In The Big Chair - Anand Krishnan of IBS Software

Anand Krishnan, CEO

In 2018, Anand Krishnan was brought on as CEO of IBS Software, a leading SaaS solutions provider managing mission-critical operations for airlines, airports, hotels and cruise companies.

Prior to joining IBS Software, Krishnan spent more than 10 years at Microsoft, where he most recently served as general manager of the developer and app group.

You joined IBS Software in 2018, coming from a background in software, including at Microsoft. What drew you to the travel industry?

It was not part of a plan. When I came to IBS, I had two things in terms of how I sort of sum up the prior two decades. One is technology, specifically software, and in that journey I had seen a big industry-wide disruption, which was the cloud impacting the world of legacy software. Companies like Microsoft, where I was in 2009, 2010.

I was part of a small group of people that are scattered around the company but were collectively tasked with building and launching this new set of businesses, which today we know as Azure and Office 365.

That was fractional revenue back then. Today it's a 50-odd-billion-dollar business for Microsoft and is generally seen as a reason why they sort of came through disruption on the right side.

[Along with technology], being in horizontal software, I had seen from the customer's side, many different verticals. I saw the transformation of media as traditional media companies went to first getting their heads around the idea that content consumption was going to go to devices - multi-device, digital and screen - and then come to grips with the fact that they have to get on that wagon and then scramble to do that transformation.

Amidst all that was Netflix, which was a customer of mine for three years. They went from DVD rentals to $25 billion in revenues powered by streaming. I saw retail go through a similar transformation. When you put all of that together, I felt like I had sort of seen disruption, and there's a pattern - you see the same thing over and over.

When IBS first called me, in the context of that conversation, I started digging into travel. I had a sense this is a pattern I have seen, that the travel sector felt like it was waiting for the inflection point, but the trends were very clear. It was just a question of when. IBS had positioned themselves to be part of the answer to that. So for customers that were looking to come out of that disruption as winners, this was going to be a solution set that could help them get there. That was what took that initial phone call into something longer and ultimately resulted in me joining IBS.

Compared to other industries that you've seen, this digital transformation, this cloud transformation, was there anything about travel that surprised you?

No, I think I was I looking outside in. I've been a business traveler my whole life. As a traveler I hadn't been exposed to what exists behind the curtain. 

Let me take a step back. There’s this popular view of disruption, which is why when you read article about why the company didn’t get there – to whatever there is – it broadly reads like a narrative along the lines of, “We were sailing, everything was fine – then there was a storm and then there was this rogue wave that tipped all the boats over. That’s how things went under.”

That tends to be the narrative, which in practice is almost never the case. Disruption is never a tidal wave. It tends to be much more of a small but relentless set of changes that pile up over some time until they hit an inflection point. A frog in boiling water is a much better analogy to describe disruption in terms in how it cooks the incumbents.

An example: I was in retail a while … in 2012, U.S. retail was doing very well. Investor funds were buying brick-and-mortar retailers because they were seen as sources of stable, growing cash flows. Toys R Us was generating close to $500 million of cash every year. Five years later, 2017 now, the list of retailers that filed for Chapter 11 was a long one.

One question was – if you read the headlines at the time – it sounds like something big happened in that five-year window. What happened was Amazon. Or more broadly, what happened was e-commerce.

It’s understood that the GDSs will die; it’s just a question of when, it’s not a question of if.

Anand Krishnan

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But e-commerce didn’t happen between 2012 and 2017. E-commerce was already a thing in the late-’90s. Amazon was founded in 1994. So going into 2012, all the folks that were running these healthy businesses had for at least over a decade seen a set of trends accrue and pick up steam over a length of time, but had repeatedly looked at it and said we’re on top of it, existing business is going well, we’re OK… 

What happened between 2012 and 2017 was that that inflection point got hit. U.S. online retail share of total retail quadrupled. That quadrupling, that sudden growth in online buying, effectively crushed margins for brick-and-mortar retails and brought the whole house of cards tumbling down. And of course this current crisis we’re going through has only put the pedal to the metal on that entirely.

Going back to travel, I think it’s very similar. I think that the trend lines as a traveler have been quite obvious for a long time. The average traveler today looks fairly different than the person traveling 20 years ago. Much more digital, social, connected. You’re used to personalized experiences. You generally expect the applications you use to surround you with a soft pillow of services that cater to your needs. And that’s not the modern traveler experience. When you show up at the airport, you’re still a guy with a ticket on his phone maybe but that’s as far as it’s gone.

That disconnect has existed for a while ... I don’t think there’s a travel company in the world that doesn’t have a set of slide decks talking about all these themes in loud fonts somewhere that has been presented.

But there’s always been a sense of, “We’ll get to it. We will do this, we will do it at some pace.” What this disruption has done – as painful as COVID has been to the travel industry – one thing it has done is shorten that timeline to that inflection point. We will come out of this assuming some things to be ground reality that otherwise we would have said will happen at some point in time.

Going back to question of what was surprising, I would have said that sense of urgency to me was further out in time compared to my expectation coming in.

With COVID, how are you seeing travel brands prioritize the cloud given all the other priorities and budget constraints they’re facing?

With the cloud, I’m always careful when I use the word because taking a mess of stuff that you’re running in some facility you own and dropping it onto the cloud is a Band-Aid. It does get you something, but it doesn’t get you where you want to go.

If I go back to the business side of it, last March, the first and burning imperative for everybody was how do you survive the next 10 minutes? It was all about cost. Then that realization of how do we reduce our burn rate to something that is a fraction of what it used to be – a couple of things became obvious. Not that they weren’t known, but the pain of them was really felt.

One was that the travel industry in general maintains large amounts of completely built, owned and operated software that was built decades ago in many cases. There was a high running cost for that. For a long time, it’s been a, “Yeah we know we have to replace it, but it’s OK for now, it’s good enough for the next two years.” Now that high and relatively inflexible cost structure attached to those systems, which is wildly disproportionate to the business needs, was a problem.

Secondly, many of these systems are so siloed … people have almost forgotten about the manual work required to bridge the gaps between systems. And it’s only when you go back to see where you rationalize do you realize that having a seamless connected platform means you don't need people to do lots of things that software should otherwise be doing on its own. Collectively, one thing the entire [COVID] experience made real for people was the importance of relying on operated software that is working on your behalf. That’s what SaaS [software as a service] does.

That concept of SaaS used to be something you always had to explain to people, why it’s a good thing. That became real in a way that we could never have articulated as clearly – in a painful way, don’t get me wrong. Sitting alongside it, that’s when you really feel you wish things had moved faster nine months earlier because then these decisions would have been easier.

That was one side of it. Having got past that immediate burn, the next question for most customers – around June and July – was … we’ve hit some sort of greatly reduced steady state. How do we make the most of what is in front of us?

As a solutions provider, we have a platform that services the air cargo industry, essentially functions as a backend end-to-end for aviation cargo. We do the same thing for loyalty. Both of those sectors continued to remain profitable for airlines. Air cargo in particular, when this hit everybody decided to go online and order everything [which drove shipping volume].

So air cargo groups were immediately working out how do we maximize this? Which passenger jets can we repurpose as freighters? That agility and the ability to think of that in business terms and translate that into something systems support is something that really differentiates modern from legacy.

I think any customer that has been through the past nine months would say they lived the pain of not having [those solutions]. Or conversely, if they did make that transition, they really benefited from it.

Going back to priorities, what COVID has made real for customers is getting away from owning, maintaining and operating large chunks of legacy. I think we will see an acceleration of that trend.

Secondly, expect software to do more of the work and people do less of the grunt work. People should be doing stuff that sits on top of that. So decision assist, optimization, recommendation engines – this is all capability that sits on top of the data you already have.

Thirdly, expecting the technology to stay ahead of the business. As you think of new things you want to do, what you want to be changing is rules on the business side, not code product. Relying on a product to do that is the only way that innovation velocity gets maintained.

One overarching thing that most of the world, not just travel, will certainly have taken away from COVID is – I don’t know of a company that isn’t amazed at the transformation they’ve gone through in the first three to four months of the pandemic. Collectively there is a proof point around how fast we can move, this collective willpower in the business to go somewhere, which should be a proof point I hope remains front-of-mind for people.

In December, Amazon Web Services named IBS Software one of their preferred partners – what’s the significance of this designation?

Because we’re a SaaS provider, ideally our customer should consume the service and they shouldn’t have to worry about where it sits, whether that’s our data center or Amazon or Azure or Google. We’re cloud agnostic. That’s how we designed it and we think about it. That’s intentional because while we have a very large presence on AWS, sometimes for good reasons, customer reasons or geographical regions, they might need to continue something that sits on Azure or in our own data centers.

Going back to Amazon, we have quite a significant footprint that had started already and to some degree was there before I joined. Certainly since my joining and my background we’ve really focused on accelerating that. The relationship I would say is the biggest one we have of the cloud providers.

Amazon looking at the travel industry certainly sees the same thing, which is large amounts of legacy technology living in cost structures that are not justifiable. I’m sure from their standpoint, travel is an immense amount of opportunity. We happened to be solely focused on travel. Very often, the inevitable consequence of us transacting with a customer is they end up indirectly on Amazon, consuming our services. There was lots of synergy already in place to formalize that [AWS Travel and Hospitality Competency] program.

In real terms it means a few things: Firstly, because of what we do … the mission criticality of it, my customers have the ability to pick up the phone and call me, and we need to be able to know who is under the application and can we reach out and connect. We get that level of support from Amazon. Rarely is there a problem, but if there is an issue we can get ahold of somebody and figure that out in real time.

The other thing is, going to a customer, and in many cases that customer might already have a relationship with Amazon … it’s a win-win all around when the customer knows that we know very well what’s going on on both sides, there’s already a partnership in place.

The third thing, we are constantly looking at how do we make better use of their cloud? What would we architect, what would we retire, what components did we use? So at that architectural level there’s a fair amount of consulting that they make available to us.

Where are airlines at with NDC and do you see them investing more or less in it as they enter 2021?

This takes us back to that point about disruption. Let’s take a step back for a second and talk about the GDSs first. If we just take the context away, because it’s a muddy conversation when you talk about the world as it exists today, but just assume for a second that we are starting the aviation industry from scratch and nothing exists. You bring a set of experts into a room and say, "You have a week, and your job is to design the best, most efficient mechanism to get tickets from providers of travel to the ultimate buyers of those experiences, the passengers."

If that was the mandate and they had nothing to worry about as far as legacy goes and they just clean-sheet designed this from scratch - on the Monday of the following week there’s presentations galore and there’s charts and slides, I think it’s safe to say none of them would have designed the GDS as we know it.

Disruption is never a tidal wave.

Anand Krishnan

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So right off the bat, we can all agree that when it comes to just core value proposition, there isn’t one. The only proposition that exists when it comes to value is because of the inertia of the market, the existing traffic that flows through a system that was designed decades ago.

That’s one thing. So then the next question is what should the ideal look like? Going back to those presentations on the Monday morning, I’d say we can argue about the specifics but broadly, the concepts would be along the lines that someone providing an experience should know who their customer is. They should be able to optimize with that customer in mind. They should be able to package, bundle and price with that customer profile in mind and make all of that available and expose that all the way to the end user.

These are the concepts that NDC is trying to make available. If you think about the airlines as a simple retailer of an experience, these are all the things that you would say is core to them doing well. There can always be disagreements on what specific form or format or APIs you want to use, but the construct I don’t think there’s any real debate that this is the direction things have to go...

It’s understood that the GDSs will die; it’s just a question of when, it’s not a question of if.

Secondly, the world of richer connections between providers and consumers has to happen. In certain sectors you already see that – leisure travel, domestic travel. ... Large carriers have various versions of NDC programs or partners that connect directly. You see the beginnings of movement in that direction.

But going back to disruption, this stuff won’t flip tomorrow. You have to take small steps and be relentless. My recommendation to anybody would be take a small step – you define what small is - and once you get that up and running, however small that might be, then be relentless about improving and expanding it. That would be the journey.

For IBS Software, what are your priorities for 2021 as well as five, 10 years down the road?

Our governing vision has been – if you think of what Salesforce represents to the CRM space, we think we can do that for travel. That’s our North Star, quite simply. … Being comprehensive, seamless, integrated, always on and always evolving so that the product is always ahead of the business. … That’s our five-year priority.

What advice do you have for startup founders in travel?

If you’re a startup, you probably are already thinking of the MVP – what’s the least I can build to show some value, where can I go from there, can I get validation? So not getting too far out on your skis.

There is a tendency for most smaller businesses to look out further than you want to on your roadmap and I think that’s one thing to be careful of. But generally I would say, that aspect of not getting too far forward is something I expect most startups to do.

Where there’s really opportunity now is customers may or may not be looking for the exact thing you’re selling, but they are looking to solve hard problems in a very open way, in a way where they will take your call if you can help them.

This is not always the case. That’s the one benefit of being in tough times is if you can help, you will be welcome. The next 12 to 18 months is a good year to let your sales and account teams, unburden them a bit of the obligations they might have to drive a number. Allow them to just go in and be helpful because in that journey you will learn a lot, but you will also build a relationship. Those things will be valuable assets for you in the future.

That’s a hard thing. I know having been in those shoes. Most startups are lean teams and there’s pressure, but just setting a different set of goals and allowing people to work on just being helpful I think would be great focus for anybody in the travel sector.

The second thing, if you do find yourself in a situation where someone is willing to take an answer from you that is core competence, for God’s sake, deliver value in some period that is weeks or months, not longer than that, ideally not burning cash until value is delivered from a customer standpoint.

Other than that, while it feels like these are tough times, these are also the times when real businesses get built. I think anybody who comes through these next 12 months will know they’ve been tested and what they do is really important for customers.