Industry Update
Opinion Article13 October 2016

The Marriott/Starwood "Back to the Future" Technology Decision

By Israel del Rio, Fortune 500 CIO/CTO

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Normally my blog articles deal with generic aspects of IT transformation without reference to specific company or industry news. However, I felt this article was needed not only because it deals with an area close to my heart professionally, but with the kind of decision-making that runs counter to the core philosophical values, and technology vision, I have championed in my various writings.

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You see, as a former SVP of Technology Solutions for Starwood, I had the privilege to help conceive and initiate what has now been a decade's-long technology transformation program to move Starwood from its MVS Mainframe technology (Starlink) to modern Reservation, Call Center, eCommerce Web, Property Management and Revenue Management systems integrated with the Loyalty system via SOA interfaces and open system frameworks (system name: Valhalla).

Credit must go to successive generations of business and technical leaders at Starwood for maintaining this Valhalla vision over the years and progressively augmenting the capabilities of this next generation system ultimately delivering functionality unmatched in the hospitality industry: dynamic pricing, rapid channel distribution plug-in integration, standardized PMS, Web/Loyalty integration, multifaceted inventory and booking capabilities, advanced amenity search, etc.

To better understand the resulting Starwood's technology compared to industry legacy systems, think Tesla Model S versus a gas-guzzling 1975 Buick Electra.

Then along came Marriott . . .

When Marriott announced its interest in acquiring Starwood, one would have believed that they factored in a $500 million Starwood IP technology value within their $13.6 Billion offer, and that they would have been salivating at the prospect of having their hands on the fruits of the multi-year transformation experience this IP represented. After all, while stable as a rock, Marriott's own system today centers around 1970's Mainframe TPF technology (MARSHA) suitably kept current via the judicious use of the scotch-tape and wires represented by a cornucopia of front-end gateways and the labor intense support of inflexible legacy code, eclectic data bases, hard-coded interfaces, and a veritable zoo of different property management systems crying for better integration.

Indeed, most other major hotel chains have rightfully concluded they must move to modern technology if they are to successfully compete in the future. TheIntercontinental Hotels Group (IHG), for example, is currently engaged in a major project in partnership with Amadeus to replace its own Holidex TPF Mainframe reservation system with state of the art technologies by 2018[1]. Wyndham Hotel Group too has announced its intention to migrate its legacy system to a new system being developed by Sabre [2], and Hilton has also announced a major $500M investment to upgrade its technology[3].

Since the race to modernity is on, one would think that with Starwood's acquisition, Marriot was set to score a leap-frogging coup by being able to leverage Starwood's edge in these transformation efforts to its advantage. Right?

Wrong.

After last week's completion of the Marriott/Starwood merger, the news is that Marriott has decided to migrate the Starwood properties to the Marriott system and, aside from some elements, essentially to abandon the Starwood system. You heard correctly: MARSHA stays, and the Starwood System goes away.

Although we have grown accustomed to the fact that the progression of history is to always move forward, Marriot has found a way to define a Back to the Future Transformation Strategy under the principal argument that it will be easier to migrate the 1,200 Starwood properties to the old Marriott system than to migrate the 4,000 Marriott properties to Starwood's 21st Century solution. This argument does not make sense if you consider that IHG will surely be more than happy to be able to migrate its 4,000 properties to the Amadeus system as soon as it becomes available for roll-out in 2018.

One has to wonder if this Marriott decision is the result of a recommendation from an independent consulting company conducting an objective and unbiased assessment of the various options, or simply the result of a tribal mindset from internal Marriott technology decision-makers entrenched into protecting their turf while continuing to do things their own way.

One also has to wonder if the Marriott Board is aware of the future implications of this decision, especially when its competitors fully begin utilizing their new systems—systems that will more readily accommodate emerging demands from guests, such as seamless digitalization of services, improved shopping and pricing experiences, optimized checking and concierge services, mobility enablement, backend cognitive analytics, personalized content and entertainment services and so on.

Given that Marriott is now risking being left behind—especially as it invariably loses the people who forged the Starwood system—it's hard to argue its chosen course of action is in the best interest of its stockholders.

In the end, those of us, who wish for a successful Marriott/Starwood merger, have reason to be concerned.

Don't you agree?

Disclaimer: The views expressed in this article are entirely my own, and they do not necessarily represent the views of any company I am associated with.

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Israel del Rio

Israel is senior information systems leader and consultant who has contributed business and technology solutions by the defining the strategy and delivering multimillion-dollar transformation systems from green-field and legacy for global hospitality, gaming, and travel companies. He enjoys a reputation for innovation and effectiveness that can cut across multiple industry verticals with a particular focus on Travel and Hospitality.

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