Blazing a New Trail

Blazing a New Trail

from HostingTech.com

Having custom-built a back end that answers in form and spirit to the requirements of the Internet age, Orbitz can save airlines approximately $4 on every ticket sold, which could amount to millions in savings to airlines, and more competitive prices to endusers.

Instead of being just another Web portal using the big-three reservation systems — Sabre, Galileo, and WorldSpan — Orbitz has built its own ticket fare calculation system that could operate as a competitor to the big three. Because traditional reservation systems run — still — on mainframes and Orbitz runs on Linux, Orbitz can book a reservation for 80-percent less than competitors. By charging less than the industry average processing fee, which is $13.50 per ticket, Orbitz is tapping into a $2-billion-per-year opportunity, which is how much all airlines combined end up paying in fees to the reservation systems, according to Orbitz research.

Although Orbitz is an online travel agency first and a travel-related technology outsourcer second, it does seek to develop an ASP- like business by allowing other carriers to use its reservation system for online ticket reservations and associated services. American Airlines has become the first airline to put Orbitz’s technology behind its site.

This move puts Orbitz in an interesting situation, because giant companies with impressive resources back its main competitors, who lack ASP technology on par with Orbitz. Travelocity, (backed by Sabre) and Expedia (backed by Microsoft) outsource their ticket reservation processing to traditional ticketing vendors.

Orbitz management says the lean technology underlying their processes make significant operational savings possible. Orbitz employs 200 people, as opposed to the 600 or more people working for a typical competitor. Two engineers manage Orbitz’s entire low-fare search server farm. Two full-time engineers and one part-time engineer run its entire hotel reservation operation. Traditional reservation companies do not dispute Orbitz’s leadership in the cost department, but point out their forte is reach. “While there will always be new entrants, we are a global distribution system,” says Vela McClam-Mitchell, WorldSpan vice president and general manager in charge of worldwide travel supplier services. “While Orbitz has been able to very efficiently recreate some of the things we do, it has just recontracted with us for another 10 years.” Orbitz executives confirm that, in the case of small airlines with few routes, they often cannot justify the expense of connecting directly and use WorldSpan. “WorldSpan knows the world is changing, and they are the only global distribution system that is trying to change with it,” says Zoghlin. “I look to them as a solutions provider to Orbitz. I will always want to work with them. They have more people and capabilities than Orbitz will have in a long time.”

Reinventing the Wheel
As Orbitz competitors — Travelocity and Expedia — try to reinvent Orbitz’s back end, the company carefully controls access to its technology. One thing is certain: Hosts who might have had ASP aspirations five years ago are going to stay far away from this battle.

Market watchers indicate that a wave of outsourced e-mail applications, dominated by Microsoft-supported, outsourced management of Exchange servers, is about as far as most hosts can branch out in the ASP arena. But there is still life in the ASP idea, even though contracts with outfits like Orbitz are far off for most Web hosts. “Over the last 12 months, most any company that has a software package has been looking for ways to sell that software package online, or market features of it that can be delivered online,” says Schroepfer. “This trend has benefited Web hosting companies with a professional services arm.”

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