming a standalone company, Mercator will also be able to resolve one of its continual pain points — skilled people. According to Pride, one of the main restrictions on the growth of Mercator’s business is the people.

But as a global IT airline services company, Pride believes it will be more capable of holding on to its staff.

“If Indian staff want to go to America to work, we shouldn’t lose them, we should help them manage that process. Why lose that expertise? We have lost hundreds of people to the US over the years because that is really where they want to work. There is no reason why they shouldn’t be developing airline solutions in the States and there is no reason why we shouldn’t be developing them in the States,” explains Pride.

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