Investing in modern business software is expensive. That’s for sure! But not investing in the modernization of IT tools in time can cost your organization capitals! In the last days of 2022, US-based Southwest Airlines hard-handedly came to know this truth. The company’s outdated scheduling software was the cause of massive problems leading to frustrated travelers, a significant loss of loyalty and brand preference and finally a financial disaster. So how old are your current core systems today? Do you already have plans for modernizations available? And how well prepared are they for special situations as long as the new solutions are not available?
Between December 19 and December 28, 2022 Southwest Airlines was forced to cancel more than 16.000 flights. Leaving thousands of people stranded for days. This was partly because of the bad weather. But largely due to the use of outdated software. The financial impact is huge! Analysts said that fourth-quarter earnings for the airline could take a 3% to 5% hit. That’s the equivalent of $ 15 to 25 million. The company’s outdated IT systems and infrastructure were primarily to blame. This included various components, from phones and computers to processors.
Southwest CEO Robert Jordan apologized for the airline’s struggle to operate during the busy holiday travel week amid winter weather woes. He claimed that “these tools worked 99 percent of the time”. However, they were also older and in need of major system upgrades, with many systems implemented somewhere in the 1990s. Although the company had plans in place to upgrade the tools, they were not carried out in time to prevent the December disaster. As a result, when the weather-related delays occurred, the systems couldn’t handle new and unexpected demands.
Here’s a few interesting questions that come up:
- how good is a scheduling solution if it works well 99 percent of the time but can cause huge problems in exceptional cases?
- how many new software implementations would they have been able to pay out of the total cost of this disaster?
- how often would they have postponed the implementation of modern scheduling software in recent times “since it wasn’t the right moment”?
- did their internal teams include the ‘Cost of Doing Nothing’ in the business case they presented to the board?
Expecting outdated legacy systems to keep your company competitive, responsive and relevant is a risky move, no matter what industry you’re in. The Southwest Airlines ERP failure reveals what can happen when a company fails to invest in digital technology in time.
What plans do you have for 2023 to modernize your business software before you run into these kind of problems yourself?