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Information Age (IA): The ability to take cost out of running an airline has become critical to success. What fundamental changes has BMI made to reduce the cost of doing business?

Richard Dawson (RD): Above all, we have been changing our distribution model. A few years ago, we were only doing something like 4% of our business through the Internet. We're now doing 38%, with a target of 54% by the middle of 2006. And that takes a lot of cost out of the business because selling a ticket through a conventional travel agency mechanism is very expensive compared to doing it through the web.

The other thing we have been doing has been to introduce much more self service. We currently do about 40% of our passengers' airport check-in as self service. We're going to push that to 64% by the end of 2006 through the use of technology: web-based check-in and much more use of self-service kiosks at airports. We're going to differentiate according to how much a passenger paid for their ticket as to how much service they get: If you buy a cheap fare you will have to use self-service mechanisms to check in.

IA: It is one thing managing a major change in IT for your own employees and quite another managing one for your customers. Is that an issue with the self-service check-in?

RD: Yes, it's a big issue. At Heathrow right now, all passengers have to go through a process whereby a host [at the check-in line] verifies tickets and guides passengers to whichever mechanism is more appropriate for them. We'd like to get to the situation where the customer automatically chooses to use self service. So we're building some new kiosk software and we've employed software ergonomists at [IT services company] Conchango to help us design the interface between the customer and the machine in a way that makes it intuitive and easy to use.

That's all about designing the screens so the process is not complex and customers can understand instructions quickly. That means making the screen look obvious, through button sizes and colours. We're talking about introducing an animation as well, on the basis that 30% of verbal and written communication is ignored - what people do when they talk to each other is communicate through the use of gestures and facial expressions. So we're talking about introducing a character who displays an appropriate facial expression based on what the customer is about to do or has done.

That is part of a programme of e-enablement projects where customers can access technologies that let them do whatever they want. Our project partner, DAV Management, is running that programme of change.

IA: When did you decide you needed to bring in external project management skill from someone like DAV?

RD: We always did [outsource] - part of our philosophy was outsource the infrastructure, buy third-party systems externally and also buy project management skills off the market as and when required, rather than employing per-annum people.

Project management is a generic skill but project management of a data migration project or a desktop refresh is very different from project management of an ERP implementation. It requires different levels of second-level skill and knowledge. And to grow those capabilities in-house is very expensive. You can't get the people of the right quality, plus keeping them current and trained is a real problem. If you can find an organisation that's got a good spread of those skills, then that seems to me to be a much more cost-effective way of doing it.

When I say cost-effective, I'm not talking about consultancy rates, I'm talking here about getting a job done within a reasonable time frame according to the needs of the business. We've used DAV consultants extensively for a wide range of projects which have been business critical, and the relationship has worked well - everything's been done to the required quality and within the required timescale.

IA: Is IT treated as a strategic asset?

RD: We rely as an airline extensively on IT now. If the IT failed, you just wouldn't have an airline. But I think businesses can be strategic; I've never thought that IT is particularly strategic. What British Airways do tomorrow, we'll do a couple of weeks afterwards. The innovation only lasts as long as it's not copied and nowadays innovations are copied pretty damn quickly. What people get is a tactical short-term advantage.

What's strategic to me is adopting some service. The technology is deployed to meet that strategy and if you deploy that before someone else you get a short-term advantage. And actually sometimes you get a short-term pain as well because you end up educating the marketplace, which is very costly and can damage your reputation. If you come in closely behind that, you find a lot of the work has already been done for you. Is that more strategically advantageous than being at the leading edge? You have to make your own decision. We tend to be followers rather than leaders, although in self service I do believe we have the opportunity to be short-term leaders.

IA: Having consolidated all your outsourcing contracts into one supplier, how do you ensure Fujitsu Services delivers the added value BMI needs?

RD: You have to keep control of outsourcing partners, which is why I have a team of people employed full-time just to manage that relationship. Otherwise you don't get what you want and you don't get the value. The base level is that you get a price, define the services to be delivered. The challenge is to get the extra value out of the relationship. You have to have formal demands, procedures and incentives, and a continuous improvement programme, with formal processes around planning and strategy development. You have to get the supplier to the level where they have a deep understanding of how your business works so they can suggest ways in which they can help you.

We're developing a joint strategy with Fujitsu. We've told them our business strategy, what we think we'll want to do from an applications perspective, and other strategic imperatives related to IT. Then we asked what their strategy is for managing our infrastructure: "What changes are you going to make over the next couple of years? What's the ROI? How much are you going to have to invest, how much are we going to have to invest? How many people do we need to help you manage that stuff?" We'll put the two together and that will be our IT strategy for the next couple of years.

If you can get a coherent plan that says, 'here's a curve of service improvement and of reduction in TCO, and here are the measurements that you can test us against, for me that's real high value. They are the technology experts, they know where it's going, where the 'pinch points' are. They'll have a view on when you need to refresh your infrastructure or what's coming along next year that you might be able to take advantage of.

IA: So what is an example of major change ahead for BMI's IT?

RD: We're just evaluating changing our existing WAN which is based on IP over frame relay. So it's new technology on an old platform, and it's quite expensive. I said to my guys, why can't we use the Internet for wide area networking? I think a lot of these telecommunications suppliers have got real problems with their legacy platforms and to get from the legacy to where they really need to be, they step you through a process of perceived new technology types. And it's about them controlling their marketplace - all they're doing is changing their infrastructure in a way that's convenient to them and they're keeping their price up as a consequence.

So we're funding their change - sod that for a game of soldiers. Why can't we get from where we are now to where the technology capability actually is? If you can do voice over the Internet and large volume data transfers why not use it for everything? That's the kind of thing that I need an expert supplier to help me with - they should be able to tell you what's going on in those marketplaces and what your options are, so I do not have to do all the research myself.