Southwest Airlines is Discovering the True Cost of Outdated Tech


This put up is a part of a sequence sponsored by AgentSync.

Should you’re searching for proof that outdated know-how, guide processes, and knowledge silos may end up in disaster, all you want to do is peek underneath the hood of Christmas ’22 at Southwest Airways. What can insurance coverage professionals study from the system breakdown, and what are you able to do to keep away from a tech-induced snafu at your company, provider, or MGA?

Legacy industries with legacy issues

In a 100+ yr outdated business, it’s not shocking that a few of the know-how used within the early days would embed itself deeply into the system and be exhausting to shake. A significant business participant, based in 1967, Southwest was still using 1990s technology to energy its operations in 2022. Throw in a little bit of inclement climate, and also you’ve received the recipe for catastrophe.

If this sounds acquainted, it ought to, as a result of we’ve been writing about the cost of outdated systems for fairly a while. We’ve warned that holding onto outdated technology can put your organization in danger financially, legally, and do huge reputational hurt that makes it exhausting to retain prospects and workers.

Our argument was confirmed proper in probably the most unlucky means over Christmas 2022. As a result of we’re not speaking concerning the insurance coverage business or any legacy insurer: We’re speaking about Southwest Airways, whose internal technological infrastructure melted down with very public penalties.

Let’s be clear: We aren’t glad about being right on this state of affairs. What’s occurring with Southwest Airways, its workforce, its prospects, and their households is a nightmare of epic proportions. Nobody needs to be stranded at an airport for days with none clue after they’ll make it residence due to outdated know-how!

Within the airline business, similar to the insurance coverage business, climate occurs. Pure disasters are unavoidable however danger administration is one thing you may management. Should you don’t suppose having outdated know-how working what you are promoting is dangerous, simply have a look at the magnitude of preventable harm Southwest is dealing with proper now, largely as a result of they didn’t heed the warnings to modernize earlier than catastrophe struck.

The dangers of outdated enterprise know-how

Within the case of Southwest, insurance coverage professionals can draw a direct parallel to the type of fallout you may expertise if what you are promoting was hit by a large-scale tech snafu. Total, we’re speaking about monetary harm, reputational harm, and regulatory harm. These three buckets are intertwined to the purpose that it’s exhausting to know the place one begins and the opposite ends, nevertheless it’s the cleanest strategy to focus on areas of danger that corporations utilizing outdated tech are vulnerable to.

Monetary danger from legacy techniques

Southwest Airways brings in annual revenues starting from over $22 billion (in 2019) to over $15 billion (in 2021) – with a pure drop because of the 2020 pandemic and the airline business’s restoration. Even in a down yr, Southwest Airways firmly holds its spot as a Fortune 500 company, coming in at No. 234 in 2022.

With earnings like that, there isn’t a excuse for failing to maintain up with the evolution of recent techniques. Based on Transport Employees Union of America Native 556, which represents Southwest’s flight attendants, its members have been complaining for years, and have repeatedly asked (or demanded) that the airline improve its technological infrastructure. It turned apparent that Southwest by no means heeded these warnings as its techniques totally failed underneath the immense stress of vacation journey mixed with winter climate.

How a lot cash this may find yourself costing Southwest Airways stays to be seen, however the quantity received’t be small. In the same disaster throughout October, 2021, Southwest Airlines had to cancel more than 2,000 flights and it cost them $75 million. Simply days into the present disaster, Southwest has canceled nearly 11,000 flights according to the New York Times. The monetary fallout might embrace refunding flights, inns and meals for stranded passengers and crew, baggage supply, future flight credit, and naturally public relations and authorized prices related to the disaster.

Actually, the value of investing in a technological system overhaul years in the past would have been price it, proper?

Reputational danger from outdated know-how

The present disaster began with some epically unhealthy climate. Winter storms and sub-zero temperatures raged across the U.S. just before Christmas. Naturally, this disrupted vacation journey and airways had been canceling flights left and proper as a result of unsafe flying situations. Employees shortages as a result of sickness (a convergence of COVID-19, the flu, and RSV) definitely didn’t assist.

However by Tuesday, December 27, most airways had been working usually, reporting between 0 and 2 percent of flights canceled, in comparison with greater than 60 % of Southwest’s flights. By Wednesday, December 28, 90 percent of all canceled flights were from Southwest Airlines. Climate alone can’t account for this discrepancy. And it’s “not Southwest’s first rodeo,” because the airline has skilled two comparable cancellation occasions in current reminiscence – in each June and October of 2021 – when issues had been additionally chalked up to tech issues and “failures in network connectivity.”

Southwest Airways will solely be capable of level the finger for therefore lengthy, and time could also be up as employees and union leaders are speaking out about “outdated processes and outdated IT.” Because it turns into more and more clear that Southwest Airways ought to have identified their Nineties scheduling techniques (amongst different IT infrastructure) wouldn’t be capable of deal with the calls for of the trendy world, it’s exhausting to see how they will preserve an excellent fame in an business the place they had been as soon as beloved.

Popularity issues to workers and prospects alike. Southwest was already affected by a weakened ability to attract crew, lengthy earlier than this yr’s Christmas climate incident. The rationale hasn’t been a thriller both. A report from October 2022 included a quote from pilots that “Southwest’s know-how is solely less than the duty of effectively scheduling staffing,” which turns potential workers off. By way of client fame, the airline is taking a significant hit on buyer evaluate web sites like TripAdvisor and AirlineQuality.

There’s no telling what the greenback worth of this reputational hurt shall be when all is claimed and executed, nevertheless it’s clear they’ll have to “give away a lot of free stuff,” apologize, and make sure this doesn’t happen again, in response to an MSU Denver enterprise professor. A technique Southwest Airways can be certain that historical past doesn’t repeat itself (once more) is to right away overhaul its inside operational know-how and techniques, which the airline’s CEO Bob Jordan says is already taking place across the 1:30 mark of his apology video.

Regulatory danger from legacy techniques

Like insurance coverage, the aviation business is closely regulated for security and client safety. So when a meltdown of this stage happens, it’s pure that regulators are asking questions. U.S. Transportation Secretary Pete Buttigieg is taking the state of affairs critically and, in remarks to CNN, stated he’s made it clear to Southwest Airways that he expects them to go above and past their authorized obligations to compensate prospects for the state of affairs.

Buttigieg additionally spoke with airline union leaders from pilot and flight attendant associations. Based on these conversations, the Southwest “meltdown” would have been largely preventable if the airline’s management made totally different decisions concerning their know-how. In an interview, Buttigieg says, “They made clear that they’ve been elevating the alarm about these points of their techniques for a while, and that this actually has to do with selections and decisions when it comes to the investments that this airline has made – or has did not make – over time that appear to be catching as much as them now.” See the dialog here.

Whether or not the Federal authorities will impose financial fines on Southwest Airways continues to be to be decided. Buttigieg is making it clear that he’ll be wanting into the state of affairs and that he expects Southwest Airways to not less than “pay cash refunds for canceled flights and cover stranded passengers’ hotel and meal costs” in response to The Guardian. He stated he’ll be wanting carefully to see if Southwest Airways is assembly its authorized obligations to customers. The Guardian additionally reviews, “In Congress, the Senate commerce committee additionally promised an investigation. Two Senate Democrats known as on Southwest to offer “vital” compensation for stranded vacationers, saying that the airline has the cash as a result of it plans to pay $428m in dividends subsequent month.”

With all proof pointing in direction of the disaster falling squarely on Southwest Airways’ poor administration and resolution making with regard to its technological investments, regulators seem to have little persistence for inaction and future snafus if the airline doesn’t make concrete upgrades.

Defending your self from the dangers of outdated know-how

Should you’re studying this, you’re most probably an insurance coverage skilled, not an aviation one. Nonetheless, the sorts of selections Southwest Airways has made about its funding in know-how (or lack thereof), and the results it’s now dealing with, are really a cautionary story for any business nonetheless largely working with final century’s tech. Sure insurance coverage, we’re taking a look at you.

At AgentSync, we’ve been doing our greatest to shout this message from the rooftops. Actually, we’d find it irresistible if you happen to’d check out how our solutions can cut back these dangers at your insurance coverage provider, company, or MGA/MGU. However even if you happen to don’t conclude that AgentSync is one of the best trendy insurance coverage resolution for you, these classes nonetheless apply.

Listed here are a number of methods to assist stop the type of monetary, reputational, and regulatory dangers your organization may face from outdated know-how.

1. Improve to trendy techniques that had been constructed on this millennium, if not this decade

Nothing says “disaster ready to occur” like a tech stack from the Nineties. In Southwest Airways’ case, when their know-how failed, individuals needed to attempt to manually do what a contemporary system ought to have been doing all alongside. It merely wasn’t potential. Southwest’s COO Andrew Watterson spoke concerning the immensely tedious and manual process of workers attempting to match obtainable crew with obtainable plane by hand, describing it as “terribly troublesome.”

That’s why our first advisable step is to ensure your inside techniques are working on the stage you anticipate in 2023, not 1990.

2. Select future-proof know-how

Investing in a brand new, trendy, tech resolution at this time received’t imply a lot if it’s outdated subsequent yr. Be sure the accomplice you’re selecting is taking steps to future-proof their software program. This implies ongoing and energetic investments in improvement, common updates and new releases, and a help crew that takes buyer suggestions and incorporates it into the product. It’s completely potential that Southwest Airways techniques had been “finest in school” 30 years in the past. It’s additionally extremely seemingly that the maker of their software program hasn’t been offering them with updates and new developments to make sure their resolution nonetheless works as nicely at this time because it did on day one.

3. Undertake know-how that has regulatory compliance baked in.

We aren’t consultants in federal aviation rules, however on the subject of insurance coverage, we’re absolutely conscious how advanced and nuanced the system of state-by-state regulation is. We even constructed a free Compliance Library that can assist you navigate state-specific guidelines.

As we’ve previously written about, we predict 2023 would be the yr of compliance. What meaning is we expect increasingly software program options (no matter business) will begin to prioritize computerized and inbuilt compliance guidelines. When compliance is baked into the system, there’s much less room – just about no room, in reality – for lacking steps or incurring violations.

4. Put money into know-how that reinforces your fame

When selecting a contemporary resolution to boost your operations, search for one which helps you grow to be referred to as straightforward to enterprise with. That is equally vital for workers, prospects, and different companions. A fame for being trendy, environment friendly, and nice to work with helps your group entice and retain inside expertise whereas others wrestle. It additionally helps you entice upstream and downstream distribution channel companions that you want to develop and scale.

Southwest Airways’ outdated techniques definitely aren’t doing it any favors with discovering and holding captains and crew members. And after 1000’s of individuals skilled the results of the airline’s outdated know-how, it’s not successful them new prospects both.

So, if you happen to’ve ever questioned whether or not the know-how you utilize to run your back-end operations really issues, we hope this has satisfied you the reply is a convincing “sure!” Should you’re able to take a better have a look at your producer onboarding, producer license compliance administration, provider appointments, and compliance at each level alongside the insurance coverage distribution channel, see how AgentSync can help.


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