New Distribution Capability gets tentative approval in the US but is it too little, too late and at what cost?
NB: This is part one of a two part analysis looking at the technology and commercial issues surrounding IATA NDC.
IATA and its member airlines had great hopes for NDC to achieve a number of goals. At a stroke, it promised (whatever "it" was) to bring back control of distribution to the airline.
It promised to open the marketplace for any user – direct and indirect - to connect via the lowest cost channel in real time with personalization. It promised to provide new revenue capability at the drop of a hat. It had the real promise of letting an airline discriminate in favor of its best channels.
It promised for some – and let’s be honest about this – to wrest restrictive distribution control from the GDS companies. Ultimately therefore we need to be focused on adoption now and benefits will flow soon thereafter. Delay adoption and benefits will be few.
The harsh reality?
We are now two years into this initiative, and what have we been able to achieve and at what speed? Frankly not much. We are not talking about new technology that is breathtaking in new capability, rather the adoption (from other business sectors particularly in e-commerce) of tried, tested and true technology and processes that have enabled cost reduction and improved product deployment across existing and new channels.
Airlines want what other sectors have been able to achieve - transformation of their distribution. Other commercial sectors have clearly benefited from greater enablement of the consumer to ultimately buy the products they want in a fair, competitive and low cost way. While airlines looked longingly and lovingly at these benefits, they could not achieve them.
The goals and promise of NDC have over time become clouded by different agendas and competing forces. I have a suspicion that NDC has somewhat lost its way along the path to (not yet) delivery. Of course in business as in politics the path to fruition is paved with compromises, some good some bad. But the process of building NDC is becoming more and more “business as usual” - highly risk adverse process and painfully slow product delivery.
Really, what was the mission goal, and when, if ever, will we be able to say: “mission accomplished”? First, let’s address the elephant in the room. Is NDC really about GDS bypass?
Yes and No!
Yes, there is a clear benefit from freeing airlines from the shackles of GDS’ highly restrictive contracts. No, because that is not really a good goal. The aim really was and remains a reformation of the process of distribution via the intermediary channels.
There is a big need to make all products available through all channels. That doesn’t mean equal (homogenized) product distribution, it means introducing a capability where there is no constraint in how an airline can deliver its products its way to and through any channel of distribution AND consumers can acquire the airline’s products in ways they want.
This indeed has a name – its called retailing. True retailing for airlines has arrived and its impact is spreading like a shockwave throughout the industry channel discrimination and control is a must in this environment.
Data Driven, Technology Powered
Technology has fundamentally changed how we do so many things in our daily lives. Monolithic technologies from mainframes to PC’s have largely been replaced by smaller apps and disposable code capabilities.
Everything (well almost) is in the Cloud and in the palm of our hands. Even as recently as five years ago distribution users such as travel agencies would demand specific technologies.
There was an arms race and technology was one of the chief weapons. Every vendor touted his superior technology. Today, specific technologies are rarely a requirement. Rightly so, business users just want functionality and performance with acceptable and expected service metrics.
Data is the new black. They really could not care less about the back end, as long as it works on a tablet or a smart phone. With that world everything changes. Consumption via a mobile device has no analogy in the conventional (legacy) world.
For example, the average app time usage by a consumer is just over a minute. Yet the move to apps is increasing at an almost exponential rate. (See Figure 1 below). Note how productivity applications are the fastest growing section of app usage.
For airlines this move means that the adoption of the open platforms that will be enabled (via the open schemas of NDC) need to accelerate.
At a recent conference, airline and industry figures on a panel I moderated were asked when NDC would reach meaningful deployment. The answer was somewhat discouraging – the fastest time was five years.
That is an aeon in internet time. It means that our industry is in real danger of being left in the dust. And this is perhaps the biggest threat to airlines. We could all wake up one morning and find that Google Flight Search and Apple Passbook are the true start and end of the purchase path of the airline product.
Is open already here? Or are we too late to the party?
In days past we used to be safe in the knowledge that the complexity of the airline industry was so great that no outsider could possibly provide products and services to the travel marketplace. That no longer holds true. Indeed the traditional airline technology providers are in serious danger of being made as irrelevant as the word processor.
For example – just look at this screen shot of my Apple Passbook. (This is just a partial shot of four airlines – the actual list is more than 50 boarding passes from the past six months).
The lessons of not understanding your customer and your environment were clearly lost on Microsoft (Windows 8) and Blackberry (Z10). Both companies tried to force their consumers to move to their new worlds.
When confronted with a choice, users – even the loyal fan base - were forced to make a “should I switch” decision that spelled doom for Microsoft and Blackberry. The rest, as they say, is history. They voted with their fingers and their wallets.
NDC could very well fall into this same trap. The airlines risk alienating their user community by making NDC too complicated. The leadership of NDC has adopted traditional methodologies to approve new technologies for the community. This was clearly a mistake and the price is now being paid by slow deployment of NDC.
Does this mean all is lost? Not yet but it could be. Just scientific, but anecdotal evidences seems to suggest a certain waning interest in NDC and a move elsewhere.
The point I am making here is that we need to put some serious effort into encouraging adoption and take the opportunity to stimulate innovation with the open standard of NDC. We need to stop thinking of every possible use case and go for the low hanging fruit and let the community – the ecosystem of travel - figure out what the market needs.
Dictating to any marketplace is no longer a successful strategy for any vendor or community group. Airlines will be far better served by a focus on continuous effort and innovation. The choice in front of the airline community is stark. Either proceed without restraint or one of the big AGFA* (Amazon, Google, Facebook, Apple) players will take away the choices you think you have.
And the technology will then be dictated to the airline community from the outside. This is not remote possibility – it is a very real, serious and imminent threat.
Where do we go from here?
We need to focus on two areas for technology: seed the marketplace with technology, and funding.
Focus 1 – There needs to be a reference platform put in place that is enabled for all. The platform can be used on its own or modified. Setting up a release version one of an actual set of code will significantly accelerate adoption. Yes, cloud-hosted solutions need to be deployed and put to use, and I can assure you that this is quite possible.
Two of the VaultPAD companies are currently producing NDC 1.0 output. In one case this has been going on for more than four years! Farelogix has valid deployments with many players in the industry – so this process should not be hard.
Focus 2 – Incentives – hard cash needs to be put into the market for the deployment of platforms. Innovation must be rewarded through a large number of programs. For example IATA funding the reference platform noted above. Another example would be rewarding members of the development community for enhancing the code base. A whole ecosystem needs to be built, and fast, to get this community growing and moving away from the legacy systems (and their attendant processes) of old.
For NDC to be ultimately successful, the community and IATA need to show that they can:
- Deliver value
- Deliver speed
- Deliver what the user and his/her consumer want
The technology itself should not matter. Data and functionality not tied to technology are the drivers of value.
It is easy to throw rocks at the GDS companies as being the "bête noire" in this story. True enough they bear a significant, but not total, responsibility for the current state of affairs. They have fought long and hard to retain their legacy technology bases.
Their opposition to NDC has clearly hampered its opportunity window. The owners of these businesses want to maintain the cash flow of the GDS segments and build restraining legal processes around it. Sadly the real technology innovation was not funded at a time when it could have been.
Imagine if Sabre had invested the costs of the lawsuit against American Airlines (and its attendant payout) instead of the bruising two year fight, into developing new technology.However the airlines were hardly smart in addressing the fundamental problems of distribution, and it took them far too long to work on a solution.
It finally took the low cost carriers’ success to make the sector as a whole realize the true benefit of enhanced technology supplemented by new business models. Ultimately the low cost carriers showed that by eschewing the traditional business models, sustainable profits could be delivered.
Airlines and other stakeholders in the airline distribution marketplace need to focus on adoption of NDC, rapid deployment and sponsorship of innovation. It won’t happen on its own and right now it is taking WAY too long. In part two I will examine the commercial restraints on NDC and what needs to be changed to speed up adoption.