Leave Your Legacy.
By Elizabeth Ivey
Thursday, 18th May 2006
Thousands of hotel properties and the majority of hospitality enterprises rely on decades-old legacy applications. Integration complexity creates serious inefficiencies and frustrations for operators, employee users and even consumers.

Thousands of hotel properties and the majority of hospitality enterprises rely on decades-old applications written in obsolete programming languages. Along with the inflexible databases and the cumbersome hardware systems on which they reside, many of these applications may no longer be supported by their creators. As distribution partners and the travel sector collectively embrace the Internet, the hospitality industry is grappling with a potent mix of legacy and web-aware systems.

Since legacy applications are tightly tied to the way hotels operate today, the health and flexibility of those applications directly affect a company's ability to manage information lucratively, to expand geographically, to offer differentiated services and to benefit from more efficient Internet-based distribution systems. A cocktail of integration complexity and costly "middleware" patches creates serious inefficiencies and frustrations for operators, employee users, and even consumers. The potential for efficiency and cost savings increases significantly when business applications can use the same operating system and network. Additional benefits offered by "next generation" programs and platforms include increased levels of interoperability and reduced cost of ownership.

What is a Legacy System?

A legacy system consists of some combination of the following: early software programming languages, older proprietary hardware, unsophisticated databases and/or non-existent network protocols. If this sounds like your hotel operation, don't panic. These systems underlie almost every corporate enterprise but are especially prevalent in the hospitality industry. By definition many legacy systems are cryptic in appearance, antiquated in platform, and with some notable exceptions, weak in functionality.

Good Help is Even More Difficult to Find

Despite their perceived stability, legacy systems are likely to be inflexible, expensive and difficult to maintain. A Gartner Group study estimated that 60 to 80 percent of an average company's IT budget is spent on maintaining existing mainframe (or mini-computer) systems. These systems are increasingly dependent upon "super users"- tenured individuals working miracles to optimize functionality through a myriad of interfaces and Byzantine data extraction. This observation is not meant to minimize the role of these persons, for they are vital to every organization. Yet no matter how dedicated they are paid to be, the day will come when they will retire, expatriate or simply grow tired of working with last century's tools.

Consider that the number programmers who can handle former language standards such as COBOL is declining annually. Recruiting personnel to support legacy systems is becoming more difficult, while 4GL programmers and network engineers enter today's workforce in droves. Likewise, the next generation of hotel employees (those graduating from high school and college over the next five years) is already proficient in Windows and browser-based applications. This workforce will be more reluctant to work with older, less intuitive systems. If a hotel company wants to attract and retain a savvy workforce, it should give employees modern tools and the opportunity to cultivate their own technology skills.

When debating the organizational challenges of replacing older systems, never underestimate the sophistication of the current or potential labor pool. "Legacy systems can create a subtly negative atmosphere among staff, who may feel the lack of investment is in them, that management doesn't care about the tools they use", says Paul Major, Director of Hospitality IT for Aspen Skiing Company. "It's difficult to attract a talented prospective hire when they see a system that they stopped using 10 years ago," he adds. Can't seem to keep your knowledge workers? The high level of turnover only compounds the need for more user-friendly systems.

Can't This Wait?

There are many forces influencing those faced with the dilemma of upgrading legacy systems. Some internal factors include the need to standardize systems across multi-property operations, the desire to move to a modern platform, ease of training in a high turnover environment, tighter integration between sales and property management systems, and the need for increased marketing and e-commerce capabilities. A major external force is the technology shift within the distribution community. Facing extreme market pressures, travel agents and consolidators are now joining the movement towards adaptive web-based systems. Finally, the consolidation taking place in the vendor community has resulted in reduced support levels for legacy product customers. No matter how compassionate you believe your current PMS vendor to be, it's only so long before the gentle prodding to upgrade turns into a harsh ultimatum.

Will your property or portfolio be prepared for this scenario? The most important options to exercise are 1) voice, assuming the needs of the operation can be articulated and 2) choice, assuming all suitable alternatives will be considered. Use these intelligently and above all, strategically.

Migration Strategy and Planning

Before beginning any modernization or migration project, hotel operators and executive management must understand exactly what their current information management needs are and whether the existing or proposed systems adequately support the business strategy, including the possibility of unforeseeable changes in strategy. It is critical (not optional) to develop a vision of what the information architecture should be in two years, four years and a decade from now. Understanding the benefits of migrating and discussing those benefits from a business perspective is an early step to migration planning.

What to look for in a new system

Various technology initiatives dealing with distribution, loyalty program administration, customer information, and transaction billing have historically operated without coherence. Few organizations have constructed the infrastructure to support this level of integration, but for just about any business the competitive future depends on an immediate commitment to new technology adoption.

What is the greatest reason for replacing legacy systems? It is the "quest for efficiency" according to Jeff Parker, IT Director for Denver-based Magnolia Hotels - an expanding collection of upscale urban properties in Colorado and Texas. Parker elaborates, "Not just efficiency in operational procedures, but efficiency in user administration, back up and recovery procedures, data extraction, property-level support and ease of training across all hotel departments."

Information must be readily available throughout the property, chain, or ownership. To understand and anticipate the behaviors of customers, analytic functionality has become essential. To drive revenue and occupancy while managing multiple distribution channels requires flexible yield and channel management tools. To capture information across multiple customer touchpoints requires superior levels of integration between systems that have not been previously linked. Integration is dependent upon the use of open standards, as well as development tools and methodologies that companies like Microsoft, IBM CISCO, and Sun have agreed upon to power client-server and web-based systems over the next decade.

Some hotel operators are so fearful about the loss of historical data they cite this as the #1 reason for staying on their current system. If this seems like a familiar fear, the questions to ask is, "How useful is that data in its present state?" (By the way, it is YOUR data and any vendor that tells you that you can't take it with you when you go is just trying to keep you with them.) But before you insist on packing that "baggage", determine the value of your legacy data. Should all customer data be retained or just data from customers that have stayed eight or more nights in the last calendar year, paid rack rate, dropped at least $100 per stay on ancillary services and/or live within a 3 hour drive? Now, if you can get that level of customer detail from your current system in less than a day, you probably don't need to pull the plug yet. But when an executive has to ask "How many programmers are needed to run that kind of report?" then evolution should not be put off much longer.

System Selection

Selection of a new technology partner is never an easy task but the stability of the company, as well as the commitment to ongoing development is essential. Instead of obsessing over having 100% of the desired functionality today, look for partners with a track record in continued product enhancement. If the articulated development track supports the property's IT vision, then the opportunity to influence that development can be very rewarding.

Many vendors have found it impossible to allocate programmers to the development of new applications on new platforms, while continuing to support existing clients. Yet the vendors must demonstrate their own ability to keep pace with technology on behalf of their market. In today's competitive technology marketplace, consider the benefits of choosing a market challenger vendor over one claiming to be a "market leader". Challenge convention, shop around objectively and don't allow managers to choose a system simply because it's the devil they know.

Think you can't afford it?

Despite an economy on the mend, the hospitality industry continues its cash struggle for the most basic capital projects. Spending money to keep legacy applications over the next few years may be a mistake. Making strategic business plans based on (or constrained by) legacy applications can be a very expensive mistake. The opportunity cost of remaining on legacy systems, especially unsupported ones, can be staggering.

Hotels and resorts that remain on legacy products are not able to benefit from the ‘collective industry wisdom' incorporated into modern systems. If you cannot sustain parity, then you are far less likely to achieve a competitive advantage. Nimble corporations are certainly discovering the opportunity to leapfrog their competitors by modernizing or migrating legacy systems in the very near term.

The future and longevity of your operation just might be dependent upon a bold move today. Despite the pain of organizational change associated with new technology and process improvement, your employees and stakeholders are likely to be thankful some day. In conclusion: when aging, disparate technology systems impair a company's potential for growth, customer service delivery, efficiency or business process change then it's time to leave your legacy.

This article was reprinted with permission from Hospitality Upgrade Magazine and was first published in the Summer 2002 edition.

Elizabeth L. Ivey, CHTP is Vice President and Chief Strategist with HVS Technology Strategies. Focusing on opportunities to improve guest experience, profitability and asset value, the division assists hospitality operators, real estate developers, investors and ownership groups with planning, selecting and contracting for new technology systems. eivey@HVSIt.com
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