December 2000

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HP sent Open Skies on a one-way flight

HP sold off the original example of its Apps-On-Tap strategy early in December, when it sealed a deal to sell its airline ticketing provider Open Skies to PRA Solutions. The buyer of the Utah-based software company which HP purchased only two years ago is an arm of the Anderson Consulting empire, and it’s a computer services firm maintaining business relationships with major airlines such as Delta and Northwest. The seller is the same HP which has been promoting Open Skies as an example of how transaction-based e-commerce is the new future for platforms such as the e3000. The e3000 still runs the Open Skies airline application serving 20 growing airlines, the largest of which has a fleet of 60-70 aircraft. HP put Open Skies out on the market in April, after its new mantra of focus led it to cut loose several software operations. Open Skies was too small to retain the new HP’s attention, according to some observers, although the mark for staying on the new HP’s radar screen was steep: $1 billion in annual sales.

The airlines doing business with Open Skies won’t see much change in operations, because the company will be maintaining its HP 3000 technology commitment. That means forward-looking carriers like JetBlue — started by Open Skies co-founder Dave Kallman, and offering things like DirectTV in each seat-back on its new fleet — can continue to cut costs with the model where Open Skies datacenters do the computing while the airlines do the flying. Those datacenters remain as the most lasting legacy of the Open Skies effort, with HP 3000s in Brussels and Salt Lake City, and another going online in Australia as a result of new deals with Down Under carriers Impulse and Virgin Air .. HP couldn’t bring its resources to Open Skies quick enough to meet its growth opportunities, the whole reason the company allowed itself to be purchased by the HP 3000 Commercial Systems Division. The company was moved out of CSY within six months of when GM Harry Sterling engineered the deal, moving to HP’s Services Group and becoming the only Apps-On-Tap venture to show a profit in that operation. HP went into a hiring and spending freeze almost immediately after Open Skies became part of the company, so any advantage of looking bigger and closing more deals more easily got sidetracked.

Two years ago, Open Skies co-founder Dave Evans had higher hopes for the deal. At that time he said, “All our competitors have a big name behind them. When we go to someone like British Airways and say ‘We’re better than these guys,’ they reply, ‘But who are you? You’re from Utah, where’s that? By the way, how much money do you guys have in the bank, and will you be there next year when we need you?’ We fought through those things, but it’s been a battle, Now I think HP’s going to be around a while.”

The new deal with PRA may turn out to be a better arrangement than the 48-person company could ever pull together with HP. PRA doesn’t do what Open Skies does — sell ticketless trips through servers for airlines — but it’s an owner which already knows the airline business. The Minneapolis-based company audits ticket sales for airlines, ensuring that enough money hs been collected by travel agents on each ticket. Any shortages result in bills to the agents for the missing revenue. PRA Solutions has accounts with 25 airlines. It says its business is helping airlines transform passenger revenue accounting from a cost center to a profit center, and it can “offer a unique combination of application software, technology services and innovative business process services.” Alas, all that is done with Sun servers. The Open Skies business stopped selling new HP e3000s years ago, when it moved its model from server and software sales to outsourced e-services. HP’s top two executives at the company have left to pursue other opportunities in the past few months. Former head of the 3000 division’s marketing Roy Breslawski and former lab section manager Jim Sartain are both gone, the latter working at finance software provider Intuit. HP thinks it might have a shot at continuing to serve Open Skies. "We highly value the relationships we have built in this marketplace, and HP will continue to work closely with PRA Solutions to deliver industry-leading services to our customers," said Jim Jenke, director of Business Development, HP Services. Jenke’s business sold the unit.

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