Cloud transformation clears businesses for digital takeoff

In an age where customer experience can make or break a business, Cathay Pacific is embracing cloud transformation to enhance service delivery and revolutionize operations from the inside out. It’s not just technology companies that are facing pressure to deliver better customer service, do more with data, and improve agility. An almost 80-year-old airline, Cathay Pacific embarked on its digital transformation journey in 2014, spurred by a critical IT disruption that became the catalyst for revamping their technology. By embracing the cloud, the airline has not only streamlined operations but also paved the way for innovative solutions like DevSecOps and AI integration. This shift has enabled Cathay to deliver faster, more reliable services to both passengers and staff, while maintaining a robust security framework in an increasingly digital world. According to Rajeev Nair, general manager of IT infrastructure and security at Cathay Pacific, becoming a digital-first airline was met with early resistance from both business and technical teams. The early stages required a lot of heavy lifting as they shifted legacy apps first from their server room to a dedicated data center and then to the cloud. From there began the process of modernization that Cathay Pacific, now in its final stages of this transformation, continues to fine tune. The cloud migration also helped Cathay align with their ESG goals. “Two years ago, if you asked me what IT could do for sustainability, we would’ve been clueless,” says Nair. However, through cloud-first strategies and green IT practices, the airline has made notable strides in reducing its carbon footprint. Currently, the business is in the process of moving to a smaller data center, reducing physical infrastructure and its carbon emissions significantly by 2025. The broader benefits of this cloud transformation for Cathay Pacific go beyond sustainability. Agility, time-to-market, and operational efficiency have improved drastically. “If you ask many of the enterprises, they would probably say that shifting to the cloud is all about cost-saving,” says Nair. “But for me, those are secondary aspects and the key is about how to enable the business to be more agile and nimble so that the business capability could be delivered much faster by IT and the technology team.” By 2025, Cathay Pacific aims to have 100% of their business applications running on the cloud, significantly enhancing their agility, customer service, and cost efficiency, says Nair. As Cathay Pacific continues its digital evolution, Nair remains focused on future-proofing the airline through emerging technologies. Looking ahead, he is particularly excited about the potential of AI, generative AI, and virtual reality to further enhance both customer experience and internal operations. From more immersive VR-based training for cabin crew to enabling passengers to preview in-flight products before boarding, these innovations are set to redefine how the airline engages with its customers and staff. “We have been exploring that for quite some time, but we believe that it will continue to be a mainstream technology that can change the way we serve the customer,” says Nair. This episode of Business Lab is produced in association with Infosys Cobalt. Full Transcript Megan Tatum: From MIT Technology Review, I’m Megan Tatum, and this is Business Lab, the show that helps business leaders make sense of new technologies coming out of the lab and into the marketplace. Our topic today is cloud transformation to meet business goals and customer needs. It’s not just tech companies that have to stay one step ahead. Airlines too are under pressure to deliver better customer service, do more with data, and improve agility. Two words for you: going further. My guest is Rajeev Nair, who is the general manager of IT infrastructure and security at Cathay Pacific. This podcast is produced in association with Infosys Cobalt. Welcome, Rajeev. Rajeev Nair: Thank you. Thank you, Megan. Thank you for having me. Megan: Thank you ever so much for joining us. Now to get some context for our conversation today, could you first describe how Cathay Pacific’s digital transformation journey began, and explain, I guess, what stage of this transformation this almost 80-year-old airline is currently in, too? Rajeev: Sure, definitely Megan. So for Cathay, we started this transformation journey probably a decade back, way back in 2014. It all started with facing some major service disruption within Cathay IT where it had a massive impact on the business operation. That prompted us to trigger and initiate this transformation journey. So the first thing is we started looking at many of our legacy applications. Back in those days we still had mainframe systems that provided so many of our critical services. We started looking at migrating those legacy apps first, moving them outside of that legacy software and moving them into a proper data center. Back in those days, our data center used to be our corporate headquarters. We didn’t have a dedicated data center and it used to be in a server room. So those were the initial stages of our transformation journey, just a basic building block. So we started moving into a proper data center so that resilience and availability could be improved. And as a second phase, we started looking at the cloud. Those days, cloud was just about to kick off in this part of the world. We started looking at migrating to the cloud and it has been a huge challenge or resistance even from the business as well as from the technology team. Once we started moving, shifting apps to the cloud, we had multiple transformation programs to do that modernization activities. Once that is done, then the third phase of the journey is more about your network. Once your applications are moved to the cloud, your network design needs to be completely changed. Then we started looking at how we could modernize our network because Cathay operates in about 180 regions across the world. So our network is very crucial for us. We started looking at redesigning our network. And then, it comes to your security aspects. Things moving to the cloud, your network design is getting changed, your cybersecurity needs heavy lifting to accommodate the modern world. We started focusing on cybersecurity initiatives where our security posture has been improved a lot over the last few years. And with those basic building blocks done on the hardware and on the technology side, then comes your IT operations. Because one is your hardware and software piece, but how do you sustain your processes to ensure that it can support those changing technology landscapes? We started investing a lot around the IT operations side, but things like ITIL processes have been revisited. We started adopting many of the DevOps and the DevSecOps practices. So a lot of emphasis around processes and practices to help the team move forward, right? And those operations initiatives are in phase. As we stand today, we are at the final stage of our cloud journey where we are looking at how we can optimize it better. So we shifted things to the cloud and that has been a heavy lifting that has been done in the early phases. Now we are focusing around how we can rewrite or refactor your application so that it can better liberate your cloud technologies where we could optimize the performance, thereby optimizing your usage and the cloud resources wherein you could save on the cost as well as on the sustainability aspect. That is where we stand. By 2025, we are looking at moving 100% of our business applications to the cloud and also reducing our physical footprint in our data centers as well. Megan: Fantastic. And you mentioned sustainability there. I wonder how does the focus on environmental, social, and governance goals or ESG tie into your wider technology strategy? Rajeev: Sure. And to be very honest, Megan, if you asked me this question two years back, we would’ve been clueless on what IT could do from a sustainability aspect. But over the last two years, there has been a lot of focus around ESG components within the technology space where we have done a lot of initiatives since last year to improve and be efficient on the sustainability front. So a couple of key areas that we have done. One is definitely the cloud-first strategy where adopting the cloud-first policy reduces your carbon footprint and it also helps us in migrating away from our data center. So as we speak, we are doing a major project to further reduce our data center size by relocating to a much smaller data center, which will be completed by the end of next year. That will definitely help us to reduce our footprint. The second is around adopting the various green IT practices, things like energy efficient devices, be it your PCs or the laptop or virtualizations, and e-based management policies and management aspects. Some of the things are very basic and fundamental in nature. Stuff like we moved away from a dual monitor to a single monitor wherein we could reduce your energy consumption by half, or changing some of your software policies like screen timeouts and putting a monitor in standby. Those kinds of basic things really helped us to optimize and manage. And the last one is around FinOps. So FinOps is a process in the practice that is being heavily adopted in the cloud organization, but it is just not about optimizing your course because by adopting the FinOps practices and tying in with the GreenOps processes, we are able to focus a lot around reducing our CO2 footprint and optimizing sustainability. Those are some of the practices that we have been doing with Cathay. Megan: Yeah. fantastic benefits from relatively small changes there. Other than ESG, what are the other benefits for an enterprise like Cathay Pacific in terms of shifting from those legacy systems to the cloud that you found? Rajeev: For me, the key is about agility and time-to-market capability. If you ask many of the enterprises, they would probably say that shifting to the cloud is all about cost-saving. But for me, those are secondary aspects. The key is about how to enable the business to be more agile and nimble so that the business capability can be delivered much faster by IT and the technology team. So as an example, gone are the days when we take about a few months before we provision hardware and have the platform and the applications ready. Now the platforms are being delivered to the developers within an hour’s time so that the developers can quickly build their development environment and be ready for development and testing activities. Right? So agility is a key and the number one factor. The second is by shifting to the cloud, you’re also liberating many of the latest technologies that the cloud comes up with and the provider has to offer. Things like capacity and the ability to scale up and down your resources and services according to your business needs and fluctuations are a huge help from a technology aspect. That way you can deliver customer-centered solutions faster and more efficiently than many of our airline customers and competitors. And the last one is, of course, your cost saving aspect and the operational efficiency. By moving away from the legacy systems, we can reduce a lot of capex [capital expenditure]. Like, say for example, I don’t need to spend money on investing in hardware and spend resources to manage those hardware and data center operations, especially in Hong Kong where human resources are pretty expensive and scarce to find. It is very important that I rely on these sorts of technologies to manage those optimally. Those are some of the key aspects that we see from a cloud adoption perspective. Megan: Fantastic. And it sounds like it’s been a several year process so far. So after what sounds like pretty heavy investment when it comes to moving legacy hardware on-prem systems to the cloud. What’s your approach now to adapting your IT operations off the back of that? Rajeev: Exactly. That is, sort of, just based early in my transformation journey, but yeah, absolutely. By moving to the cloud, it is just not about the hardware, but it’s also about how your operations and your processes align with this changing technology and new capabilities. And, for example, by adopting more agile and scalable approach to managing IT infrastructures and applications as well. Also leveraging the data and insights that the cloud enables. To achieve this, the fundamental aspect of this is how you can revisit and fine tune your IT service management processes, and that is where your core of IT operations have been built in the past. And to manage that properly we recently, I think, over the last three years we were looking at implementing a new IT service management solution, which is built on a product called ServiceNow. So they are built on the core ITIL processes framework to help us manage the service management, the operations management, and asset management. Those are some of the capabilities which we rolled out with the help of our partners like Infosys so that it could provide a framework to fine tune and optimize IT processes. And we also adopted things like DevOps and DevSecOps because what we have also noticed is the processes like ITIL, which was very heavy over the last few years around support activities is also shifting. So we wanted to adopt some of these development practices into the support and operations functions to be more agile by shifting left some of these capabilities. And in this journey, Infosys has been our key partner, not only on the cloud transformation side, but also on implementation of ServiceNow, which is our key service management tool where they provided us end-to-end support starting from the planning phase or the initial conceptual phase and also into the design and development and also to the deployment and maintenance. We haven’t completed this journey and it’s still a project that is currently ongoing, and by 2025 we should be able to complete this successfully across the enterprise. Megan: Fascinating. It’s an awful lot of change going on. I mean, there must be an internal shift, therefore, that comes with cloud transformation too, I imagine. I wonder, what’s your approach been to up skilling your team to help it excel in this new way of working? Rajeev: Yeah, absolutely. And that is always the hardest part. You can change your technology and processes is but changing your people, that’s always toughest and the hardest bit. And essentially this is all about change management, and that has been one of our struggles in our early part of the cloud transformation journey. What we did is we invested a lot in terms of uplifting our traditional infrastructure team. All the traditional technology teams have to go through that learning curve in adopting cloud technology early in our project. And we also provided a lot of training programs, including some of our cloud partners were able to up skill and train these resources. But the key differences that we are seeing is even after providing all those training and upskilling programs, we could see that there was a lot of resistance and a lot of doubts in people’s mind about how cloud is going to help the organization. And the best part is what we did is we included these team members into our project so that they get the hands-on experience. And once they start seeing the benefits around these technologies, there was no looking back. And the team was able to completely embrace the cloud technologies to the point that we still have a traditional technology team who’s supporting the remaining hardware and the servers of the world, but they’re also very keen to shift across the line and adopt and embrace the cloud technology. But it’s been quite a journey for us. Megan: That’s great to hear that you’ve managed to bring them along with you. And I suppose it’d be remiss of me if we’re talking about embracing new technologies not to talk about AI, although still in its early stages in most industries. I wonder how is Cathay Pacific approaching AI adoption as well? Rajeev: Sure. I think these days none of these conversations can be complete without talking about AI and gen AI. We started this early exploratory phase early into the game, especially in this part of the world. But for us, the key is approaching this based on the customer’s pain points and business needs and then we work backward to identify what type of AI is best suitable or relevant to us. In Cathay, currently, we focus on three main types of AI. One is of course conversational AI. Essentially, it is a form of an internal and external chatbot. Our chatbot, we call it Vera, serves customers directly and can handle about 50% of the inquiries successfully. And just about two weeks back, we upgraded the LLM with a new model, the chatbot with a new model, which is able to be more efficient and much more responsive in terms of the human work. So that’s one part of the AI that we heavily invested on. Second is RPA, or robotic process automation, especially what you’re seeing is during the pandemic and post-Covid era, there is limited resources available, especially in Hong Kong and across our supply chain. So RPA or the robotic processes helps to automate mundane repetitive tasks, which doesn’t only fill the resource gap, but it also directly enhances the employee experience. And so far in Cathay, we have about a hundred bots in production serving various business units, serving approximately 30,000 hours every year of human activity. So that’s the second part. The third one is around ML and it’s the gen AI. So like our digital team or the data science team has developed about 70-plus ML models in Cathay that turned the organization data into insights or actionable items. These models help us to make a better decision. For example, what meals to be loaded into the aircraft and specific routes, in terms of what quantity and what kind of product offers we promote to customers, and including the fare loading and the pricing of our passenger as well as a cargo bay space. There is a lot of exploration that is being done in this space as well. And a couple of examples I could relate is if you ever happen to come to Hong Kong, next time at the airport, you could hear the public announcement system and that is also AI-powered recently. In the past, our staff used to manually make those announcements and now it has been moved away and has been moved into AI-powered voice technology so that we could be consistent in our announcement. Megan: Oh, fantastic. I’ll have to listen for it next time I’m at Hong Kong airport. And you’ve mentioned this topic a couple of times in the conversation. Look, when we’re talking about cloud modernization, cybersecurity can be a roadblock to agility, I guess, if it’s not managed effectively. So could you also tell us in a little more detail how Cathay Pacific has integrated security into its digital transformation journey, particularly with the adoption of development security operations practices that you’ve mentioned? Rajeev: Yeah, this is an interesting one. I look after cybersecurity as well as the infrastructure services. With both of these critical functions around my hand, I need to be mindful of both aspects, right? Yes, it’s an interesting one and it has changed over the period of time, and I fully understand why cybersecurity practices needs to be rigid because there is a lot of compliance and it is a highly regulated function, but if something goes wrong, as a CISO we are held accountable for those faults. I can understand why the team is so rigid in their practices. And I also understand from a business perspective it could be perceived as a road blocker to agility. One of the key aspects that we have done in Cathay is we have been following DevOps for quite a number of years, and recently, I think in the last two years, we started implementing DevSecOps into our STLC [software testing life cycle]. And what it essentially means is rather than the core cybersecurity team being responsible for many of the security testing and those sorts of aspects, we want to shift left some of these capabilities into the developers so that the people who develop the code now are held accountable for the testing and the quality of the output. And they’re also enabled in terms of the cybersecurity process. Right? Of course, when we started off this journey, there has been a huge resistance on the security team itself because they don’t really trust the developers trying to do the testing or the testing outputs. But over a period of time with the introduction of various tools and automation that is put in place, this is now getting into a matured stage wherein it is now enabling the upfront teams to take care of all the aspects of security, like threat modeling, code scanning, and the vulnerability testing. But at the end, the security teams would be still validating and act as a sort of a gatekeeper, but in a very light and inbuilt processes. And this way we can ensure that our cloud applications are secure by design and by default they can deliver them faster and more reliably to our customers. And in this entire process, right? In the past, security has been always perceived as an accountability of the cybersecurity team. And by enabling the developers of the security aspects, now you have a better ownership in the organization when it comes to cybersecurity and it is building a better cybersecurity culture within the organization. And that, to me, is a key because from a security aspect, we always say that people are your first line of defense and often they’re also the last line of defense. I’m glad that by these processes we are able to improve that maturity in the organization. Megan: Absolutely. And you mentioned that obviously cybersecurity is something that’s really important to a lot of customers nowadays as well. I wondered if you could offer some other examples too of how your digital transformation has improved that customer experience in other ways? Rajeev: Yeah, definitely. Maybe I can quote a few examples, Megan. One is around our pilots. You would’ve seen when you travel through the airport or in the aircraft that pilots usually carry a briefcase when they load the flight, and you are often probably wondering what exactly they carry. Basically, that contains a bunch of papers. It contains your weather charts, your navigation routes, and the flight plans, the crew details. It’s a whole stack of paper that they have to carry on each and every flight. And in Cathay, by digitization, we have automated that in their processes, where now they carry an iPad instead of a bunch of papers or briefing pack. So that iPad includes all these softwares that is required for the captain to operate the flight in a legally and a safe manner. Paperless cockpit operation is nothing new. Many airlines have attempted to do that, but I should say that Cathay has been on the forefront in truly establishing a paperless operation, where many of the other airlines have shown great interest in using our software. That is one aspect from a fly crew perspective. Second, from a customer perspective, we have an app called Customer 360, which is a completely in-house developed model, which has all the customer direct transactions, surveys, or how they interact at the various checkpoints with our crew or at the boarding. You have all this data feed of a particular customer where our agents or the cabin crew can understand the customer’s sentiment and their reaction to service recovery action. Say for example, the customer calls up a call center and ask for a refund or miles compensation. Based on the historical usage, we could prioritize the best action to improve the customer satisfaction. We are connected to all these models and enable the frontline teams so that they can use this when they engage with the customer. An example at the airport, our agents will be able to see a lot of useful insights about the customers beyond the basic information like the flight itinerary or the online shopping history at the Cathay shop, et cetera, so that they can see the overall satisfaction level and get additional insights on recommended actions to restore or improve the customer satisfaction level. This is basically used by our frontline agents at the airport, our cabin crew as well as all the airport team, and the customer team so that they have great consistency in the service no matter what touchpoint the customers are choosing to contact us. Megan: Fantastic. Rajeev: So these are a few example looking from a back end as well as from a front line of the team perspective. Megan: Yeah, absolutely. I’m sure there’s a few people listening who were wondering what pilots carry in that suitcase. So thank you so much for clearing that up. And finally, Rajeev, I guess looking ahead, what emerging technologies are you excited to explore further going forward to enhance digital capabilities and customer experience in the years to come? Rajeev: Yeah, so we will continue to explore AI and gen AI capability, which has been the spotlight for the last 18 months or so, be it for the passenger or even for the staff internally. We will continue to explore that. But apart from AI, one other aspect I believe could go at great ways around the AR and the VR capabilities, basically virtual reality. We have been exploring that for quite some time, but we believe that it will continue to be a mainstream technology that can change the way we serve the customer. Say for example, in Cathay, we already have a VR cave for our cabin crew training, virtual reality capabilities, and in a few months’ time, we are actually launching a learning facility based on VR where we could be able to provide more immersive learning experience for the cabin crew and later for the other employees. Basically, before a cabin crew is able to operate a flight, they go through a rigorous training in Cathay City in our headquarters, basically to know how to serve our passengers, how to handle an emergency situation, those sorts of aspects. And in many cases, we travel the crew from various outports or various countries back into Hong Kong to train them and equip them for these training activities. You can imagine that costs us a lot of money and effort to bring all the people back to Hong Kong. And by having VR capabilities, we are able to do that anywhere in the world without having that physical presence. That’s one area where it’ll go mainstream. The second is around other business units. Apart from the cabin crew, we are also experimenting the VR on the customer front. For example, we are able to launch a new business class seat product we call the Aria Suite by next year. And VR technology will help the customers to visualize the seat details without them able to get on board. So without them flying, even before that, they’re able to experience a product on the ground. At our physical shop in Hong Kong, customers can now use a virtual reality technology to visualize how our designer furniture and lifestyle products fit in the sitting rooms. The list of VR capabilities goes very long. The list goes on. And this is also a great and important way to engage with our customers in particular. Megan: Wow. Sounds like some exciting stuff on the way. Thank you ever so much, Rajeev, for talking us through that. That was Rajeev Nair, the general manager of IT infrastructure and security at Cathay Pacific, who I spoke with from an unexpectedly sunny Brighton, England. That’s it for this episode of Business Lab. I’m your host, Megan Tatum. I’m a contributing editor and host for Insights, the custom publishing division of MIT Technology Review. We were founded in 1899 at the Massachusetts Institute of Technology, and you can find us in print, on the web, and at events each year around the world. For more information about us and the show, please check out our website at technologyreview.com. This show is available wherever you get your podcasts. If you enjoyed this episode, we hope you’ll take a moment to rate and review us. Business Lab is a production of MIT Technology Review, this episode was produced by Giro Studios. Thanks for listening.