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Copyright © 2005-2008 Blue Water Solutions, Inc. (BWSI). Confidential Proprietary Trade Secrets & Know How
Blue Water SolutionsBlue Water Solutions
Aviation, Aerospace & DefenseAviation, Aerospace & Defense
Copyright © 2005-2008 Blue Water Solutions, Inc. (BWSI). Confidential Proprietary Trade Secrets & Know How
CONFIDENTIALCONFIDENTIAL
Presented to: SVP Operations, XX Airlines
MRO Technologies & Services MRO Technologies & Services
Point of ViewPoint of View
Presented by: Michael Wm. Denis, Senior Associate, Blue Water Solutions, Inc.
8 September, 2008
2
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO: NonAviation MRO: Non--Defense Industry Size and Growth ~ 4.0% CAGR to $62BDefense Industry Size and Growth ~ 4.0% CAGR to $62B
14
11
7
9
14.1
11.5
7.4
9.2
12
10.4
6.9
8.5
9.8
11.1
7.1
8.1
11.0
11.1
6.9
8.4
11.0
13.0
7.4
8.5
9.4
14.3
8.6
8.6
10.9
21.6
9.7
9.0
12.1
22.2
12.7
11.3
13.0
26.9
11.8
10.9
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005 2006 2012 2016 2017
Airframes & Mods Engines Components Line
$41B
$51B
$41B
$37B
$36B
$38B$42B $40B
Five & Ten Year Compounded Annual Growth Rate Projections
Airframes & Mods = 4.7% slowing to 3.6% CAGR
Engines = 4.7% moderating to 4.5% CAGR
Components = 4.1% moderating to 4.0% CAGR
Line = 4.2% moderating to 4.0% CAGR
$58B
$62B
3
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO: Industry Structure / Aviation MRO: Industry Structure / ““EcoEco--SystemSystem””
Regulatory Services
Logistics Services
Technology Services
Financing & Leasing
Engineering Services
Total T
echnical S
ervicesM
ainte
nan
ce S
ervi
ces
Defense Operators & Depots
Engine OEM
Airframe OEM
Component OEM
Commercial AircraftFleet Operators
Le
ga
cy I
n USAF/USN
Fle
et
1
Fle
et
2...
UK MoD
Fle
et
1
Fle
et
2
...
CountryX
MilitaryForces...
Other Segments:� BizJet / Corporate� Air Taxi / VLJ� GA: General Aviation
...
Le
ga
cy O
ut
LC
C N
et
Ou
t
3PMP & 3PL
Sourcing, Provisioning, Procurement, Warehousing, Distribution, Transportation, 3PL
Maintenance Planning / Packaging / Scheduling, Regulatory Compliance, Tech Docs, Reliability Engineering
Air
fram
e,
En
gin
e, C
om
po
nen
t &
To
tal T
ou
ch
Serv
ices
Power x Hour Engine Bundling, ACMI Wet Lease, Performance Driven Outcomes
FAA, JAA/EASA, CAA, NTSB
Infrastructure Products / Services, SaaP (On-Premise, EAI, Application Management), System Integration, SaaS (On-Demand)
4
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO: Core Business ProcessesAviation MRO: Core Business Processes
Customer Relationship
Management
Supply Chain Management
Reservations, Airport
Operations, Finance & Human Capital
Shop, Tool & GSE Maintenance
Airframe & Engine
Maintenance
Flight Operations Maintenance
Engineering,
Maintenance Programs & Regulatory
Pricing, Marketing & Sales
Airport Operations
Flight Operations
Human Capital Management
Finance & Accounting
5
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO: Core Business Processes vs. Industry Structure:Aviation MRO: Core Business Processes vs. Industry Structure:
Collaboration Capabilities and Technologies are noCollaboration Capabilities and Technologies are no longer an option!longer an option!
EASA, FAA, ICAO, ATA, IATA, ASD, AIA
6
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Industry Structure & Synchronization vs. Nature of Demand & SuppIndustry Structure & Synchronization vs. Nature of Demand & Supply of Servicesly of Services
As the Structure and Integration of Services
increases so does:
Increasing Complexity to Execute
Increasing Barriers to Competitor Entry
Increasing Barriers to Customer Exit
Increasing Margins of Return
Increasing Likelihood of Cartels / Dominant Exchanges
Increasing Likelihood of Horizontal Monopolies
As the Nature of Demand & Supply of Services
increases so does:
Increasing Breadth or Depth of Services Demanded
Decreasing Sources of Supply Provided
Increasing Likelihood of Proprietary Standards
Increasing Likelihood of Vertical Monopolies
Structure of Industry & Synchronization
Nature of Demand & Supply (Services)
Increasing Complexity to ExecuteIncreasing Barriers to Competitor Entry and Customer Exit
Increasing Margins of Return
Incre
asin
g B
read
th o
r D
ep
th o
f S
erv
ices D
em
an
ded
Decre
asin
g S
ou
rces o
f S
up
ply
Pro
vid
ed
Incre
asin
g R
isks t
o M
arg
ins
Increasing Margins
7
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO Industry Structure vs. Demand & Supply of ServicesAviation MRO Industry Structure vs. Demand & Supply of Services
Structure of Industry & Integration
Nature of Demand & Supply (Services)
Process, Human Capital ConsultingOrg Design, Skills, Training, LEAN/6σσσσ, Metrics
System EngineeringImplementation, Integration
Component MaintenanceAvionics, LRUs, Subs, Fab
LeasingEngine, Airframe, ACMI
Engineering ServicesPMA, Mods, XML Task Cards
Infrastructure ManagementH/W, LAN/WAN, Communications
Application ManagementOn-Premise Management
AdvisoryServices
TechnologyServices
MaintenanceServices
BusinessServices
KnowledgeServices
PerformanceServices
Increasing Complexity to ExecuteIncreasing Barriers to Competitor Entry and Customer Exit
Increasing Margins of Return
Incre
asin
g B
read
th o
r D
ep
th o
f S
erv
ices D
em
an
ded
Decre
asin
g S
ou
rces o
f S
up
ply
Pro
vid
ed
Incre
asin
g R
isks t
o M
arg
ins
Technology ConsultingApplication & Infrastructure
Strategy ConsultingFinancial, Marketing, M&A
Business Process OutsourcingFI, HR/Payroll, Call Ctr, CRM
Utility ComputingHosting, Grid H/W, WAN/Comms
Airframe MaintenanceHangar / Heavy Check / RON
Line Maintenance Engine Maintenance
Engine Power X HourBundled Acq + Eng + Mtc + Log
Airframe Performance MgtPBL, PDO, Goldcare, TTS+
Fleet ManagementReg, Mx Program, Pln, MOC/MCC
3rd Party LogisticsVMI, Warehousing, Dist / Trans
Knowledge ManagementMRO SaaS + CASS Reliability / BIIn
creasing Margins
8
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Software as a Service / On Demand has two key differentiators:Software as a Service / On Demand has two key differentiators:
Source: Marc Benioff, CEO, salesforce.com, Tour de Force Atlanta, Apr. 2008, “The Future of Cloud Computing”
9
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Just as Applications evolved via Abstraction, Virtualization andJust as Applications evolved via Abstraction, Virtualization and OutsourcingOutsourcing……
Source: Marc Benioff, CEO, salesforce.com, Tour de Force Atlanta, Apr. 2008, “The Future of Cloud Computing”
10
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
…… so too are Platforms moving to the so too are Platforms moving to the SaaSSaaS / On Demand business model / On Demand business model ……
Source: Marc Benioff, CEO, salesforce.com, Tour de Force Atlanta, Apr. 2008, “The Future of Cloud Computing”
11
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
…… a business model that originated in the airline / aerospace inda business model that originated in the airline / aerospace industry.ustry.
MRO ITMROSCMCateringCRS / GDS
12
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
The three waves of adoption of a The three waves of adoption of a Disruptive Value Innovation Disruptive Value Innovation in any industry are:in any industry are:
Source: Saugatuck Technology, 2007, “SaaS Beyond the Tipping Point”
The focus of SaaS shifts over time from cost-effective delivery of stand-alone applications (Wave I), to integrated business solutions enabled by web services and ESBs (Wave II), then to human workflow and collaboration based business transformation (Wave III).
Wave III: 2008-2014Workflow-enabled
Business Transformation
SaaS 2.0Evolution of Software-as-a-Service
Wave I: 2001-2006Cost-effective
Software Delivery
Ad
op
tio
n
Low
High
SaaSTipping-Point
2006
Wave II: 2005-2010Integrated
Business Solutions
SaaS 1.0
2007 2008 2009 2010 2011 2012 20132003 2004 2005
Early Adoption• Stand-alone Apps• Multi-tenancy• Limited Configurability• Focus on TCO / rapid deploy
2014
SaaS 2.0
Ubiquitous Adoption• Optimized Business Ecosystems• IT-targeted Ecosystems• Inter-enterprise Collaboration• IT Utility / SaaS Infrastructure• Customized, Personalized Workflow• Focus on Business Transformation
Mainstream Adoption• Integrated w/ Business Portfolio• SaaS Integration Platforms • Business Marketplaces
and SaaS ecosystems• Customization Capability• Focus on Integration
13
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
By 2010, a new SaaS business services provisioning model emerges, combining pure-play SaaS solutions with business services from both next-generation and traditional infrastructure, application hosting, Managed Service Providers and Business Process Outsourcing (BPO).
While many SaaS vendors desire to remain pure-play application solution providers, customers and industry specific trends in addition to Wall-street economic valuation metrics will decide how far into business services SaaS must go to effectively compete with traditional software vendors.
SaaS2.0
SaaS1.0
ASP
BusinessProcess
Outsourcing (BPO)
Infrastructure,Hosting &
ApplicationManagement
New Collaboration Services Models
SaaSSaaS and Business Process Outsourcing are on a collision course and Business Process Outsourcing are on a collision course ……
Pure Play Infrastructure / Communications
SaaS Infrastructure / SIPs
SaaS BPO
SaaS CSP
Source: Saugatuck Technology, 2007, “SaaS Beyond the Tipping Point”
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Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Strategic
Value
Tactical
Value
System Collaboration
Business Processes
Business Applications
…… to create new business models around Collaboration Services Proto create new business models around Collaboration Services Providers (CSP).viders (CSP).
Technology Infrastructure
Business Services Provider
Business Process Management
Software as a Service
Application Management
Infrastructure Management
Hosting Services
From 1:1 to 1:N
From client site to web site
From SMB to global 1000
From tactical to strategicFrom commodity to industry specializedFrom cost-reducing to profit-enhancing
Operational
Value
Collaboration Services Provider
Systems Integration
Management
Increasing ROIC for an
Industry Collaborative
Shared Service
Increasing Propensity to
Outsource
Commodity Activities
Optimal Single Company
Risk / Return Proposition
On-Premise DeliveryFixed Solutions
Fixed Cost Plus Pricing Transaction Oriented
1:1 Company Standards 1:1 Client-specific Dedicated Delivery
On-Demand Delivery Configurable Solutions Shared
Utility Pricing Event / Workflow Oriented
1:N Industry-standards 1:N Industry-specific Ubiquitous Delivery
15
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
System Economics Strategy
Total Solution Strategy Best Product Strategy
Microsoft
Source: “The Delta Project: Discovering New Sources of Profitability in a Networked Economy”; Arnoldo Hax, Ph.D., MIT Sloan; Dean L. Wilde II, Dean & Company
Wal-Mart Southwest
Incr
easi
ng B
ondin
g Q
uotien
t
Point of View: The Strategic Positioning of select Aerospace & DPoint of View: The Strategic Positioning of select Aerospace & Defense efense MROsMROs
16
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO Trends: Supply Chain Management Business Process OuAviation MRO Trends: Supply Chain Management Business Process Outsourcing tsourcing
(BPO) and Software as a Service ((BPO) and Software as a Service (SaaSSaaS) are merging into Collaboration Services.) are merging into Collaboration Services.
Customers:
� Air Canada, American Airlines, Air India, PIA, Singapore, US Airways, KLM, Cathay Pacific, ANA, JAL, FedEx, Air New Zealand, Austrian, Lufthansa, China Airlines, Northwest, Egypt Air, Gulf Air, Icelandair, Kuwait Airways, Mexicana Airlines, Qatar Airways, Saudi Arabian Airlines, Royal Jordanian, Thai Airways, Virgin Atlantic & United.
Technology Partners:
� EDS (Hosting), AMOS, Lawson, Mxi, Oracle, SAP, TRAX, Quantum Control and Ultramain
Services:
� AeroBuy - a comprehensive, catalogue-based procurement system with full electronic connections to the aviation supply chain.
� AeroRepair - a solution that seamlessly enables end-to-end business process automation of the entire repair order lifecycle.
� AeroAOG - a comprehensive, e-commerce application used to mitigate the impact of AOG situations and to more efficiently manage the airline's loan/borrow/exchange business.
� AeroSourcing - a negotiation platform with full electronic connections to the aviation airline supply chain.
� AeroConsignment - a complete solution used to optimally manage consignment stocks between multiple trading partners.
� AeroComponent - a comprehensive, online application used to manage all components under "Support Contracts" with a single or multiple Component Providers.
� AeroDex - a business intelligence tool that enables you to make better decisions in order to manage your aviation company.
� Sourcing Process Management Services - a world-class team of sourcing experts who recognize the airline industry procures a variety of commodities and services that are critical to their daily operations.
Equity Owners of AeroXchange identified in BLUE. NWA’s equity will transfer to Delta Air Lines upon completion of the merger in late 2008. Airlines in BOLD are implementing or evaluating Mxi’s Maintenix solution.
17
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO Trends: Bundled MRO Business Process Outsourcing (BAviation MRO Trends: Bundled MRO Business Process Outsourcing (BPO) and PO) and
Software as a Service (Software as a Service (SaaSSaaS) are merging into Collaboration Services.) are merging into Collaboration Services.
HAECO is pleased to offer Fleet Technical Management (FTM) and Inventory Technical Management (ITM), two comprehensive total support packages that provide cost-effective, customized engineering and maintenance solutions. Airlines have recognized, in a highly competitive environment, they need to focus on their core competence of flight operations, maximizing revenue/yield and driving out costs by allowing HAECO to provide technical management services through a dedicated team of professionals that covers all aspects of airline engineering functions to ensure fleet operational safety and airworthiness requirement are totally complied with, to the satisfaction of operators' QA and regulatory authorities. HAECO selected and implemented Russell Adams enterprise:airline to provide the Fleet Technical Management (FTM) capability.
Lufthansa Technik’s unique Technical Operations web suite, manage/m™, allows commercial aircraft operators to manage all core functions of their fleet’s regulatory, engineering, maintenance and supply chain operations as a completely web-based system. All they need is access to the Internet.
Rounding out Lufthansa Technik’s Total Technical Services all-encompassing portfolio of maintenance, repair and overhaul (MRO) services, the modules of manage/m™ comprise a complete range of airline proven support functions that permit operators to live up to their responsibilities to the aviation authorities. manage/m™ improves effectiveness and efficiency offering real added value. manage/m™ is powered by Swiss Aviation Software’s AMOS solution.
Lufthansa Technik is proud to sponsor the official READI – web suite application! The purpose for the Reliability Exchange of Airline Data International (READI) is to provide a forum for the exchange of operational benchmark data, establishing the performance metric fleet Mechanical Scheduled Performance (MSP). READI is hosted by FedEx and currently comprises 30 airlines and OEMs.
Boeing CAS, Boeing IDS, Lockheed Martin Aeronautics, Rolls Royce DS&S, Bombardier, Embraer, Delta TechOps, KLM / AFI all have similar offerings in place or in some stage of realization
18
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
LufthansaLufthansa’’s corporate strategy and execution already includes s corporate strategy and execution already includes SaaSSaaS capabilities.capabilities.
Customized proprietary version of SAP A&D IS 3.0
Lufthansa Systems
AirlinesCargoCateringMaintenanceTechnologiesFinance & Investing
Lufthansa AG
Passenger Services
Lufthansa Airlines
Cargo CarrierFreight Forwarding3PL Services
Lufthansa Cargo
Swiss International
Catering
LSG SkyChef
Finance & InvestingLeasingConsultingTravel MgtAirliance, Amadeus
LH Holdings
LHT Airline Customers LHT Airline Customers
LHT LogisticsLHT Philippians, Sofia, Malta, Tulsa, Alitalia, Budapest, Shannon, AMECO, Shenzhen, CSA
Lufthansa Technik
19
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO Trends: Total Services Business Process OutsourcingAviation MRO Trends: Total Services Business Process Outsourcing (BPO) and (BPO) and
Software as a Service (Software as a Service (SaaSSaaS) are merging into Collaboration Services.) are merging into Collaboration Services.
Dubai Aerospace Enterprise has an amazing business vision
Behind the $15 billion Dubai Aerospace Enterprise is a very shrewd appreciation of business trends and a clear strategy to put Dubai at the head of the next big thing – aviation services.
The business concept here is to create a center of innovation for aviation, from the leasing and maintenance of planes to training personnel at a new aviation university to operating private airports and even manufacturing aircraft components.
Leveraging the fact that the Middle East and North Africa region will take 58% of wide bodied aircraft deliveries between 2005 and 2025, and 50% of recent new narrow body aircraft orders have been in the Middle East as the regional carriers are in the process of doubling their fleets.
DAE has a phased business plan to create an aviation center of excellence at the new Jebel Ali airport complex, and has established six operational subsidiaries across 14 industry segments. Further announcements are to follow for each business sector as this bold business plan is transformed into reality. � DAE Capital Aircraft leasing, Financing and Insurance with value-added services and a global presence.
� DAE Manufacturing Delivering cutting-edge research & development, manufacturing and assembly.
� DAE University An aviation campus for all levels of education, attracting both national and international students.
� DAE Airports Airport development and operations that lead the world in reputation and returns.
� DAE Engineering The global centre for aviation maintenance and support through acquisitions and partnerships.
� DAE Services An emerging world class solution provider in the aviation industry, focusing on offering technology based products, business services and outsourcing.
By 2015, DAE is expected to employ 30,000 people and to have 8,000 students a year passing through its university
This is yet another example of Dubai Inc. spotting a new opportunity through global business and technology trends and mobilizing its immense resources to capitalize at the opening.
Blue Water SolutionsBlue Water Solutions
20
CONFIDENTIAL
Information technology is central to Boeing’s corporate strategy of creating value for their aircraft customers and their passengers. This is a global strategy that leverages advanced networks, communications and applications to share information digitally amongst all stakeholders. This initiative is shared across all Boeing business units and extends from onboard technology enhancements to lifecycle information management tools. Maintenix® is central component of this strategy for the 787 aircraft as it provides the information hub for managing data and integrating these diverse technologies and services for the Boeing GoldCare offering. The objectives of the initiative include:
Leverage Boeing’s engineering knowledge and fleet-wide perspective to improve resource planning and maintenance execution activities
Automate traceability from maintenance activities back to compliance with source documents for maintenance requirements
Leverage fault information being captured onboard the aircraft to streamline line maintenance planning and execution activities
Set industry standards to facilitate closer integration between the airline community and the manufacturers and maintainers
Aviation MRO Trends: Engineering Business Process Outsourcing (BAviation MRO Trends: Engineering Business Process Outsourcing (BPO) and PO) and
SoftwareSoftware--asas--aa--Service (Service (SaaSSaaS) are merging into Collaboration Services.) are merging into Collaboration Services.
Boeing signs Long Term Agreement with Mxi TechnologiesOttawa, Canada (July 8th, 2008) – The Boeing Company has named Mxi as a partner for GoldCare, Boeing's comprehensive life-cycle management service developed for the 787 Dreamliner. Boeing has selected Mxi to supply Maintenix®, an integrated, intelligent software solution that will serve as the maintenance management portion of a comprehensive suite of enabling technologies for GoldCare.
Under GoldCare, Boeing leads and integrates a global team to deliver maintenance, engineering, and materials management tasks within a predictable per-flight hour cost. Goldcare offers two levels of service, GoldCare and GoldCare Integrated Materials Management Service; both of which include new enabling technologies that turn airplane operating data into actionable information and knowledge.
Ottawa, Canada (July 23rd, 2008) – The Boeing Company, the world's largest manufacturer of commercial jetliners and military aircraft, has signed a "Software License Distribution Agreement" with Mxi Technologies, a leader in aviation maintenance management software. Under terms of the agreement, Mxi will supply Maintenix®, an intelligent, integrated software solution that will provide Boeing with meaningful improvements to their labor productivity in after-sales product support.
Boeing’s Global Operations Center. © The Boeing Company
Blue Water SolutionsBlue Water Solutions
21
CONFIDENTIAL
Aviation MRO Trends: Engineering Business Process Outsourcing (BAviation MRO Trends: Engineering Business Process Outsourcing (BPO) and PO) and SoftwareSoftware--asas--aa--Service (Service (SaaSSaaS) are merging into Collaboration Services.) are merging into Collaboration Services.
“Technology is the key enabler of this kind of collaboration, which involves a significant amount of product lifecycle management across multiple countries. Boeing requires all its partners on the 787 to use an application called Catia, made by Dassault, and the plane is designed at a special online site, maintained by Boeing, called the Global Collaboration Environment. Goldcare customers, will also
benefit from advance engineering, maintenance and supply
chain management collaboration technologies that will
significantly reduce and predictably smooth lifecycle costs.”
Source: Boeing Co. as reported in CIO Insight magazine, 6 March, 2007
GoldcareGoldcare Network PartnersNetwork Partners
Americas Europe / MENA Americas Europe / MENA AsiaPacAsiaPac
OR
?
OR
OR
Back Office (ERP)
Maintenance (MIS)
Blue Water SolutionsBlue Water Solutions
22
CONFIDENTIAL
Aviation MRO Trends: Sustainment Business Process Outsourcing (BAviation MRO Trends: Sustainment Business Process Outsourcing (BPO) and PO) and SoftwareSoftware--asas--aa--Service (Service (SaaSSaaS) are merging into Collaboration Services.) are merging into Collaboration Services.
Blue Water SolutionsBlue Water Solutions
23
CONFIDENTIAL
Aviation MRO Trends: Sustainment Business Process Outsourcing (BAviation MRO Trends: Sustainment Business Process Outsourcing (BPO) and PO) and
SoftwareSoftware--asas--aa--Service (Service (SaaSSaaS) are merging into Collaboration Services.) are merging into Collaboration Services.
Maintenance information system linking the seven global F-35 operators is activated for flight test
Lockheed Martin is getting a head start on plans for a global Joint Strike Fighter sustainment system by switching on the information network that will collect, analyze and communicate maintenance data for F-35 flight testing.
The autonomic logistic information system (ALIS) will begin collecting data from the first F-35, which had completed 17 flights by the end of April. Initially data will be entered by maintainers, but an upgrade is planned to enable the aircraft to downlink data in flight, says Kevin LeBeau, ALIS integrated product team director.
ALIS provides 38% of the functionality needed to support the 14 development flight-test aircraft planned, says LeBeau, enabling maintainers to isolate faults and trigger the supply chain to deliver replacement parts.
Functionality is based on commercial software, including the Maintenix maintenance management system developed by Canada's Mxi Technologies. LeBeau says the ALIS team is developing shippable code every 30 days. When the second F-35 flies in May 2008 maintainers will be able to run checks and access status on the flight line using laptops and handheld portable maintenance aid.
Lockheed has established an operations control centre at its Fort Worth, Texas facility that includes sustaining engineering in order to develop repair tasks, improve component reliability and optimize the maintenance program against key performance parameters of aircraft availability, sortie generation rate and the performance based logistics contract, which shares risks and costs between the US DoD and Lockheed.
The international program team includes the United States, United Kingdom, Italy, Netherlands, Turkey, Canada, Australia, Denmark and Norway with Singapore and Israel participating through a non-program Security Cooperative Participation agreement.
The global sustainment operations centre in Fort Worth, Texas, USA. © Lockheed Martin
24
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
BuildBuildOnOn--PremisePremise
Custom S/W (SDLC)Custom S/W (SDLC)
1:1 Client1:1 Client--specific Solutionspecific Solution
Ad Hoc Capability MaturityAd Hoc Capability Maturity
Internal Infrastructure (Data Centers) Internal Infrastructure (Data Centers)
Customized DeliveryCustomized Delivery
Capital + Operations Pricing / Customer of 1 CostCapital + Operations Pricing / Customer of 1 Cost
Capability Sourcing FrameworkCapability Sourcing Framework
LeasedLeasedOnOn--DemandDemand
Configurable S/W & Processes (OnConfigurable S/W & Processes (On--Demand/Demand/SaaSSaaS) )
1:N Industry & Client1:N Industry & Client--specific Solutionspecific Solution
Agile & Continuous Capability MaturityAgile & Continuous Capability Maturity
External Infrastructure (Utility Computing)External Infrastructure (Utility Computing)
Ubiquitous DeliveryUbiquitous Delivery
Subscription Pricing / Shared CostSubscription Pricing / Shared Cost
BuyBuyOnOn--PremisePremise
COTS S/W (COTS S/W (BoBBoB or Suite) or Suite)
1:1 Industry or Function1:1 Industry or Function--specific Solutionspecific Solution
Fixed Version Capability MaturityFixed Version Capability Maturity
Internal Infrastructure (Data Centers) Internal Infrastructure (Data Centers)
Specialized DeliverySpecialized Delivery
Capital + Operations Pricing / Customer of 1 CostCapital + Operations Pricing / Customer of 1 Cost
ManagedManagedOnOn--CallCall
Fixed S/W & Processes (BPO / MBS)Fixed S/W & Processes (BPO / MBS)
1:N Industry & Function1:N Industry & Function--specific Solutionspecific Solution
Fixed Version Capability MaturityFixed Version Capability Maturity
External Infrastructure (Grid Computing)External Infrastructure (Grid Computing)
Dedicated DeliveryDedicated Delivery
Process Pricing / Shared CostProcess Pricing / Shared Cost
Structure, Agility & Functional Fit of Solution Product / Service
Structure of Capability Delivery
Decreasing Cost per Unit Capability-Maturity Increasing Business Agility to Respond to Change
Decreasing Risks (Operational, Financial & Technology)
Dec
reas
ing
Cos
t per
Uni
t Cap
abili
ty-M
atur
ity
I
ncre
asin
g B
usin
ess
Agi
lity
to R
espo
nd to
Cha
nge
Dec
reas
ing
Ris
ks (
Ope
ratio
nal,
Fin
anci
al &
Tec
hnol
ogy)
25
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO Trends: Aviation MRO Trends: LCCsLCCs are transitioning to more Managed or Leased Services.are transitioning to more Managed or Leased Services.
New US Airways
Structure, Agility & Functional Fit of Solution Product / Service
Structure of Capability Delivery
Decreasing Cost per Unit Capability-Maturity Increasing Business Agility to Respond to Change
Decreasing Risks (Operational, Financial & Technology)
BuildOn-Premise
Functional Orientation Input Centric Thinking
Custom S/W (SDLC)1:1 Client-specific
Internal Infrastructure (Data Centers) Customized Delivery
BuyOn-PremiseProcess OrientationOutput Centric ThinkingFixed / Configurable S/W (Suite + BoB) 1:1 Industry-specificHosted Infrastructure (Data Centers) Standardized Delivery
LeasedOn-Demand
Effects Orientation & Causality Centric ThinkingCustom / Configurable S/W (BoB: ASP or SaaS)
1:N Client / Industry-specificBundled Infrastructure (Utility Computing)
Open / Services Oriented Delivery
ManagedOff-PremiseCapability Orientation & Outcome Centric ThinkingFixed S/W & Processes (BPO / MBS)1:N Function-specificBundled Infrastructure (Grid Computing)Dedicated Delivery
Dec
reas
ing
Cos
t per
Uni
t Cap
abili
ty-M
atur
ity
In
crea
sing
Bus
ines
s A
gilit
y to
Res
pond
to C
hang
eD
ecre
asin
g R
isks
(O
pera
tiona
l, F
inan
cial
& T
echn
olog
y)
America West
US Airways
AA
Skybus
Southwest
Virgin America
Delta
Lufthansa
Sabre / Mxi eMergo
Boeing / Mxi Goldcare
Airbus Airman
Merlin
MEMIS
TPF
LHT manage/m (AMOS)
Boeing Ops Center (Mxi)
Lockheed ALIS (Mxi)
AMOS
Mxi Technologies
Russell Adams
HAECO FTM (RA) LHT / AMOS
TRAX
Sceptre
United
Ryan Air
Air Asia
Singapore
Air Arabia
Alitalia
Blue Water SolutionsBlue Water Solutions
26
CONFIDENTIAL
BOEING
Engineering & Maintenance
AIRBUS
Flight Operations
AIRTAC
IETM / IETP
S1000D
AirN@v
Airbus MRO Network Boeing Goldcare Network
SX0001
eLogbook / EFB
S1000D
PHM
S5000F
AIRMAN
In-service
Data Mgt
AirSparesServicesS2000M
AirPl@nS4000M
AHM
S5000F
Flight Deck
MIS
FOS
Collaboration
Network
Avioniques
CREW
Airline MIS (Maintenance
Information System)
Cabin
MIS
Aircraft Reliability
Management
Integrated Materials
Management S2000M
GoldcareS4000M
S1000D
A I R L I N E
Global OpsCentre
Collaboration Chokepoint
Aviation MRO Trends: Legacy carriers and Aviation MRO Trends: Legacy carriers and MROsMROs have a chokepoint to collaboration.have a chokepoint to collaboration.
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Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO Trends: ASD SX0001 is the new standards for aviatioAviation MRO Trends: ASD SX0001 is the new standards for aviation MRO.n MRO.
Aviation Sustainment Lifecycle Management (SLM)
The Office of the Secretary of Defense, NATO, and ALL leading members of the AIA,
ASD and ATA have signed an agreement to converge on the ASD SX0001 standards.
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Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Aviation MRO Trends: Collaboration architecture will be based onAviation MRO Trends: Collaboration architecture will be based on SX0001 and SOA.SX0001 and SOA.
MISMIS
MRO Information SystemMRO Information System
S5000FInternational
Specification for Service Data
Capture & Management
using ISO 13374 OSA-CBM,
ACARS, On-Board Systems & FOQA
S1000DInternational
Specification for Technical
Publications (IETP / IETM)
using a Common Source
Data Base (CSDB)
S2000MInternational
Specification for Materiel
Management (SCM) using EDI / XML Automated Processing
S4000MInternational
Specification and
Procedures
Handbook for RCM / MSG3
Scheduled Maintenance and
Reliability Analysis
S3000LInternational
Application and Procedures
Handbook for Logistics Support Analysis (LSA)
ISO 10303
AP 239Specification for Product Life Cycle
Management (PLCS) & Multi-
Dimensional Configuration Management
(MDCM)
ISO 10303International
Specification for Product Data Management
(PDM) & Computer Aided Design, Engineering & Manufacturing
(CAD, CAE, CAM)
ERP Finance,
Accounting & Controlling via
SAS 70 processes and procedures
compliance
SCORM International
Specification for Advanced Distributed
Learning using the Shareable Content Object
Reference Model
ERP Human Capital Management –
Recruiting, Succession, On-Boarding,
Talent, Training and Learning Management
Flight Operations
SystemsOperations Control
/ Maintenance Control, Air Traffic Control, Weight &
Balance and Dispatch
J2EE Web Service Universal Adapter (ESB / SOA)LDAP & PKI
Security Services
Dev
ice,
Pri
nte
r &
Wirele
ss
Ser
vice
s
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Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
J
Airlines
Defense
Evaluation Criteria
A
B
Third Party MROC
Airframe OEMD
Engine OEME
Aviation MRO COTS Software Products
A B C D E F
HelicopterG
Biz Jet / GAF
G H I
= Market Presence of 2 or more customers with full running implementations
Aviation MRO IT Market Segments ComparisonAviation MRO IT Market Segments Comparison
SaaS / On DemandH
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Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
System Economics Strategy
Total Solution Strategy Best Product Strategy
Microsoft
Wal-Mart Southwest
Incr
easi
ng B
ondin
g Q
uotien
t
Point of View: The Strategic Positioning of select Aviation IT VPoint of View: The Strategic Positioning of select Aviation IT Vendorsendors
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Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Software as a Service dominates growth stocks and Wall Street IPSoftware as a Service dominates growth stocks and Wall Street IPOs.Os.
Fortune: Hot IPOs of ’08, “If 2007 was a good indicator, the kinds of private tech companies that will make it into the public markets this year feature either a technological innovation or a business model innovation or both that give customers lower costs and flexibility. On-demand software companies like Success Factors (SFSF), K12 (LRN) and more recently NetSuite (N) managed to get out the IPO door on the back of their business model innovation. In the wings are SugarCRM, PeopleClick, BlueRoads, BlueTie, Cloud9 and Dave Duffield’s Workday. Open-source (Red Hat, mySQL) is another category being welcomed by the Street, as is virtualization (VMware & XenSource.”
Goldman Sacks: Getting SaaS savvy is On-Demand in 2008, “Software-as-a-Service (SaaS) is one of the most important trends in business at present, and will become pervasive over the next several years. We expect SaaS to expand the total addressable market for enterprise software, with growth in SaaS outpacing growth of the overall software market for the next three to five years. Large on-premise only application vendors such as Microsoft, Oracle, and SAP will embrace the trend. Despite this, small and pure-plays should continue to dominate in the near term, with an ongoing rapid entry of new companies into the market, and a healthy IPO market.
32
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
IATA / McKinsey Aviation Eco-System Value Analysis
15
2.8
4.43.7
2.2
0.5
-0.2
-1.6
10.5
5.1
0.3
-1.2 -1.1-0.4
-1.8
-5.5
-10
-5
0
5
10
15
20
We
igh
ted
EV
A (
RO
IC -
WA
CC
) %
Re
turn
We
igh
ted
Sp
rea
d (
RO
IC -
WA
CC
) %
Services based companies deliver higher Economic Value Add (EVA)Services based companies deliver higher Economic Value Add (EVA) ……
CRS/GDS
Freight
Forwarders Leasors
Airframe
OEM
MRO
Services
Travel
Agencies Airports Airlines
Source: IATA and McKinsey & Co. “Aviation Value Chain Profitability – IATA Economics Report 2004”
1996-2000
vs
2000-2004
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Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Enterprise Value to Revenue Multiples
0.13
4.10
0.450.810.91
1.85
5.90
2.80
0.00
2.00
4.00
6.00
8.00
10.00
12.00
ARBA WEBX TLEO KNXA RNOW ULTI CNQR VSCN CRM SAASAvg
SEGTop-10
Avg
S&P1000
Avg
EULCC
Avg
USLCC
Avg
EULegacy
Avg
USLegacy
Avg
US /LCC
EOY 2005
EOY 2007
S&P Avg 2.8
…… and higher EVR multiples due to predictable cash flows and lockand higher EVR multiples due to predictable cash flows and locked in EPS.ed in EPS.
Source: Capital IQ Data Services (a Division of Standard & Poor’s) dtd 8 January, 2008
Ente
rprise
Valu
e p
er
dolla
r R
evenue (
EV
R M
ultip
le)
34
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
On 20 December, 2007, open source technology leader Red Hat announced the election of James M. Whitehurst, as President, Chief Executive Officer and a member of the Board of Directors. Mr. Whitehurst was most recently Delta Air Lines’ Chief Operating Officer, responsible for Flight and Technical Operations, Marketing and Sales, Customer Service, Network and Revenue Management and Corporate Strategy. Prior to joining Delta in 2002, Mr. Whitehurst served as Vice President of The Boston Consulting Group (BCG). Between 1998 and 2002, Jim lead Delta’s eCommerce group, which planned IT strategy and evaluated IT investments for Delta Air Lines, Delta Technologies, DL’s wholly owned subsidiary, and collaborated with Worldspan, DL’s joint venture with Northwest Airlines and Trans World Airlines.
It was during this period that Jim and Vince Caminiti, SVP Sales for Delta, identified direct online marketing and sales channels as a value innovation for DL to simultaneously reduce the cost of sales by bypassing the monopolistic CRS/GDS vendors and travel agent commissions and increase load factors, reduce excess capacity and increase customer intimacy by demonstrating that DL was a fair value fare provider. Included in the agreement to open DL’s inventory to Priceline.com was a $18M warrant for 1.86M shares at $0.93 per share. Between 1999 and 2003, DL exercised warrants and options returning $1.134B in pre-tax cash to shareholders at a five year IRR(5) of 129%. It could be said that timing was everything in that DL luckily liquidated 62.7% of their investment in 1999 near the peak of the dot-com bubble. A downwardly adjusted post dot-com bust average price of $29/sh would still have yielded $199M in pre-tax cash to shareholders at a five year IRR(5) of 61.7%.
Priceline.com was one of several equity, debt and cash IT investments Delta Air Lines made over the past decade which, like American Airlines, the old US Airways and Lufthansa, yielded higher Economic Value Add than traditional IT sourcing methods and significantly higher Total Shareholder Return than other direct reinvestments in operations.
Source: Delta Air Lines annual reports FY2000, CY2000, 2001, 2002, 2003.
DeltaDelta’’s Billion Dollar Value Innovation: The Storys Billion Dollar Value Innovation: The Story
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Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
$711
$301
$127
$13
$1,134
$199
$(200)
$-
$200
$400
$600
$800
$1,000
$1,200
1999 2000 2001 2002 Actual Pre-TaxNet Cash Flow
Adjusted Pre-Tax Net @ Avg
$29/sh
Investment (Net Cash)
Return (Net Pre-Tax Cash)
Year
$ i
n M
illi
on
s
$18
$1134
IRR(5) = 129%
$199
IRR(5) = 61.7%
DeltaDelta’’s Billion Dollar Value Innovation: The Resultss Billion Dollar Value Innovation: The Results
Source: Delta Air Lines annual reports FY2000, CY2000, 2001, 2002, 2003.
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Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
The question is The question is ……
Where are you today and where do you want to be tomorrow?
Can you articulate your strategic competitive advantage in one sentence?
Which of the 15 aerospace sub-industries should you invest R&D, marketing & sales resources in - and when and - in what order and - in what geographies?
Which strategic forces are driving change in each sub-industry and geography?
Which bundle of process and technology services are most attractive in each sub-industry and in which geographies?
Which bundle of process and technology services are “cost of doing business” / low margin commodities vs “cost of winning business” / high margin innovations?
Which strategic position (Best Product, Total Solution, System Lock-In) can you pursue and which should you pursue and how?
Who could / should you partner with and develop alliances with?
What should your branding image be and how can your marketing material address the various strategic forces?
What is your go-to-market plan and schedule and how do you align marketing and the sales force in order to be ready to execute?
37
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Successful companies
have a well defined
process to continuously
sense, interpret, decide
and respond (SIDR) to
industry change across
multiple long view
scenarios.
Successful companies
have architected their
businesses to be agile
(plug and play) in order to
efficiently adapt to
change, to effectively take
advantage of unique
situations and to
continuously measure
and mature capabilities.
Our approach is Our approach is …… Strategy is a cyclical analytical continuous improvement procesStrategy is a cyclical analytical continuous improvement processs
S
D
R I
S
O
P T
Critical Success (CSF) Key Process (KPI)
Strategy
Competitive Positioning
Industry Structure
Set the strategic agenda
Target customer value
Open collaboration
Peer innovation
Governance
Execution
Values & Metrics
Industry Analysis
Strategy Formulation 33
22
44
55
77
88
99
66
11
Competition Analysis Porter: Forces Model
Schwartz, Lindgren, Kim & Mauborgne: Blue Ocean / Scenarios
Womak, Harry & Breyfogle: 6σ / Lean
Haeckel, Cebrowski, Bradley & Nolan: Sense
Kanter, Christensen & Gottfredson: Collaborate
Sense & Observe
Hax: Bonding Theory
Senge, Kaplan & Norton: Balance
Peters, Keen, Smith & Khalsa: Focus
1010 Interpret & Orient
1111 Decide
1212 Respond & Act
OODA: Observe, Orient, Decide, Act John Boyd, COL/USAF ret.
SIDR: Sense, Interpret, Decide, Respond - Stephen P. Bradley & Richard L. Nolan; Stephan H. Haeckel
38
Blue Water SolutionsBlue Water SolutionsCONFIDENTIAL
Accelerating the future
of Aviation Maintenance
Blue Water Solutions, Inc
2235 Bent Creek Manor
Alpharetta, GA 30005
O: 678.524.8289
F: 770.777.4759
E-mail: [email protected]
www.avioxi.com