The European travel technology sector has seen its first major financial collapse of the current recession - BlueSky Travel Systems, based in Manchester, UK, has gone into administration this week.
The company employs around 100 people and counts Thomas Cook, Mark Warner, First Choice and Slattery’s Travel amongst its roster of clients.
Rumours of BlueSky’s demise were confirmed by Steve Driscoll, former managing director and founder who still has a financial interest in the business.
BlueSky launched in 2002 and captured its jewel in the crown, Thomas Cook Group, in 2006 in what was believed to be a £20 million contract to overhaul TCG’s online and retail reservation systems.
The collapse marks a spectacular fall from grace after BlueSky was placed in 12th position in the UK’s Sunday Times TechTrack 100 table of Fastest Growing Private Technology Companies in 2008.
The fate of the Thomas Cook contract is still unknown.
However, a statement from Ludger Heuberg, CEO for group operations and acting CFO, Thomas Cook Group, said:
“We are saddened to learn that our software partner BlueSky has gone into administration.
“We intend to monitor the position of the administration closely and we will consider our options in order to best protect Thomas Cook’s interests and to establish the best possible position regarding the future delivery of the contract previously held by them.
“Our thoughts are with those at BlueSky at this time, and we will be in regular contact with the administrators to understand their intentions with the company.
“In the meantime, BlueSky’s administration will not have any impact on the day-to-day operations of our business.â€
Sad news for all those who may lose their jobs.
Three immediate thoughts.
1. What will Thomas Cook do now?
2. Will others follow BlueSky, especially those mainly serving the traditional pre-packaged holiday market?
3. Are there too many technology suppliers chasing too few customers?
@mike
1) Thomas Cook will probably have to wait and see if a buyer comes in and takes on the contract from BlueSky. Alternatively, and I am sure they are talking to other people anyway, they might simply hive it off to another firm keen to get hold of it – perhaps overseas.
2) Difficult to say. Very few publish their financials (apart from Anite). Who would’ve thought BS was in trouble to this degree with a turnover of £9M last year.
3) Not so sure. This is first major collapse of a tech firm during this recession in Europe. Some might say that indicates they are less vulnerable to vagaries of the market.
Hi Mike
1) Not sure what Thomas Cook will do
Certainly a pickle as that was no small project. Other UK leading system vendors have reduced staff recently so the question is whether any company is in an immediate position to pick up a project of that size (and what remains to be done?)
And if someone else picks up that project – would it be based on the BlueSky system – or their own system. If a new system vendor comes in at this stage and prompts a system change…. going to get expensive. If someone takes on the existing codebase that strategy has issues too (as how many people does it require to maintain – what skills etc)
2) Yep
3) Probably
The key question to me is – could neither of the 3 big clients afford to keep BlueSky afloat?
Therefore someone somewhere must have made a judgement that the outcome of BlueSky going into administration is less painful than propping BlueSky up and keeping them going
So probably the clients are in a better position than it first looks. Or they think they are, which isn’t exactly the same thing.
All of this is speculation incidentally. I have no knowledge of any detail on any Thomas Cook project nor what may or may not happen to Bluesky technology and company (other than what is in the public domain via Tnooz and other travel industry media)
I suspect the Thomas Cook deal is very complicated.
But as BlueSky’s major customer and having invested heavily, both financially and in time and people, I’m surprised that Thomas Cook didn’t find a way to help it continue.
No doubt BlueSky had a contract to deliver iTour to Thoams Cook at an agreed price. I suppose a key question is “How much of the solution has been delivered and at what price?”
I’m sure the BlueSky management team will be doing all it can to secure future employment for it’s people. But unless there’s an immediate market for iTour, that could be difficult.
I wish them well.
What will Thomas Cook do now? Well, it appears that, as Alex says, they have determined to allow Blue Sky to go into administration. After all, they were the main funder of the business. One suspects that the project was not delivering what Thomas Cook intended, otherwise they would have surely worked to keep the company afloat.
Will others follow Blue Sky? Maybe, but then again maybe this is the classic case of a company taking on one major client and effectively becoming their IT team (after all this project dwarfed anything else Blue Sky were working on I believe) and failure to deliver causes company failure. That’s not the same as a technology company that has a proven product, a proven delivery track record and is delivering to multiple clients.
Are there too many technology suppliers chasing too many customers. In the UK, sure!
As a Director of a technology supplier, my sympathies also go out to the BlueSky management team and their staff. A tough situation to find yourself in.
It’s being reported on another website that Thomas Cook cancelled the contract with BlueSky, forcing it into administration.
If this is correct,(it may not be), why? It’s like sacking the builder when the house is half finished, then knocking it down after paying for all the materials.
Unless Thomas Cook has found another builder who can finish the job quicker and at less cost?
This also suggests that finding a buyer for BlueSky will be quite a challenge.
The mind boggles.
Off Crain’s Manchester Business News…
MCR said today that Thomas Cook’s decision to cancel the project left Bluesky with no alternative but to go into administration.
Partner Phil Duffy, who was appointed on Tuesday, said: “Due to a number of contractual issues and market uncertainty in the travel sector the contract has been cancelled half way through development.
“There was no alternative for BlueSky but to go into administration whilst a buyer is sought.
Mike, your analogy assumes the “builder” can finish the house! Maybe it was always an un-finishable project!
Mark
Not wishing to make bad news worse as none of us are particularly enjoying that BlueSky are no longer with us ….. but according to the statement made by the administrators:
http://www.mcr.uk.com/mcr-appointed-administrators-for-bluesky-travel-systems.html
“The development and introduction of the reservation system, which has been given the code name GLOBE, was to be phased in brand by brand over the three years following the signing of the contract in late 2006.
Phil Duffy, Partner at MCR states: “Due to a number of contractual issues and market uncertainty in the travel sector the contract has been cancelled half way through development”"
Hence the three facts mentioned are:
- 3 year project
- commenced end of 2006 (by my maths 3 years ago)
- currently half way through
Surely administrators are very careful indeed with the text they use in their official statements – so to state that it was a 3 year project, be very specific about when that 3 years started, and to mention completion status, sounds like they want us to read those 3 facts together.
Thanks Mark.
If the project can’t be completed, that’s a significant amount of Thomas Cook investment down the drain. I hope there’s a Plan B?
@ Mike
Ah, we could have a long discussion about the sunk cost fallacy
http://skepticwiki.org/index.php/Sunk_Cost_Fallacy
Sorry Alex, I’m not advocating that you or anyone else subscribes to a so-called Sunk Cost Fallacy. I’m merely observing that a considerable amount of time and money has been expended on this project over the last three years and it may have to be written off.
Assuming that there was sound justification for Thomas Cook to embark on a £20m IT project three years ago, it either has to start again or hopefully salvage something from this one. Maybe starting with a clean sheet is an option, given a rapidly changing technological and distribution market?
Hi Steve
Sounds interesting.
Any ideas on what the other customers will do! Are they going with the same deal?
My guess is Thomas Cook has the Globe IPR and is looking to take it forward under it’s direct control, maybe looking to reduce the overall cost.
I’d also guess that the other (few) customers will be excluded.
But I stress these are “guesses”!
All:
Tnooz has tonight gathered some more information regarding the Thomas Cook element in all this.
We are waiting for verification before posting again. Please stand by.
Thanks Steve.
If Thomas Cook buys the IPR, what has the administrator left to sell? I suppose the IPR can be sold more than once, but surely that dilutes the value?
Still leaves the question “What (or who) forced BlueSky into administration and why?”
Is GLOBE and iTour the same thing?
Or is iTour just a subcomponent of GLOBE?
GLOBE was/is the name of the TC project for Itour.
And yes now they will be the same thing.
But is Globe and iTour the same?
Mark Warner is an iTour customer. Does iTour offer Mark Warner all the functionality of the Globe version of iTour? Did the contract with Thomas Cook allow other iTour customers to benefit from Thomas Cook sponsored functionality and if so when? How much development has still to be delivered and accepted?
In my experience these arrangements can be comples and difficult to unravel. Time will tell.
Where is this info coming from? innocent until proven guilty! Give us some proof!
Proof of what Peter, that BlueSky is in administration?
Peter Eves read your emails you are on a list discussing this.
Its sad but true
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Thanks.
Gents, our true enemy is still to reveal themselves. Speculatively, if Thomas Cook does end up with the IPR and some of the key staff, it may end up very much in their favour………………moving swiftly to Mike’s comments on “is there just too few clients for too many tec companies?”
absolutely not! the industry is as buoyant as ever with new entrants, new products and an evolving market which keeps the dream alive. Yes, some tec companies made redundancies and Traveltek was one but not in development staff but to accommodate the shift on emphasis of our own marketplace and the very exciting opportunities that 2009 has brought not just to us but to all travel tec companies.
Mike, the future is bright, the future for travel is definately technology based and more than ever.
I don’t disagree with Kenny’s view that travel needs technology more than ever. But I also believe that there are too many suppliers chasing too few customers, as BlueSky may have discovered?
But I could be so wrong. Then again Kenny is a supplier who believes passionately about his products and future prospects, as he should.
By the way Kenny, who do you think is “our true enemy”?
Interesting comment.
Mike, I dont see much competition in our field so I have to disagree. the “enemy” I was referring to was simply to plant a seed that in my view, from start to finish, “that deal” was “unusual” and has to have a story behind it which may well emerge sooner ather than later. Anything else is just peculation and not for the public domain me thinks