Online Exclusive: Patrick Naef, head of Mercator

How the head of Emirates IT division plans to grow the firm.
Patrick Naef, head of Mercator and divisional senior vice president, Emirates Group IT.
Patrick Naef, head of Mercator and divisional senior vice president, Emirates Group IT.

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Mercator’s Patrick Naef has been given a mandate to grow Emirates IT division over the next few years. Here’s how he plans to carry out that task.

How long does it take to implement a product like SkyChain?
Well, there isn’t a one-size-fits-all approach. The first implementation that we carried out was when we developed the system for Emirates SkyCargo, which took two years. But now, it’s very much dependent on the processes of these customers as to how long it will take.

To give you one example, when we sold the system to Swiss World Cargo, they had a lot of very specific processes that they desperately wanted to have implemented in the system. As a result, we then spent around 5000 man-days of additional development on the system, so that project ran for approximately 14 months until everything was customised to their expectations and the system is now hosted in Switzerland in one of their outsourcing data centres.

Is it possible to have it implemented in a shorter time period?
Of course – another example would be Midex, based in Al Ain. They just took the system as it was, as they had only just started operating. They made the point that if it was good enough for Emirates SkyCargo, it was good enough for them. Within two weeks, the system was up and running.

Do a high number of existing legacy systems complicate the implementation process?
That’s certainly another factor that contributes to the length of time it takes. How many systems do we need to interface in? From revenue accounting to reservation systems - you name it - depending on complexity and interfaces the process can take much longer. The Midex case was particularly interesting because we have a stripped-down version of SkyChain that we offer to smaller, leaner carriers. We run the system in our data centre, so it’s a classical ASP model; we offer the service and provide everything in terms of hardware, hosting, communication.

It’s possible that we could provide that for larger customers, but it’s always dependent on what that client wants. The other model, which tends to be for larger clients, is doing all the maintenance and implementation of the system for them, and then they run the system in their own data centres or with their outsourcing partner and we are in charge of maintenance support.

When SkyChain goes live, is it a standalone system by that time, or is it operating with existing legacy systems?
It’s a bit of both – we replace a number of legacy systems, but there will still be a number of systems in place that we have to interface with. The initial project with Swiss World Cargo is over now, but we do have a number of follow-ups to make. For example, we’re currently updating the legacy systems for e-freight, and we’re also developing additional functionalties for SkyChain, which we’ll implement in a later phase to replace more legacy systems in the future.

Just to give you an example, when we went live with SkyChain for Emirates, we replaced 23 legacy systems, and since then we have replaced another three or four systems simply as a result of the additional functionalities in SkyChain. So we’ll probably be working on putting new solutions in for a long time to come.

So, in effect, you never sign off on a project entirely?
Absolutely; every customer is different and every customer has legacies that we need to integrate with.

How closely does your team work with each client?
There is typically a pretty long sales cycle involved with the process, where you are already working very closely with a potential customer to understand their needs, so by the moment we sign the contract, we know already what they need and how to approach it. In the case of Swiss World Cargo, we knew exactly which areas needed further development and customisation and how we would go about implementing it.  Our team works onsite with the customer and we don’t take on the contract and then return to Dubai to develop it here.

We had people travelling around the world visiting Swiss World Cargo offices, because at that time in the US, they had very specific requirements for customs. And, at that time, Emirates wasn’t operating to Brazil so we had to comply with Brazilian customs rules and send our people there to understand local requirements. So, after a few weeks, there’s a very close-knit operating team where it’s almost impossible to tell who works for Mercator and who works for the client.

Why should clients sign up for your solutions rather than the others available on the market?
Having worked for other airlines before I joined this company, I was really impressed by the tight integration of our suite of products. That’s because we have a strategy of developing a lot of these systems in-house rather than trying to get a patchwork of acquired or bought products. In other airlines, you just pick and choose and try and integrate it all. That’s quite unique and I don’t think I’ve seen that tight integration anywhere else in the market.

I guess that’s one of the compelling selling propositions that maybe we haven’t been so good at getting across to the market. In the past, we were very much focused on selling individual systems but we have now changed the approach a bit and tend to go for where can we add value to an airline by providing a whole raft of solutions rather than just individual systems.

How compliant is SkyChain with the e-freight concept?
I’m no e-freight specialist, but we compared the e-freight compliance of SkyChain with IATA’s standards and we are far, far advanced on the requirements that IATA provides. Our head of SkyCargo, Ram Menen, is one of the industry’s e-freight champions and has been very passionate about spreading the word about this project. I guess what we can offer is probably the most e-freight advanced system in the whole industry.

What are the unique selling points of Mercator’s solutions?
If I look at our pipeline for the future, we’ve never had such a healthy and promising outlook as we do now. As one of the very few IT providers for the airline industry that is actually part of an airline group, there aren’t many companies that have almost unlimited access to industry know-how. Around 20 years ago, every airline had their own IT dept, but these got bought out, or sold to venture capitalists. Besides us, maybe Lufthansa has a similar set-up, but after that I’d struggle to find another provider that has the type of access we have.

Most other companies are desperate to find an airline to try out their launch product in and very often I see these fail. We see this all the time, particularly in the cargo area; I don’t know how many millions have been sunk in this way. Whatever we sell to the market, clients know that it has been developed in conjunction with SkyCargo, so when a customer buys that solution, they know that it’s proven and has been tested with one of the fastest-growing airlines in the world.

Do you have any words of wisdom for the logistics and air cargo industry in the Middle East?
I think one of the areas that I would recommend most of the traditional cargo carriers and logistics firms to consider is the reduction in complexity. That was something that we learned when we drew down 23 legacy systems to one. There is a huge cost reduction you can achieve by doing that.

Many of these systems have a tendency to mushroom, meaning that a lot of these companies ended up by having a highly complex mesh of systems where it was hard to keep data up to date and accurate between systems. That in itself can be hugely expensive. Whenever you change one system you need to adapt all the systems to reflect that change. The more you move away from that approach and towards an integrated approach such as that provided by SkyChain, the greater the chances are you will achieve cost benefits.

Do you have any new products lined up for launch this year?
I wouldn’t want to answer that question right now, but what I can say is that we are constantly exploring new opportunities to grow our business. From the Emirates Group perspective, we have identified Mercator as being one of the businesses that we want to grow significantly in the future. In terms of new products, we will communicate those when we are ready to do so.

What’s your outlook for the future?
About two years ago we sat down and assessed how we would go forward. The IT division has more than enough to do just to support Emirates, so there was always the question as to how much we would distract ourselves from delivering to the external business. But that side of the business is hugely attractive and it’s also good for the group not to be so dependent on the airline, which is why you see Emirates also investing in other areas, like ground handling, hotels and resorts etc.

As a result, I have been given the mandate to aggressively grow the business, so over the next few years we will expand by offering new products, new services and potentially also through acquisition. We definitely want to become one of the major players in the market.
 

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