Keeping an Eye on Costs and Risks
The outdated ERP System as a Risk Factor What you can learn from
the SouthĀwest Airlines
Software Disaster
the SouthĀwest
Software
In the final days of 2022, things went haywire at US carrier Southwest Airlines. With the companyās outĀdated software causing massive problems, resulting in frustrated travelers, a significant loss of loyalty and brand preference, and ultimately a financial disaster. How long have you been working with your IT systems? Have you already planned modernizations? And how well are you prepared for such situations by then?
Southwest Airlines: outdated ERP Software caused major Chaos
Between December 19 and 28, 2022, Southwest Airlines was forced to cancel more than 16,000 flights. Thousands of people were stranded for days. Some of this was due to bad weather. But above all, this planning disaster was due to the airlineās outdated software with IT systems and infrastructure in need of modernization.
Imminent Losses in the Double-digit Million Range
The financial impact of this mess is enormous. Analysts predicted that the airlineās profits could fall by three to five percent in the fourth quarter. Thatās the equivalent of 15 to 25 million US dollars.
IT Systems from the 1990s could not cope with unexpected Demands
CEO Robert Jordan apologized for the airlineās problems during the holiday week, when winter weather conditions prevailed. He claimed that āthese tools work 99 percent of the timeā.
However, these were older systems that needed extensive system upgrades, as many systems had been introduced in the 1990s. Although Southwest Airlines had had plans to upgrade the software, these had not been implemented in time, so the disaster in December could not be prevented. When the weather-related delays occurred, the systems simply could not handle the new and unexpected demands. As a result, Southwest Airlines was forced to create flight plans manually.
This Example raises the following Questions:
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How good is a scheduling solution really if it works well 99 percent of the time, but can cause major problems in exceptional cases?
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How many new software implementations could Southwest Airlines have funded with the total cost of this disaster?
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How many times recently has the company postponed implementation of modern ERP software ābecause it wasnāt the right timeā?
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Did the internal teams include the ācost of doing nothingā in the business case they presented to the management?
When will you modernize your Software?
Investing in modern business software is expensive. But not investing in modernizing IT tools in time can cost your company a lot more money.
Expecting your company to remain competitive and responsive is risky - no matter what industry youāre in. In any case, the failure of Southwest Airlinesā ERP system shows very clearly what can happen when a company doesnāt invest in digital technology in time.
What plans do you have for modernizing your business software in 2023 - before you face similar problems as Southwest Airlines last December?
