Continental Airlines Case Study 0

CONTINENTAL AIRLINES CASE STUDY

FALL 2013

DECEMEMBER 1, 2013

TIMOTHY DUNCAN
Continental Airlines Case Study 1

Abstract

Continental Airlines has formed a strategic partnership with EDS, an Information

Technology consulting firm that provides solutions to businesses who need services

regarding IT infrastructure, etc. Continentals relationship with EDS has been up and

down. There has been many successes and also much room for improvement. In this

paper, I will discuss the relationship between Continental and EDS, how EDS can

meet the changing needs of Continental, the flexibility of the original agreement, and

whether Continental should also do business with other contractors outside of EDS

in order to suite their expanding business needs. I will begin with a background and

analysis of the situation at hand

Continental Airlines Case Study 2

Background and Analysis

In 1994, Gordon Bethune became president of Continental after being

recruited from Boeing. Bethune succeeded the former CEO after an unsuccessful

project. In 1995, Continental recorded a profit for the first time and income without

the assistance of bankruptcy protection. The Go Forward Plan was impletmented in

1995 by Bethune to return the business to profitability. This plan consisted of four

tenants: Fly to Win, Fund the Future, Make Reliability a Reality, and Work Together.

These concepts were to be implemented throughout the organization in unison.

This was a significant achievement for Continental. With changes in management,

their outsourcing relationship also needed to be accessed.

Continental Airlines signed a 10-year contract with Electronic Data Systems

(EDS) an outsourcing consulting group who was responsible for many of the IT

solutions for Continental. Due to this contract, Continental had significantly

downsized their own Information Technology Department from several thousand to

about 25, providing for an effective cost savings benefit. However, the contract,

which is static was beginning to show signs of strain due to the ever-changing

nature of Continentals business environment. Bill Miller, Senior Director of

Telecommunications stated, One of the most challenging aspects of this agreement

was perpetuating the intentions, underlying assumptions, and strategic objectives of

the original contract. In the five years after it was signed, only one person from

Continental who sat at the negotiating table remained with the airline and only two

senior managers who lived through the outsourcing process were still here. We
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needed to understand the spirit behind the services outlined in the contract as well

as the mechanics of what was to be performed and how (Christensen & Pearlson).

Key Issues

One of the main issues facing the agreement between EDS and Continental

was the constant changes that were taking place within management. For example,

there was so much turnover within the management team that a significant amount

of people who were present during the implementation of the contract were no

longer there. This created issues of knowledge turnover, and inconsistency. Given

that Continental is now making major profits and performing well financially, they

are trying to assess how to keep the momentum going and that includes what to do

going forward with their relationship with EDS. In effect, there needed to be a new

defined vision for IT at Continental.

With the implementation of the initial contract, it included that EDS provide

data processing, systems development, system integration, hardware and software

maintenance, telecommunications voice and data network services, and other

telecommunications services. However, as Continental grew, it was imperative that

other services be performed to meet their growth needs. EDS was only able to

handle so much in regards to IT services. This created a key issue for Continental

moving forward. EDS was not able to cuite every business need given their broad

business scope (in several countries).

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Other key issues were the inevitable lack of communication and understanding

between Continetal and various vendors including EDS. Miller described the

situation stating the internal IT department [Continental] must walk a thin line

between the systems users and Continental and EDS. It is often and uncomfortable

position. The perception of EDSs role going forward with the Go Forward Plan was

mixed. The perameters of the initial agreement is considered to be the main culprit

for the mix-ups.

Recommendations and Conclusions

As it was stated in the article, Continental cannot be expert at every non-

core aspect of its operations. We need partners to accomplish our long-term

objectives and EDS is one such partner. However, no relationship or contract can be

viewed as static in an environment where changes occur as quickly as they do in our

industry and our company. These changes necessitate modifications but we must

make those changes in a manner that benefits both parties.

In terms of the original agreement, I believe that Continental and in

particular, Wejman needs to consider their current needs versus their old needs.

With the assessment of their current needs, Wejman needs to figure out what

exactly in the contract needs to be amended. It is imperative that their needs

assessment is thought over critically with focus groups from both parties to make

sure that the needs of both parties are met successfully. Wejman also needs to

consider whether Continental needs to rely on EDS for much of its IT needs. As

stated in the article, EDS has turned out to be more of a service provider rather than

a consultant, creating a void that the company did not initially expect or prepare for.
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Wejman should consider varous other contractors or vendors for other process

improvement and consutling needs that EDS isnt equiped to handle.

Concepts at theories that were effective include the Monthly Close Meetings,

Joint Committees, and Project Review Meetings. These meetings allowed for

effective communication and collaboration between both companies for an

assessment of business needs and solutions. In addition, I think that Continental

failed to consider other contractors for their IT needs. Someone in the IT

department shuold have researched heavily the capabilities and weaknesses of EDS

and planned accordingly. If there were knowledgeble people in the internal IT

Department, they would have known where the void was and how to fill that void

way before problems and shortcomings became aparent.

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REFERENCES

Neils Christensen and Keri Pearlson. Continental Airlines: Outsourcing IT to

Support Business Transformation

Pearlson, Keri; Saunders, Carol. (2013) Managing and Using Information Systems: A
Strategic Approach. Wiley & Sons: New York