On a cold, sleety day in early 2010 even the most fervent lover of British culture has difficulty imagining the desire to hire a car and travel the length and breadth of the island. But at the Avis car hire depot on the outskirts of Heathrow Airport there is a busy footfall of traffic, laced with a variety of accents, all setting out on their own personal adventures.
“Car hire struggles with being the poor cousin to the holiday value chain,” says Adam Gerrard, the CIO of Avis Europe. But as our conversation reveals, the car hire industry is on the cusp of major change.
Avis is a global brand, formed in 1946 by Warren Avis with a three-car rental business based out of Willow Run Airport in Detroit. The Avis business in Europe began in 1965 as part of a major expansion. Twenty years later Avis Europe split from its parent in the US and floated for the first time on the London Stock Exchange.
Although effectively two separate companies, Avis on both sides of the Atlantic share the same branding, co-operate on a wide variety of business needs and, critically for Gerrard, share the Wizard mainframe computer system developed and operated from the US.
Introduced in 1972, Avis describe Wizard as “the first and still the most extensive online, real-time reservation, rental and management information system in the industry”.
“We are a very federated environment and we have central resource teams for human resources, finance, legal and IT,” Gerrard explains. Avis Europe operates in 12 countries where it owns all the offices. “On top of that we have the licences, as it is not cost-effective to have a franchise in every country. It’s a very wide-ranging -environment to work in,” Gerrard notes.
But consumer car hire is only half of the Avis business. Business-to-business rental is vital to the Avis model, and the firm supplies corporate fleets and cars to the insurance industry when its customers have their own cars taken off the road in an accident. Over the last year the holiday business, dubbed direct-to-customer in the trade, has been healthy as the pound has weakened against the euro.
“There is the retail aspect and there is a fast-moving goods mentality, as we have to manage yields through the maximum utilisation of the car fleet. There is the complexity of 200 to 300 cars being picked up at a variety of locations, being driven all over the place and possibly returned to different locations,” Gerrard says.
Each car is of course an asset and of late those assets have had to be sweated, increasing the mileage each car does before the manufacturers buy them back at a pre-agreed price. Gerrard explains that part of his IT team provides data intelligence to ensure Avis charges the best price per car in the business.
Valued at a billion euros, the Avis fleet of hire cars ranges from prestigious sports cars like the Audi R8 through cheap and cheerful Peugeots and the ever-popular VW Golf. “For every €15,000 that we spend on an IT project, it is a vehicle lost and therefore revenue, and that is our core business case,” Gerrard explains of the simple business mathematics he deals in.
“There is more demand than supply though,” Gerrard adds of the €47m budget he has to operate on. He says this budget is consistent with the competition and over the last two years, like most CIOs, he has been taking cost out of the IT operation.
“In 2008 we took a big chunk out of costs. We could have been more aggressive then, but that would have taken too much out of the business; we did just enough for a potential uplift in the economy. We were ready to flex upwards our resources if the economy pulls up.”
Read Adam Gerrard's responses to the CIO Questionnaire
To cope with such a complex business environment, Gerrard and Avis are developing a central services model. “We are seen as an enabler, though we are not where we need to be,” Gerrard says of the perception of IT. The Avis Europe IT operation consists of three service centres in Bracknell, Budapest and Barcelona as well as major offices in Italy, France, Germany and Spain. The aim of the central services model is to have development teams at each of these centres that become experts in particular verticals, so the German office- has already become the leader in fleet optimisation, Italy in fleet administration systems and France in CRM.
“We are trying to build a model where the centre hosts and delivers enterprise services while the national teams focus on driving innovation,” says Gerrard. “We are deploying enterprise versions of the best locally developed applications across the corporate locations in the group this year and from 2011 we will look to extend these tools to the franchised operations.
“What I’ve done in the centre is move to a functional approach, removing silos so that all the project managers, business analysts and developers are pooled, creating pan-European professional families.”
This approach is not just for IT: the entire Avis organisation has formed functional boards that meet IT and decide which tools are suited to their markets.
Creating functional groups of technologists could lead to the sort of developer excitement that defined the dotcom days but Gerrard is very aware of this and sees the challenge for the IT teams as just the opposite. “We have to take out complexity. The focus has to be on the customer. If we don’t make things simpler we won’t be able to expand on what we do.”
A functional approach
There are boards across the business that meet and debate the needs of each functional business unit. Gerrard explains that IT operates on a functional and country basis because of the complexity of the business. Co-ordinating it all are relationship managers for each function, for example the IT director for the UK is also the relationship manager for the sales and marketing board across Europe.
Avis introduced its US-built Wizard mainframe system to its European subsidiary in 1985. “Most car hire companies developed their own systems [and] Avis Europe is a sub-licence to the mainframe,” Gerrard explains, adding that being a sub-licensee is no disadvantage to the European operation.
“We have steered some of the mainframe development and it is a very collaborative way of working with the US.”
The US operation continues to develop the mainframe and the benefits of this are realised by the European arm, which does incur costs if they request developments.
Since Warren Avis opened that first Detroit office, car hire has been about two distinct markets, the retail holiday car hire and the business-to-business insurance and fleet market.
But in the 21st century the concept of car ownership is being seriously challenged, and car clubs where consumers join a syndicate that lets them rent a car by the hour, day or week, as and when -required, is a growth industry.
“Personal mobility is the overall concept; it is about allowing people to get around. There is lots of talk about mobility solutions,” Gerrard says of the changing attitude towards cars. Consumers are rejecting car ownership because of increasing petrol costs and the damage cars do to the environment. Avis, like many in the car hire market, is considering entering the car club market and Gerrard says IT and especially the internet will differentiate the market players.
Avis is still incorporating former rival Budget into its business following the 2006 merger by parent company Cedant. Gerrard said the boards of both companies are working out the best way forward and in IT they are looking at the best customer proposition.
Gerrard effectively began his career in the motor industry, studying Automotive Engineering at Loughborough University. His IT career began as a technical services manager at electronics retailer Dixons before moving to the Brambles Group, whose blue Chep pallets line the loading bays of manufacturers, retailers and distributors. Gerrard says Brambles was a better training ground for his CIO role at Avis than the head of IT role he took at Thomas Cook. Although Thomas Cook and Avis are both in the travel and tourism sector, Gerrard explains that the yield management and having a product that shifts about the country in the hands of a wide variety of customers at Chep is more similar to the challenges at Avis.
That automotive engineering degree will come in useful as Gerrard is looking for a classic sports car to restore. That project will fill his free time, as does his support for Bolton Wanderers and a new-found love of opera. “It’s healthy to not do the IT and business thing away from work.”