Battling huge losses, and ongoing travel restrictions in Europe, Amadeus' decision to team up with the technology titan could pay off — but the race is on to deliver something tangible as rival Sabre gets to work with Google.
The official statement, issued at the end of last month, coincided with the travel tech giant’s release of its full-year 2020 financial results — a $609 million loss.
The announcement was vague: Amadeus will “harness cloud technology to innovate and explore new products and solutions and create smoother travel experiences” and with Microsoft “reimagine the travel industry going forward.”
However, an Amadeus executive spearheading the Microsoft collaboration shared a few clues with Skift about what’s in store.
It’s Not Just About the Money
During the earnings call on February 26, analysts attempted to pin down Luis Maroto, Amadeus’ president and CEO, on some of the specifics around the Microsoft deal.
Sabre, for example, said it will save an incremental $75 million per year of fixed technology cost savings from 2024 once it migrates to Google’s platform. But Maroto gave nothing away, only replying that any savings would be reinvested into research and development.
“I’m not going to say the financials weren’t important, but definitely not one of the top 10 drivers,” Denis Lacroix, the newly appointed senior vice president, cloud transformation program at Amadeus, told Skift. “If there were going to be any savings, we would put them back into product development.”
Any new products will probably be tagged on to Microsoft’s existing platforms, with Lacroix repeatedly referring to the U.S. company’s “incredible footprint.”
“They own LinkedIn,” he said. “I’m sure once we actually bring the right brains together, there’s got to be something, perhaps around corporate travel.”
Lacroix also said Microsoft “owns the desktop, more or less” — which is questionable if you consider how far Google is entering the space with its Chrome operating system. But he points out there’s more to Microsoft, including its enterprise resource planning software Dynamics 365. “It’s not as famous as their famous German competitor (but) this is already used by some of our airline and agency customers,” Lacroix said, referring to SAP.
Meanwhile, with corporate messaging and collaboration tools in the spotlight as the pandemic forces more people to work remotely, Lacroix said Microsoft Teams was another aspect that can play a big role in future product development.
“We need to try and isolate the ideas that we’re going to incubate, and over time once they actually all work, bring them to market. We won’t be running out of ideas, the question is to find out what has true potential for the travel sector,” he said.
While the cost savings from transferring more data and processing to the cloud aren’t front of mind, Lacroix is excited by the extra speed Amadeus stands to gain.
When searching and booking any type of travel, latency and response times matter, particularly in an era where people get frustrated if search results don’t pop up almost immediately.
Lacroix cited a large online travel agency in the U.S. that is one of its customers, but also a customer of one of its competitors: “When you do an airfare search on their website, they would send it to us, and the competition, and award the rest of the booking flow to the GDS that offered the best response time.”
Having the heavy lifting done from its data center in Erding, Germany for a customer in Australia, for example, wasn’t making sense.
“If it takes 200 or 300 milliseconds of latency because of the distance, there’s nothing you can do. We do have some customers that measure transactions down to the millisecond,” Lacroix said. “If we don’t bring our product very close to where our customer is consuming our services, we are potentially at a competitive disadvantage.”
Some customers were also insisting on having their personal data stored in their own country, due to privacy concerns.
Then there’s the actual hardware. Amadeus has been using cloud technology in a hybrid mode since 2015. Some of the cloud providers, including Microsoft, were coming up with processors you can’t buy in the market, Lacroix said.
“If we continued to do everything ourselves by just procuring hardware from the usual suppliers, we’ll lose the race,” he said. “Nobody’s going to go around building data centers in different countries. We had to take a look at our core operating principle, and do things differently.”
As a result, Amadeus will leverage Microsoft Azure, and its artificial intelligence capability, across the globe to optimize its operations.
Window of opportunity
So what’s in it for Microsoft exactly?
For Google, its deal with Sabre makes a lot of sense because the search giant has never shied away from its intentions to make money from travel. This is an aspect that’s not gone unnoticed by some of Amadeus’ customers, according to Lacroix, who implied they were surprised by Sabre’s allegiance considering Google’s lack of neutrality.
But Lacroix is keen to point out Amadeus isn’t just another Microsoft customer. “A vendor is strictly someone buying services. In our case we wanted someone who’d have skin in the game. It’s not just ‘sell us some cloud services,’” he said.
He thinks Microsoft will benefit from a deeper understanding of how the travel industry works, and learn more about operating mission critical software in the real world. “What happens if we lose our departure control system?” he said. “We’ll take them through a technical Heathrow scenario of not being able to check in anyone anymore.”
Along with Sabre joining forces with Google, and Travelport trying out a new look with its first ever end-to-end rebrand, it seems the global distribution systems are reinventing themselves. The results could prove revolutionary.
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