Alaska Air Taps Oracle To Build Customer Loyalty

The airline implements Siebel loyalty-program software designed to shift the focus away from revenue-draining free miles and more toward personalized service.
The poor economy and high fuel costs created a difficult year for airlines, and Alaska Airlines was no exception. The airline, which primarily serves the West Coast, had to drop flights in recent months and is in the process of trimming its workforce by 10%, including the layoffs of about 1,000 employees.

Alaska Air has improved its fuel usage in recent months and is looking for ways to get additional revenue from customers, including fees charged for its fledgling in-flight Internet service and other à la carte charges. But Alaska also hopes to build and grow on its reputation for high-quality service with several new customer-focused initiatives, some of which are powered by a recently implemented software platform from Oracle called Siebel Loyalty Management.

"What we're trying to do at Alaska Air is accelerate through the economic downturn," said Steve Jarvis, the company's VP of marketing, sales, and customer experience. That acceleration plan includes gaining more market share from competitors.
Although Jarvis calls Alaska Air's airfares "competitive," the airline isn't going to win market share through cutthroat pricing; it's better known for customer service than low-cost fares. In a JD Edwards survey released in June, the airline ranked No. 1 in customer satisfaction among traditional carriers. Alaska knows it must retain and grow its customer base to survive the difficult industry, and it's looking to the new loyalty system as the driver of that effort.

Siebel Loyalty Management replaces the mainframe-based system that ran Alaska's Mileage Plan program, but it's going to do much more than keep track of and dole out customers' earned miles, Jarvis explained. Alaska Air plans to heavily use the system's "triggered events" features, so that it can provide customers with more information and options when service disruptions happen, or offer them promotions based on personal information gleaned from their profiles or travel history. For example, at a future time, this might include offering a promotion tied to an important date, such as a customer's birthday, Jarvis said.

Alaska put the system to its first big test on Dec. 20, when it had to cancel 62 flights because of a surprise snowstorm in Seattle and other weather hazards on the West Coast. The system triggered e-mails to frequent fliers affected by the cancellation that explained what had happened and apologized for the inconvenience. In some cases the system generated free travel awards to inconvenienced customers based on the information it had about them and their specific situations.

"The ability to do more automated and proactive recovery from service failure is a real interest of ours," Jarvis said.

For example, if a customer's flight is canceled, Alaska is looking at better utilizing its airport check-in kiosks to let a customer select her way to a new flight via the airline's Web-based reservation system, rather than stand in a long line at the ticket counter.
"We ought to be able to power our back-end system with tools we now have to make that [service disruption] less stressful," Jarvis said. Alaska currently provides e-mail alerts to customers' handheld devices if there's a change or disruption in their scheduled flights, but it's looking at how it can better personalize those messages to provide each customer with more choices in service based on profile information.

It's been a long and time-intensive journey to implementing the Siebel Loyalty system, however. The company first began talking to Siebel about the system in 2005, shortly after it implemented Siebel Analytics and shortly before Siebel was acquired by Oracle (NSDQ: ORCL). It started the implementation in late 2006 and finished in April 2008, but in the past few months it just finished "stabilizing" the system and will "start to fill out customer profiles on an opt-in basis," Jarvis said. "That was a massive implementation of a very critical transaction system for us." He did not disclose the cost of the software, which runs on an Oracle database.
Jarvis thinks customers will have a much more personalized experience as a result of a system that is less focused on miles redemption and more on an improved traveling experience and promotions specific to a customer's personal interests. A lot of air travelers have become frustrated with trying to redeem earned miles -- with every airline making it more difficult to do so as they try to protect their dwindling revenue -- so airlines need to move beyond the award miles approach.

Said Jarvis: "For our most frequent customers, it's not about the miles, it's about the service we deliver."

Author: Mary Hayes Weier @ www.informationweek.com

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No takers for Oracle database machine

There has been considerable interest in Oracle's database machine, according to CEO Larry Ellison, but it has not led to any sales, he admitted.

The company launched the Oracle Database machine and the Exadata Storage Server (both jointly developed by HP) in September, aiming them at customers looking for high-end data warehousing products. Both machines combine Oracle's software and ProLiant servers from Oracle partner Hewlett-Packard.

Since then, the buzz has been big, Ellison said during a quarterly earnings conference call. "As measured by pipeline growth and pipeline size, this is the most successful introduction of a new product in Oracle's history," he said before admitting that "it's going to be a while" before Oracle can convert that buzz into solid sales of the product.

Still, the Exadata business "looks very, very promising and should help us drive growth over the next 18 months," Ellison said.

Ellison said a number of demonstration machines are in the hands of customers, but it was unclear whether any companies are now using the products in production.

"It doesn't surprise me that Oracle didn't name any specific customers on an earnings call, and that's because it was an earnings call, not a product announcement or customer-win or testimonial call," said Forrester Research analyst James Kobielus. "Don't interpret that as any slap against the new HP Oracle appliance, which is a strong product with considerable customer and market interest."

Oracle and HP also released the product in the middle of an economic recession, "so it may take some time to make those pipeline conversions," Kobielus said.

The new products are going up against the likes of Teradata, Netezza and Greenplum, the last of which announced NYSE Euronext as a customer this week.

During his keynote address at OpenWorld, Ellison had tart words for those competing products, but such boasting could be premature, suggested Curt Monash, founder of Monash Research.

"Until there are some major production Exadata success stories, it remains less proven than a number of smaller vendors' alternatives," Monash said via e-mail Friday. "Oracle will find Exadata pioneers anyway, of course, but not necessarily a huge stampede of them."

Greenplum's president, Scott Yara, echoed Monash.

"Oracle and HP are two great companies, but it's not a guarantee for success in the market," Yara said. "They're going to sell Exadata. Whether they're going to be the leader is another question. ... I think Oracle personally has a lot to prove."

Author: Chris Kanaracus @ www.computerworlduk.com

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Oracle's edge

The software giant will no doubt feel some pain as companies scale back staff. But its stable infrastructure business will help it weather the storm better than most. Say what you will about Larry Ellison's style, but the in-your-face founder of Oracle knows how to manage a company through a recession, at least so far.

In an economic climate where other companies are heading for the lifeboats, Ellison is skippering Oracle into a position of strength. And it comes down to selling software that relies on a growing stream of corporate data, rather than a growing number of employees.

During a recent conference call, Ellison and his management team were practically optimistic, projecting that overall revenue for Oracle's fiscal third quarter ending in February will be up from 8% to 11% adjusting for currency exchange.

In its most recent second quarter, revenue came in below guidance, with sales growth of 6% (9% was the Street's estimate), but with operating profit margins at almost 46%, above estimates, and pointing to Oracle's ability to maintain pricing power. (Earnings were down slightly for the quarter, a slip Oracle blamed on the strengthening dollar.)

Oracle (ORCL, Fortune 500) is feeling some pain, like every other company out there, but so far it is not as acute. And when you dig into the numbers, it gives you a sense of why Oracle may offer relative safety in these uncertain economic times.

Oracle sells both applications -- human-resources software and customer-relationship software, for example -- and so-called infrastructure software. The latter includes Oracle's core database products, as well as middleware, which acts as a sort of glue between all kinds of software and services.

Applications are generally sold on a per seat basis, so revenue is based on staff size at Oracle's customers. Infrastructure software is sold based on capacity, the number of processors (CPUs) in a server running the software, for example.

The scary issue for a lot of tech companies is of course is one of headcount. As companies cut numbers to weather the recession, they are also cutting the number of seats they need for any number of applications. But companies are less likely to scale back on the efficiencies an automated enterprise can offer them, so that business is not as vulnerable.

Because it is driven by "data, not heads, the (infrastructure) segment should be more stable than other software businesses through the recession," writes Morgan Stanley analyst Adam Holt, who has an "overweight" rating on Oracle, with a 12-month price target of $22.

In that context, data versus heads (or applications versus infrastructure), investors would be wise to look at other software companies SAP and Microsoft, for example, which will be subject to the same forces.

In the second fiscal quarter, Oracle posted database and middleware revenue of almost $3 billion, up 4% year over year. During the same quarter, the applications business was flat to slightly down.

"Oracle's negative year-over-year growth in applications do not bode well for SAP," says JMP Securities analyst Patrick Walravens, who has a "market perform" rating on Oracle. SAP has a very application-heavy product offering. "Our checks so far suggest SAP has already seen some of its larger deal prospects in North America push out."

At some point the economy will recover, and headcount will once again grow. At that point, Oracle will be able to push its applications business harder. In the meantime, unlike some of its competitors, Oracle has the leverage to wring additional revenue from its infrastructure business, and sail -- as it did after the tech bubble burst -- far ahead of the pack.

Author: Michael V. Copeland @ money.cnn.com

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