Suppliers fly high via the internet

British Airways
Project: Extranet linking corporate travel departments and travel agents
Aims: Improve communication, establish online booking and gather customer information
Start date: Early 1999
Finish date: Ongoing - online booking by end of 2000
Cost: £100m over two years
Problems: Managing channel conflict
Successes: New working methods developed, development cycles slashed.

The world's favourite airline might deal with hundreds of travel agents, thousands of corporate travel departments and millions of business travellers every year, but what BA really, really wants is to get inside those customers' heads.

The company realised that its daily contact with travellers presented a golden opportunity in the internet space, says Simon Parks-Smith, head of business-to-business (B2B) ecommerce at BA. "Unlike a dotcom, we actually get to meet our customers," he says.

What was required was a way to collect information on the preferences of business travellers, and to inform those high-value partners about special offers. To date, the best way of doing this has been through low-tech methods such as memos sent to the head offices of travel agents and corporate customers.

BA charged its newly formed ecommerce division - eBA - with the task of creating an electronic booking and travel information service that would link directly into BA's internal systems. The result is a £100m extranet project that offers online booking and travel information to 1000 travel agencies and 135 corporate travel departments.

The project will correct a long-term problem for the company, says Parks-Smith. "Two thirds of our turnover is generated by corporate customers, and 85 per cent of our business goes through travel agents," he says. "There's a mistaken belief that travel agents will vanish overnight, but they won't."

Onwards and upwards
Six months into the project, BA's extranet is still little more than a way to deliver timetable information and advice on difficult bookings. But in the next six months the company will complete the rollout to business partners, and boost the technology to offer online fare information and booking components which will connect direct to BA internal systems. The systems at the core of the extranet service are identical to those used successfully in BA's direct sales.

The extranet, once complete, will change the way BA does business radically. The 135 travel offices already online generate £600m of business annually. That sum is likely to increase as new features are added; allowing corporate travel departments or travel agents to request seats, organise special check-in times and even book hotels or cars direct from the desktop. BA's reward is that it will know what its customers want, hopefully before they ask.

However, the company is aware that the online travel sector is fiercely competitive. "The threat is that we become a commodity product. So the best defence is personalisation," says Parks-Smith. For example, customers will be able to check in online, or request that their gate number be sent to a mobile phone via simple messaging service (SMS) if they are late for a flight. With this type of service, BA hopes to fend off the swarms of identikit internet travel services.

The project will be extended even further later this month, with the launch of a beta service for small-to-medium enterprises (SME). That system will incorporate a travel management portal, allowing small business customers to book tickets online with any airline, run travel policies for their business, and request travel information. "If it works it will give our SME customers the type of travel management they just can't afford today," says Parks-Smith.

Travelling easy
BA will offer travel agents free use of the portal as a co-branded initiative. When travellers make a telephone booking via the portal, the only difference will be that they will be speaking to a travel agent, rather than BA's sales team.

Despite the potential revenues of the B2B initiative, the rollout has experienced some cultural problems. Some managers - particularly those whose job it is to liaise with travel agents - see the B2B service as a threat to their own divisions. Such conflict was inevitable, says Parks-Smith. But he is willing to sacrifice internal revenues in exchange for the all-valuable customer data.

The success of the extranet's development is a result of the 120-strong eBA team, which has been created from multiple business divisions within BA. Marketing managers complement technical staff and operations specialists. Development work is done separately by a combination of 100 in-house developers and 100 IBM ecommerce developers.

As with all large teams, there is the risk of creating over-sized, lumbering and late projects. So eBA teams are kept small - eight is a typical team size - and projects are kept to three months, says John Mornement in eBA operations.

BA has had to make some changes. For the first time in the company's history, it is buying off-the-shelf applications, largely abandoning the practice of hard coding. "Where there's a component available we're happy to use it, but that's not always the case," he says. "Our online check-in and the Executive Club are unique to BA, for example," he adds. "But we do have a buy versus build philosophy now."

The basic systems supporting the extranet were written in Java, taking care to separate the presentation layer from the business logic and the back-end systems. This gives the company the opportunity to plug the same systems into any means of delivery. The same business logic that drives the system will soon be able to send SMS messages and interact with BA's interactive TV effort.

But Mornement says the company is wary of supplying business partners with systems that don't work properly. "We are very happy to be the first airline to use a technology, but we are not so happy to be the first company to use it," he says. "We should not be in the technology proving business."

BA is fighting on two fronts: to keep the attention of consumers who have a wide choice of airlines; and to manage the channel conflict that results from the opportunities ecommerce offers. "We're forcing ourselves into conflict," says Parks-Smith. "There is a need for a direct offering, but our relationships with our partners will have to endure."

Forte hosts a procurement ace

Company: Rocco Forte Hotels
Project: Cut cost and time of technology procurement
Aims: To source entire IT system for new hotel
Start date: March 2000
Finish date: Equipment installed later this year, hotel opens 2001
Cost: IT equipment worth £500,000
Problems: Not suitable for specialist IT requirements
Successes: Improved efficiency and better control over the tending process.

When you have a shopping list for three servers, 44 desktops, four laptops, 30 printers and other assorted hardware products, you know you're in for a long day.

The verdict of Rocco Forte Hotels UK systems manager Robert Davison, when faced with this task? "Very tedious." That was until Davison abandoned the traditional tender process with its long-winded proposals and endless sales pitches in favour of reverse auction site ace-quote.com.

Davison was charged with the task of kitting out the group's Lowry Hotel in Manchester - due to open next year. The project involved sourcing all the hotel's front and back-office hardware, which would run the bespoke software employed by the hotel group.

The decision to use ace-quote.com was basically the result of a tip-off. "One of my IT managers based in Cardiff had used the site, and she told me about it," says Davison.

The site allows registered buyers to post a tender, which is distributed to registered suppliers via email. The suppliers then submit bids and compete for the business via email. As a buyer, Davison was free to choose any supplier from the list of tenders, which meant sifting through quotes from 35 suppliers that pitched for Forte's business within a week.

Apart from speed, another advantage for Davison was the control he had. The pitches were made via email, so far less intrusive than sales calls and he could respond in his own time. "And the range of responses gave me the opportunity to make a better decision," he says.

The reverse auction had two particular advantages for Rocco Forte, which has a corporate policy of using Compaq suppliers. "It put us in touch with companies we had missed in the past," says Davison. He was also able to see when an offer was overpriced. "I was able to say, 'you will be discounted unless you can lower your price'."

Size doesn't matter
Davison initially limited his use of the site to small tenders, but Helga St Blaize, ace-quote.com co-founder, bridles at the idea that an online reverse auction is not appropriate for large deals. "We have a contract worth £3m up for auction at the moment. We are seeing excellent growth at the high end," she says.

Although St Blaize admits that this is, to some extent, "business buyers experimenting", she is unsurprisingly adamant that ace-quote.com suits the IT purchasing environment. "No matter how good the relationship between buyers and existing suppliers, there will always be ad-hoc suppliers needed," she says. "People are saying, 'we need it now. We can't wait for next year's budgets'."

For Davison, the main achievement of putting the £500,000 tender for the Lowry Hotel online wasn't squeezing a lower price out of his suppliers, but squeezing more hours out of his day. Having narrowed his online quotes down to three, he then had each pitch for the business. Integrated Network Solutions won the contract.

There are limits to this approach. "This was the IT infrastructure, but there are areas of the hotel's IT procurement that I can't get," he says. The technology used in the hotel's guest rooms is ultra-bespoke and specific to the hotel community. "The service that guests get on their desks is not available, that type of procurement is not viable."

So, while the reverse auction can satisfy general-purpose needs, Davison accepts that it is less useful in finding vertical suppliers for services such as internet access delivered through the television. If Davison is looking for ace-quote.com to broaden its approach, he will be disappointed.

Vertical markets are key
According to St Blaize, the key to success for ace-quote.com is to be more vertically focused. Instead of broadening the list of suppliers, it will franchise its technology to companies in other vertical markets. "Our expertise is in the IT sector," she says, "You need to mine a sector very deeply to provide an effective service."

Acequote.com does not generate the level of traffic experienced by consumer sites, but it has a higher look-to-buy ratio. The site receives 100 new registrations and 100 new orders every day, with a typical request receiving five quotes from the site's 3500 registered suppliers.

The site's decision to narrow its focus stems from a weakness - as acequote.com gets more registrations from a broader cross-section of the business community, it has the potential to scare off serious buyers who consider it a gimmick.

"We have large growth at the high end, but we need to match an appropriate seller to a buyer. It's not just about getting the cheapest quote, it's about getting the right quote," says St Blaize.

The site has organised its content to channel users into communities where they will be surrounded by peers and matched with resellers who are accustomed to their business needs. The channels will also provide news, background information and resources such as benchmark test figures.

Davison has also won over his board. "They view the idea very favourably now," he says. "I'll be making more of our IT procurements this way in future."