Preemptive Transformation: Fix It Before It Breaks – Lessons Learned From Southwest Airlines
There’s an old phrase some say originated in the rural South, and others attribute it to Thomas Bertram Lance, (Bert Lance), Director of the Office of Management and Budget in Jimmy Carter’s 1977 administration: “If it ain’t broke, don’t fix it.”
While that ideological phrase and thinking may hold water in some situations, —it’s detrimental in a world where time, speed, convenience, and ubiquity matter most.
Southwest Airlines found out the hard way during the 2022 holiday season. The cost of not upgrading your IT infrastructure because it’s not broken can come back to haunt you faster than Jacob Marley’s ghost of Christmas past.
Cause and effect, and poor planning
December 2022’s deadly storm dumped up to 50.3 inches of snow across 11 U.S. states. The weather led to widespread flight cancellations for Southwest Airlines—more than 90% according to FlightAware, a flight tracking website.1
Two of Southwest’s biggest hubs, Chicago and Denver, were hit hard by the storm leaving passengers with no way to connect to other flights or accommodations. Southwest’s crew members and pilots were also stranded without the ability to communicate through the company phone system so they could know where they needed to be next.
The culprits? Experts in the field and union representatives for Southwest employees cited the business’s vulnerable operations, legacy technologies, and poor planning to account for the holiday season as the cause for bringing the company to its knees. Could this happen to your company? You bet.
Will geopolitical and economic uncertainties affect tech spending?
The next 12 months will most likely be challenging, whether the world enters a recession or not. During 2022, the U.S. and its global partners battened down the hatches and prepared for a worldwide recession. With a new year underway, the recession still hasn’t materialized. However, the tech industry continues to see layoffs while the global economy is making companies reconsider their spending.
Two areas that will likely see tech spending in 2023 are cloud services, especially in data management as more companies are investing in environmental, social, and governance (ESG) interests to reduce their carbon footprint while moving away from on-premises data centers to the Cloud.
Another area where tech spending will be focused is cybersecurity. With threats becoming more frequent, more sophisticated adequate spending for upgrades and tighter secure networks seems likely.
To invest in IT or not invest—when is the right time?
If you’re still using paper-driven processes or legacy systems to manage compliance, product complexity, and internal and supply chain communications—now is the time to make your digital transformation and start automating your processes for better performance and market demands.
According to the latest statistics, roughly 70% of organizations either have a digital transformation strategy or are currently working on one, and 56% of CEOs said that their digital improvements have already increased profits.2
With cloud adoption becoming increasingly popular, 61% of businesses migrated their workloads to the Cloud in 2020, and in 2022, 94% of businesses used cloud services.3
A manufacturer’s performance and process effectiveness are directly related to its success; consequently, adopting the right technology that improves performance and allows for scalability as workloads increase is crucial. Teams can analyze data using the Cloud to determine if additional tactics are needed to improve the productivity and efficiency of their processes.
Cost of cloud computing
Cost savings and efficiency are the main reasons companies migrate to a modern cloud environment. The key factors cloud service providers consider when they decide how much to charge customers are networking, computing, and storage.
To calculate the total cost related to moving to the Cloud, an organization should conduct a thorough audit of the status of its existing IT infrastructure, including all direct and indirect costs.
Direct costs are easier to assess—they include staff, hardware, maintenance, software, and physical facility.
Indirect costs are a little more difficult to determine because they include the loss of productivity for any reason, such as server downtime, addressing customer complaints, and repairing a damaged reputation.
Networking costs: The vendor chooses how much it must spend on network upkeep. As a result, the provider estimates the costs for the hardware, network configuration, labor, and maintenance.
Storage costs: The vendor calculates the cost of maintaining existing storage hardware or the cost of purchasing new hardware to meet the enterprise’s storage requirement.
Computing costs: CPU expenses are calculated by the provider; client companies will have different needs when it comes to employing CPUs. Depending on the operating system a business uses, costs may also include license fees. The provider estimates the expenses of purchasing hardware for every gigabyte of virtual RAM a corporation consumes. 4
Calculating cloud costs versus traditional infrastructure
When setting up on-premises infrastructure, there are three different costs to consider:
- Capital costs: Server hardware, server software licensing, network infrastructure, storage, and backup infrastructure.
- Operational costs: Support for server hardware, software, and network infrastructure, as well as the storage warranty, data center power and facilities, current system administration labor, IT training, and IT staff turnover.
- Indirect business costs: Planned and unplanned downtime.
Benefits of moving to the Cloud
- Easy and fast setup: A company can quickly set up a cloud solution. The IT department of the company may quickly get it online and then remotely deploy it via the vendor’s website. The arrangement can be configured and managed remotely by the IT staff over the internet.
- No maintenance: The vendor oversees maintaining the cloud’s hardware, software, and networks. Therefore, companies don’t have to worry about security updates or maintaining their infrastructure. As a result, companies may manage the infrastructure with a small IT personnel and substantially save total expenditures.
- Faster disaster recovery: Companies may easily retrieve their information using cloud-based services in the event of an emergency, such as a power loss or natural disaster.
Savings of moving to the Cloud
- No significant up-front capital expenditures for hardware. Moving to the Cloud eliminates the need to buy physical servers, network storage, cooling systems, disaster recovery systems, etc.
- Reduced software costs because upgrades are included in the subscription.
- Lower IT support costs.
- Business continuity.
Don’t wait for disruption before you modernize your technology
When it comes to your IT infrastructure and business systems, the cost of doing nothing can be detrimental to your company as Southwest Airlines found in December. The airline company is anticipating a money-losing fourth quarter.
The cancellations will result in a pretax hit of $725 million to $825 million from lost revenue, plus extra costs, including reimbursements for travelers and premium, pay for employees.5 Don’t wait for obsolescence and collapse:—“If it ain’t broke, you haven’t looked hard enough.”
Learn more about the benefits of cloud solutions.
References
1. Southwest Airlines Service Meltdown
2. Digital Transformation Statistics
4. Breaking Down the Cost of Cloud Computing
5. Southwest Airline Winter Storm and Technology Breakdown WIll Cost Up To $825 Million
Joseph Prock