Sita to restructure as airlines switch to IP - Sita SC to form systems integrator entity Sita NV - Company Business and Marketing

CommunicationsWeek International, July 19, 1999 by Joanne Taaffe

Sita SC, the network services provider to the air transport industry, plans to change from a non-profit making co-operative to a dual-structure organization, creating a separate commercial entity, Sita NV, specializing in systems integration.

The 50-year-old Geneva-based Societe Internationale de Telecommunications Aeronautiques SC, which serves 692 airline members, plans to carry out the restructuring by October. It hopes the new structure will let it forge joint ventures and re-shape itself as a systems integration company at a time when the airline industry is moving away from proprietary airline protocols and adopting IP-based networks and applications.

"The Internet has taken a real grip of the hearts and minds of our customers [and] they're asking us to do more in these areas," said Peter Heath, Sita's president, north-east and central Europe.

The move will result eventually in an initial public offering of shares. After that there "is a very definite possibility" that Sita NV could be acquired by another company, according to Eric Paulak, Stockholm-based research director at the Gartner Group.

Heath admitted: "Being the only seamless global information and telecommunications solution provider to the air transport industry obviously makes SITA attractive to a number of large players who have global aspirations."

Sita's strength in network services is founded on the proprietary transport protocols peculiar to the industry sector it serves. But a report on IT trends in the airline industry commissioned recently by Sita found that 85% of the world's airlines are moving to IP-based networks and applications.

The Dutch airline KLM, a customer of Sita, said the uptake of IP by the airline industry could loosen Sita's hold on the sector. "The competition will probably increase; with IP you have to add something to distinguish yourself," said Jan Van Bekkum, project manager of outsourcing at KLM.

One industry analyst, who declined to be named, was blunter: "Airlines are moving to a TCP/IP front end, which dispenses with the need for [proprietary] routed protocols and potentially dispenses with the need for Sita in the longer term, taking the airlines to a commodity marketplace where the telcos will rely on massive volume [and] low margins."

But even if Sita faces new competition, British Airways' general manager of information management and strategy, Peter Giles, argues that "IP will fuel Sita's growth. [With IP] airlines will be able to make use of services--richer messaging services and intranet access."

Faced with this shift to IP, Sita will attempt to exploit its understanding of airline businesses and the applications they use in order to offer systems integration services. In particular, it will concentrate on systems integration work in areas such as data warehousing and desktop management designed to help airlines manage customer relationships.

"[Airlines] have an enormous amount of data and are looking at ways, such as data mining, to access it," said Heath.

According to Van Bekkum, Sita already offered some systems integration services, but "not all members use [them] so they didn't want to finance that."

In order to acquire expertise in IP applications and systems integration, Sita plans to form alliances with other companies. It has been working with IBM since last year on systems integration, covering areas such as desktop computing, IP applications and thin client technologies. But the company's status as a non-profit making "societe cooperative" prevents it taking equity stakes in software or systems integration firms. and prevents other enterprises investing in Sita, noted a company spokesman.

"If we're going to develop, then we have to form new relationships rather than do it ourselves. And we have to develop a structure to allow that to happen," said Heath. "There's a great need for additional knowledge," he added.