Airline-backed online travel agency banks on new search engine

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by Ephraim Schwartz

(IDG) -- Orbitz, the online travel agency owned by five major airlines, is banking on new search engine technology to differentiate it from entrenched competitors such as Priceline.com and Travelocity.

But last week Orbitz announced that its launch would be delayed until next summer. Officials at the company -- coming from American, Continental, Delta, Northwest, and United airlines -- said the delay stems from their desire to roll out the system in a massive beta test with 50,000 users this February, as well as to iron out its deployment across Sun server farms. The plan is to ramp up to 100,000 beta users by next spring, officials added.

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And if the search engine technology Orbitz hopes to pioneer with its technology partner, ITA Software, is successful, consumers will benefit from access to many more choices for tickets. According to some analysts, this new software may also count legacy databases, built on 30-year-old code on mainframes, as its first technology victim.

"You can't take a traditional database, put a Web front end on it, and think it will work just fine," said Colleen Niven, an analyst at AMR Research, in Boston.

The reason, Niven contends, is that traditional database search software has not kept up with the demands of an ever-confusing marketplace that presents buyers with endless product choices and prices.

The ITA software running on both Unix and Windows 2000 servers, however, uses algorithms that are able to search every publicly available airfare. It can sort through billions of combinations.

"Where Travelocity might find the ten best prices for a ticket from Los Angeles to New York, Orbitz will give the consumer 150 choices," said Stacey Spencer, an Orbitz spokeswoman.

Lowest-cost online airline ticket shopping represents only one of many complex marketplaces created by the New Economy, with its perishable inventory and price volatility. The deregulated utilities industry in which companies shop for bandwidth and power is another example of such complexity. And Media buyers face hourly price fluctuations even just as television shows move closer to air time. Companies procuring products on buy-side exchanges are now being bombarded with hundreds of suppliers offering any combination of price, availability, and quality variables.

"There are lots of legacy systems that are going to be replaced. If you want to get more answers, you need to redo the legacy part. You can't layer new algorithms on top of old code," said Jeremy Wertheimer, founder and president of ITA Software, in Boston.

Yet technology aside, some observers believe Orbitz's business model will cause it to fail.

"The airlines want to foreclose any other competition that the Internet has created for them," said Richard Arns, executive director of the Chicago Research and Planning Group, a national organization of CIOs. "But after they increase their revenues by reducing the cost of selling tickets, they'll go after their own partners for market share."

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