Continental Airlines Case Study

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Continental Airlines Case Study

CONTINENTAL AIRLINES CASE STUDY FALL 2013 DECEMEMBER 1, 2013 TIMOTHY DUNCAN

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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. Continental’s 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


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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 Continental’s 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 EDS’s 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 noncore 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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Continental Airlines Case Study 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

Continental Airlines Case Study

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