To continue the theme of the previous entry I would like to discuss how hospitality companies can either implement new IS applications or improve existing ones in the most effective and efficient way. To address these issues I would like to provide my vision on this topic by answering the following questions: What kinds of IS implementations hospitality companies are using now and how will they be used in the near and long-term future? What are the future trends of IT in the hospitality industry?

Despite its effectiveness, ERP (Enterprise Resource Planning), has not gained widespread adoption in the hospitality industry. The main reason why it is has not gained acceptance is due to the tremendous implementation and maintenance costs. Hence for most hospitality companies it violates the cost-benefit rule: the cost of ERP is much higher than its benefits. Moreover companies fully depend on one vendor in adopting ERP solutions to confront changing business conditions. This raises the long term cost of ownership. Do ERP systems have a future in hospitality? My opinion is: No they probably do not unless they reduce their costs. But the cost reduction could only be possible if the ERP industry becomes more competitive with more vendors competing in the marketplace. Also ERP should become more flexible in changing applications and accessing data and information over the Internet to compete with two emerging approaches: EIA and SOA.

Most hospitality companies “survive” today using applications for different tasks internetworked with each other: so called “information islands”. I guess such an approach has worked perfectly for them until now: it still is much cheaper than ERP. But as business processes becoming more complex and competition increases, companies need to implement new applications (e.g. Revenue Management). Also they need to modify existing applications more frequently. Thus if the step-wise approach was not a “big deal” before, today it has become more complex. The most efficient way to deal with this issue in the future is to adopt the EIA (Enterprise Application Integration) approach. However today it is still very “raw” and risky due to a number of reasons. First it is not clear what IT complexity level is required to manage the middleware. Second companies need to hire in-house IT experts. This could be problematic (expert shortage) and costly (security issues: cannot outsource it or use open systems code). Third all in-house applications will depend on middleware; if middleware crashes all systems will fail. I think this approach will become the most popular and widely used in hospitality in the future if the aforementioned issues are to be solved. A good example of EIA in hospitality is Stone Bond's Enterprise Enabler®, which had been successfully implemented by The Houstonian Club & Spa, an exclusive Houston urban resort.

Another emerging IS trend—SOA (Service Oriented Architecture)—is a revolution in IS. Instead of spending money on in-house IT applications, companies can easily do the most of their business processes utilizing APIs to interconnect different systems package functionality. Starwood Inc. is a good example of successful SOA implementation in hospitality. "It was the best way to let us map our technology with our various brands," says Del Rio, Starwood's senior vice president of technology solutions. “Instead of having each of Starwood's hotel chains build their own applications, SOA allows the brands to share the same programs and features—but they can be customized specifically for each hotel's look and feel”. Despite this approach being relatively new and untested, it is a huge cost savings for the companies. For example, Del Rio predicted total $20mln savings in annual maintenance costs for Starwood Inc. from implementing SOA. However I think big hotel operators and casinos still would be wary of implementing it today due to the high complexity, lack of expertise, time consuming development, and data security issues. It took about five years for Starwood Inc. to work on it. However I think SOA will become the best way to go for hospitality companies in the future with further IT enhancements and more security provided. According to an IDC report, by 2010 companies will spend upwards of $33 billion on SOA services.

In conclusion I think the two approaches: SOA and EIA will find their place among different hospitality companies. ERP will probably become obsolete. But these two approaches they will need to be modified in order to compete with each other. This competition is in the best interest of customers: quality of all the products and solutions will continuously increase while costs will come down. Just a few years ago choice was limited to either ERP or “information islands”, but today it has become much broader due to IT development. And I predict that in the near future some new even more sophisticated products will appear on the IS market.