When Air Canada spun off Aeroplan, its frequent flyer rewards program, as a separate entity in 2001, the new company faced some tough challenges. Not the least of them was building an IT infrastructure, including e-commerce capabilities, almost from scratch. Virtually from day one, though, the Aeroplan IT brains trust agreed that the best way to achieve their goals was by implementing a service oriented architecture (SOA).
Building an SOA naturally entailed a few challenges of its own, as Remi Lafrance, general manager of technology operations and head of the company's IT architecture group (ITAG), discovered. But five years on, the challenges have for the most part been met and the e-commerce capabilities are in place. The SOA isn't complete but it's 70% there, Lafrance says, and it's already paying dividends.
Aeroplan has enjoyed significant success. It raised C$275 million (US$271 million) in an IPO in 2005. In fiscal 2007, the company reported income of C$189.7 million -- a 35.1% increase over 2006, its second consecutive year of double-digit growth.
"If you look at the number of partners we've signed up, where we are now versus where we were back then, and the impact Aeroplan has had overall in Canada as a loyalty company -- those are the results, in good part, of the work we've done in expanding our IT capabilities," Lafrance says.
Aeroplan started as a cost center. It was a program offering Air Canada customers one way, and one way only, to accumulate reward miles and redeem them: fly Air Canada, then fly again. In 2001, the new entity was faced with remaking itself as a for-profit enterprise, which would mean transforming its simple business model and finding new sources of revenue.
In the "loyalty" business, the way to do this was by adding new partners -- merchants and brands anxious for access to the airline's choice customer base and willing to pay for the privilege. Aeroplan has been singularly successful in this, adding more than 90 partners since 2001. Some are partners whose products members can buy to accumulate points; others have products Aeroplan can offer as rewards. This in turn leads to expansion of the member base; non-flyers now have a way to accumulate miles, which attracts more partners, and so on.
Working with new partners
But the company had to somehow keep a lid on the costs of setting up and working with new partners. In 2002, there were no automated systems for communicating with partners. The whole reward-redemption process itself was largely unautomated, and Aeroplan's e-commerce presence amounted to a few static pages at the Air Canada site. So one of the first priorities was creating a modern e-commerce-based Web site and infrastructure that would allow partners to interact directly with Aeroplan systems.
The initial breakthrough came when the company implemented an SOA-based e-commerce firewall from Reactivity, now owned by Cisco Systems. Among other things, the Reactivity technology allows partners to securely exchange XML messages with Aeroplan over the Net. "This opened up all sorts of possibilities in terms of direct connect between Aeroplan's infrastructure and external infrastructures to allow the flow of e-commerce," Lafrance says. "And we saw that we could start leveraging that and using service oriented architecture to a far greater extent."
The next major undertaking, begun in 2004, was to build an enterprise software bus (ESB). It would handle coordination between front-ends -- of various partners as well as Aeroplan -- and Aeroplan's legacy back-end transactional systems. The company had cobbled together the architecture to this point from open source components such as Linux, Apache, and J2EE (Java 2 Platform, Enterprise Edition), and it remained committed to standards-based and open source technology. "But when it came to the ESB," Lafrance says, "we didn't want to take any risks around performance or capabilities. So we made a decision to do it the standard way, with commercial-grade, tier-one type software."
After issuing an RFP and reviewing a small handful of solutions, Aeroplan chose BEA Systems and its WebLogic and AquaLogic products, the latter developed in partnership with Vancouver-based Elastic Path Software. According to Lafrance, BEA was the only respondent that could demonstrate how it would tackle the project while ensuring Aeroplan was able to continue doing business through the development and transition processes.
"Continuity of business was critical, and they demonstrated with a pilot, at no cost to us, their ability to take on that responsibility and make it work in relatively short order," he says. The result is a framework that now makes it relatively easy to add new partnerships and build new applications around them. One simple example is a recent project with Pepsi.
Aeroplan members can accumulate 10 miles with the purchase of a Quaker orange juice product. (Pepsi owns Quaker.) They go to a Pepsi-branded Web site and type in their name and Aeroplan number. The Pepsi server communicates with the Aeroplan ESB, which authenticates the name and member number in the member profile database, reports back to Pepsi, then updates the member's plan to add the 10 miles when the transaction is completed.
"Now in the majority of cases we're building on stuff we already have," Lafrance says. "This is cutting down on the time to implement because we're reusing a bit of this, a bit of that. Maybe we're adding a new service we didn't have before, but when we do, now we do it in such a way that we can reuse it next time."
Thanks to this reusability Aeroplan can implement new automated partner relationships 15 to 20 percent faster than it could before. That will increase to 30 to 40 percent faster as the company phases in more use of the WebLogic technology, and save an estimated C$30,000 to C$80,000 per partner, he says.
While the ESB project alone cost over C$3 million, Lafrance declined to put dollar figures on either the total cost of the SOA undertaking or the potential return on investment. SOA, he says, is simply the company's "new modus operandi."
Time to implement and related cost savings were not the only benefits, though. The demonstrable speed to implement also helps Aeroplan sell its brand when it enters into negotiations with a prospective new partner. "The SOA framework is not only allowing us to develop more, but also to showcase more," Lafrance says.
And SOA delivers a "whole slew of benefits from an IT development life cycle perspective." The framework makes it easier for his team to measure results and manage application quality assurance, for example.
Laying out the SOA roadmap
All of this has not come without some adversity, even though the Aeroplan IT architecture group made a good decision at the outset, Lafrance believes. From the beginning, the team's strategy was to break down the task into small manageable components and plot their completion on a continually updated three-year roadmap. The component pieces would be completed by incorporating them into business-driven IT projects.
A project, such as an early one to implement the first non-air rewards program, wasn't just a development project; it was also an opportunity to enhance the e-commerce framework while allowing the project to get delivered at the same time. This approach had multiple benefits. "It meant I never had to go to anyone and say, 'I need $10 million to build SOA over a five-year time frame,'" Lafrance points out. And that made it much easier to get buy-in for the whole idea of SOA and his team's approach. Senior management, including the president, was onboard from day one.
Lafrance admits he may not have hit on this strategy by thinking the problem through in linear fashion. It may even have been "a fluke," he says, chuckling. "But if there's one thing we've learned from the whole experience it's that this worked very well for us. I think it could work well for others too."
Not all the lessons were learned so painlessly. When we ask him for the single biggest challenge of implementing the SOA framework at Aeroplan, Lafrance doesn't hesitate. "I would say overall, it had nothing to do with the technology," he says. "It's been primarily about establishing partnerships with new vendors."
One salient feature of Aeroplan's IT environment: almost everything is outsourced. The IT department has fewer than 30 employees, most of them analysts and architects. Principal partners include BEA (software licenses and application development), IBM (software maintenance and management and system development) and Telus (hosting and network services).
The project was knocked for a wobble when it took an unexpected year and a half to "stabilize" the first important long-term relationship, with Telus. "It's all about communicating in the same language, in the same manner, understanding each other," Lafrance explains. "And the kinds of checks and balances you do on a monthly basis to reconcile expectations versus delivery." According to Lafrance, SOA magnifies everything because it's so complex. And perhaps more importantly, the fact that it opens so many possibilities tends to crank up expectations and demands -- and strains -- on the relationship.
He initially believed at least some of the problems had to do with the specific players involved on both sides, but changed his mind when the company later started working with IBM, and the same thing happened. It was "a full year of very painful transitions", despite his team being forewarned and forearmed after the Telus experience.
"Anyone who thinks they can implement a technology like this using a new partner that they've never done business with before and do this in couple of months is dreaming," he says.
The second biggest challenge: making the transition from legacy systems, most of them originally resident on Air Canada mainframes, as some still are. Again, it wasn't the SOA technology, or even the fact that the destination was an SOA environment, Lafrance says. The legacy environment in this case was not well enough understood or documented and its original architects had long since departed.
"So there were many surprises and many cans of worms that we opened," he says. "We had some budget overruns and we did take longer than we would have hoped -- but only because the point of origin was a lot messier than what we had thought."
This was somewhat mitigated by Aeroplan's strategy of breaking the SOA implementation into logical pieces and tackling them one at a time. Once the team understood the potential for the legacy systems to trip them up, it could build in time between implementation projects to scope out the next step and plan how to solve whatever issues presented themselves.
That is indeed the only way to overcome any of the challenges the company faced, Lafrance believes. "If you know ahead of time and brace yourself for something, you can plan accordingly and work at trying to mitigate the impact," he says. "But if you're not ready for it, it's going to take you by surprise and then you're always backpedaling trying to get out of it."
A different approach to data
If there was one thing he could do differently, it would be to "embed the data layer into our SOA a lot sooner," Lafrance says. Aeroplan initially saw SOA as primarily a transactional solution, but data, he now believes, is just as important. Fully integrating the company's vital customer data into the framework has not yet been done. It still resides on an Air Canada mainframe, though a project is now underway to "repatriate" and establish SOA-integrated data systems on resident servers.
Failing to do that earlier in the process, he admits, may mean having to partially redesign services and applications. It would have been better to have hired a data modeler early on and use technology such as the AquaLogic Data Services Platform to integrate the data layer from the start.
"There are two ways to go at SOA," Lafrance says. "With transactions at the center, or data. I think if data is in the middle, that would result in better designs of services, more effective transport of services and less processing time."
Not that he has any deep regrets. The Aeroplan SOA has already delivered tangible benefits and they will only increase. That's the nature of the beast: once established it pays dividends every time you build a new application or, as in Aeroplan's case, add a new partner.
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.