In this Blog entry I would like to concentrate on how IS is used and implemented by hospitality companies around the world in the most efficient and effective way. Recently the hospitality industry is becoming more and more global: most of the large hotel and restaurant chains, and gambling companies do not limit their presence to only one country or region but, just the opposite, they are trying to gain a competitive advantage through geographical diversification. It is not a secret that the U.S. and Western Europe markets are highly consolidated and penetrated for the hospitality industry today. Therefore many industry players see opportunities for future growth and promise for sustainable competitive advantage and big profits in the undersupplied emerging and developing country markets in the different parts of the world, such as Eastern Europe, Africa, Latin America, and some parts of Asia. However despite of great opportunities there are a lot of risks and challenges companies have to deal with as they grow internationally.

One of the biggest challenges for hospitality companies linked to their international expansion into the emerging or developing countries is the selection, implementation, and exploration of the appropriate IS which would enable companies to manage both: internal company needs for efficient business processes and external relationships with the local environment. This is not an easy task for CIOs and managers of these companies. When a company opens a new hotel or restaurant in the U.S. it usually selects and implements a common IS solution across all the other hotels and restaurants of the same brand or within the same industry of independent hotels. Only a few major IS vendors dominate the hotel information system marketplace. Therefore there is little competition between these major IS vendors and very high entry barriers for new entrants; which gives present IS sellers a lot of power over the buyers. Thus they can keep prices for the IS implementation and maintenance high, request system upgrade every three-to-five years, and produce very similar undifferentiated products. Usually the hospitality managers selecting IS are “bought” by the definition that a particular IS is created based on the “best practices” of the industry. However in most of the cases the “best practices” definition is no more than just an advertising trick made on by a small group of interested parties and is not supported by any independent research or evidence. What is the best way of doing business for one company is not necessarily the case for another especially within the international context. Despite some efficiency in performing business processes with the help of IT in U.S. and Western Europe, that could be called “best practices”, the other most important processes, such as accounting, payroll, taxes, for example, could be very different in other countries and would require a huge IS customization, which could be very costly. And depending on the cost of this required customization and implementation this particular IS solution, widely used in U.S. or Western Europe, may not be the best choice for other countries. Moreover managers should take into account the possibility to adapt IS applications for their foreign language, currency exchange rates, inflation rates, and other factors that could differ from U.S. and Western Europe. What’s more in some countries companies can face extra costs for local employee training and absence of vendor support and maintenance.

One of the possible solutions for this problem could be implementation of local open source software solutions in the countries that have ability to develop them. These solutions could be even more effective and efficient for business process support in the local environment than traditional “best practices” IS and would not need a lot of customization. Furthermore open source IS would be much cheaper to implement, explore, and maintain. Also these open source IS solutions often will not require the large investments in hardware and software and frequent updates. Therefore open source IS implementations instead of traditional “western” IS vendor solutions will give companies huge cost savings, more flexibility, permanent support by local vendors, and a bigger pool of local employees familiar with the system. Only one possible downside can occur for big hotel and restaurant chains - the interoperability of this local open source IS with IS used in the entire company and the ability to codify the data collected by local IS into the standard format used across the worldwide enterprise. But I think with the recent KMS development it is not a problem anymore. However CIOs and managers should analyze their development strategy taking into account the economies of scale and economies of scope in each particular country and make the appropriate IS selection based on this analysis. For example, if a company plans to open only a few hotels in some region maybe it would not make any economical sense to trade-off the traditional IS for a local solution. But if the company’s strategy is rapid growth in some location it would be wise for managers to evaluate all the alternatives including local open source IS in the decision making process instead of just “blindly” choosing the IS application based on so-called “best practices”.