Datalex flying high as it aims to leave turbulence behind

When you book a flight, it's quite likely that Dublin-based technology firm Datalex is powering the software behind the airline's booking site. From its offices in East Point Business Park, Datalex helps airlines such as Delta, Air China, Virgin Atlantic, JetBlue and Aer Lingus get as much revenue as possible from their websites, selling everything from inflight meals, seat upgrades and priority boarding to car hire and hotels.

With airlines under increasing competition from low-fare carriers and constantly having to offer good prices, they are increasingly turning to companies such as Datalex to drive new sources of income.

But while airlines have spent years looking to Datalex in order to become more profitable, the software company itself only became profitable in recent times.

When Aidan Brogan took over as chief executive in 2012, it had been suffering annual losses for years.

Between 2007 and 2011, it made an annual loss of more than $1 million each year. While this might have driven many businesses to the wall, Datalex hung in there, determined to fight through the recession.

Communications solutions

The origins of Datalex stem from Channel Communication Services (CCS), a company set up by Scottish businessman

Neil Wilson

in Amsterdam in 1983. The company developed industrial communications software for Dublin-based Westinghouse and, as a result, soon came on the radar of IDA Ireland.

In 1984, the authority asked Wilson if he would consider setting up an office in Dublin.

The following year, Wilson sold his 50 per cent stake in CCS and set up Datalex with the aid of grants from the IDA. The company initially provided check-in and reservations technology but, as the airline industry went into a slump in the late 1980s, a decision was made to focus on global distribution systems.

Datalex began selling communications solutions directly to global distribution systems such as Sabre and Sita, which then marketed the solutions to travel agents worldwide. The company also provided bespoke software directly to airlines, connecting remote offices to mainframe systems.

By 1998, Datalex was a major player in the travel industry, with about one-sixth of the world’s 150,000 travel agents operating Datalex technology to connect to airline computer reservation systems. That same year, it decided to refocus its business on internet applications for the travel industry.

In 1999, the company raised $30 million in private funding and floated on the Nasdaq and London stock exchanges the following year.

Brogan had joined the company as head of sales in 1994 and worked his way up to vice-president for sales. His entire career has revolved around the airline and travel industries. Before joining Datalex, he worked for Westinghouse in Dubai.

In 2012, when then chief executive Cormac Whelan stepped down, Brogan jumped at the chance to lead a company going through transition. He had already witnessed the company go through the boom of the dotcom bubble followed by the bust, so he wasn't fazed by the recession.

“It was crazy for any tech company going through the dotcom boom. We grew very fast and decreased very quickly. The company was downsized between 2000 and 2005,” he says.

Two years before he became chief executive, Datalex changed its business model again, moving away from being a bespoke software developer which licensed technology.

“We pressed the reset button and effectively reset the company. It was that dramatic a change,” Brogan says. “Before 2010 we were a bespoke software development company. We developed software for customers without a clear product strategy. We changed our business model, moving to a transactional model. We now get paid a transaction fee for every product be it an air fare, hotel, bags or car hire.”

The company needed a strategy to grow, as its strategy pre-2010 wasn’t working. He says the business has grown in terms of revenue, profit and size of the organisation as a result of the new strategy.

The year Brogan took over, the business turned an annual profit of $1.1 million – its first annual profit in years – and last year the company announced the first dividend in its 29-year history.

In 2014, Datalex opened an office in Beijing. Seeing China as a substantial growth opportunity, it felt the best way to exploit the Chinese market was by putting local people in an office there.

“The culture is a big challenge in China. Companies in China want to see you invest in being committed to market which is why we opened an office there. Air China sold €10 million worth of tickets using our software in one day [last month]. That’s the volume there.”

Datalex has five people employed in its Beijing office, bringing total numbers worldwide to 300. Brogan says the company will hire 100 people over the next 24 months, with a lot of them based in Dublin.

As for the future, he says Datalex wants to be the world’s leading ecommerce platform for travel and airlines.

However, while online travel has grown to be one of the biggest ecommerce categories, representing about 40 per cent of all ecommerce activity, the competition has also got tougher, especially with the likes of Google entering the market. The search giant spent $700 million buying Boston travel software firm ITA in 2010.

While Google is a potential threat, Brogan says Datalex’s main rivals are Sabre and Amadeus.

“They are much bigger than us, with valuations of between $7 billion and $8 billion.”

Engaging with customers

Airlines still only sell 30-40 per cent of their products directly, with tour operators and travel agents selling the majority, Brogan says.

However, consumer technology is driving airlines to engage more with customers.

Airlines will also need to sell more products to maximise their profits. In the future, when a person travels to a particular location, he says airlines should be able to offer advice, products and services in that location. They should be able to make recommendations for places such as bars, restaurants and hotels and sell tickets.

"Airlines will become more like retailers, selling more products to consumers. They might sell bundles with flights, hotel and experiences such as Disney tickets. Ryanair is now selling more options to customers and becoming softer. They are becoming a retailer of sorts. It demonstrates how the market is evolving".

Brogan says airlines need to be able to service customers’ every need online, be it changing a booking, choosing seats on a plane, selecting a gourmet meal or checking in. “Our software gives the customer more choice and helps the airline upsell. The passenger can tailor their travel experience, for example, by choosing where they want to sit on the plane.”

While some airlines are investing heavily in software developed inhouse, Brogan, perhaps not surprisingly, believes this is not the way to go.

“You need to be really good at your core business. Airlines are airlines, they’re not IT consultants. They also can’t keep pace with fast development changes in the software industry. Thus it’s a mistake for them to develop inhouse”.

Innovation

With technology moving faster, he says Datalex needs to innovate constantly to stay ahead of its rivals, especially in areas such as big data, payments and mobility.

Consumers are constantly switching between devices. They might use one device, such as a smartphone, to browse, another device to make the booking and another to modify the booking.

“We don’t want our software to be locked in to a specific channel or device such as a smartphone. We want the software to work on anything from a digital television to a smartwatch”.

Things are definitely on the up again for Datalex. Three years ago it had a valuation of €30 million, according to Brogan. Now it has a valuation of €130 million. In 2015, four billion people will travel by air according to the International Air Transport Association.

By 2030, that will be 7.2 billion. A huge percentage of these bookings will be done via smartphone or tablet.

“We envisage back-of-seat TVs will disappear as everyone will have their own device and wifi. There will be no kiosk as everyone will check in on mobile. People will be able to buy a movie from the airline onboard and watch it on their device.”

While Aer Lingus is the company’s only customer in Ireland, Brogan says he would love to get Ryanair one day too.

In the meantime, he is also focusing on markets abroad. He spends half his time travelling the world, trying to secure new deals with airlines.

While flying goes with the territory – he is chief executive of a travel software firm after all – Brogan says he makes the effort to always be home for weekends. CV Name: Aidan Brogan Position: Chief executive officer, Datalex

Age: 47 Family: Married with two kids

Lives: Navan Road, Dublin 7

Education: DIT Kevin Street

What readers would expect: He spends 50 per cent of his time travelling. In the last few weeks he has visited China, the US, Canada, Norway, Germany, Malaysia, Switzerland and Belgium.

Something that might surprise readers: He has eight brothers and one sister. He is from a huge GAA family. His brother Bernie and his nephews Bernard and Alan (pictured below) have all played for Dublin.