How many high-profile CIOs can say they got their job through a free ad on Craigslist? Probably not that many. But that\u2019s exactly how Bill Maguire became vice president and CIO of Virgin America. Which makes sense. Like any startup, Virgin America must do a lot with a little, including fishing for IT talent in Craigslist\u2019s free pool. That said, Virgin\u2019s resources\u2014$177.3 million in funding and a license to use the Virgin brand name, purchased from investor Richard Branson\u2019s Virgin Management Ltd.\u2014are a bit bigger than Craig Newmark\u2019s were when he began his eponymous community forum a decade ago.But, again like Craigslist, the upside is big. Virgin America\u2019s plan is to create a new kind of low-cost carrier. Its fares will be in line with the sub-$300 cross-country round-trips offered by the JetBlues of the industry, but it intends to deliver a customer experience more along the lines of Singapore Air, the first to offer such perks as in-flight high-speed Internet service.RELATED LINKS\nFlight DelaysThe competition tries to keep Virgin grounded.\n\n\nWho's Who at Virgin AmericaMeet the leadership team at the start-up airline.Virgin America executives say they want their airline to embody the next step in the evolution of bargain flying.They\u2019re a bit closed-mouthed about many of the details of what exactly that means, at least until they start selling seats early next year. But they have revealed the plans for their first route (San Francisco International to New York\u2019s JFK), their fleet (34 brand-new, fuel-efficient Airbus A320s) and certain in-flight amenities (like seats built by Italian race car seat maker Recaro with thin backs to provide more legroom). They plan to create a simplified fare structure with just a handful of price points that consumers will understand, and they hope to sell 70 percent or more of their tickets through the Web.And their IT strategy will be, of course, lean and mean.The Virgin Vision: IT Is KeyVirgin America knows its ability to offer those differentiating amenities to a price-conscious public will depend in great part upon keeping IT costs low. Maguire, whose background features a flair for squeezing nickels until they beg for mercy, will have at his disposal a generation of technology that was not available even as recently as JetBlue\u2019s 2001 launch. (See \u201cThe Virgin Tech Stack,\u201d Page 70.) He plans to deploy a mix of lower-cost (and in some cases no-cost), efficient and agile systems to create the foundation for Virgin\u2019s \u201clow-cost, high value\u201d business proposition.\u201cWe\u2019re coming along at a time when technology\u2014if you understand how to use it\u2014is a lot more lightweight, fast and flexible,\u201d Maguire says. \u201cYou don\u2019t have to put in a bunch of mainframes to run huge systems like United and American had to.\u201dMaguire, who became Virgin\u2019s CIO in January, knows the risk in embracing emerging technologies. But, as his colleagues at the airline are quick to point out, launching Virgin America is itself a huge risk\u2014160 air carriers have entered bankruptcy since the 1978 deregulation of the industry, and most never emerged. \u201cThe mortality rate is extremely high,\u201d says Tim Sieber, VP and general manager of airline consultancy The Boyd Group. \u201cI typically tell people, If you start an airline, use your ex-wife\u2019s money.\u201d\u201cThis whole venture is a risk,\u201d echoes Todd Pawlowski, Virgin\u2019s VP for guest services and airports, who joined the Virgin executive team three years ago. \u201cIf you\u2019re risk averse, you don\u2019t come to work on this project and you certainly don\u2019t work in the airline business. You have to be willing to push the envelope.\u201d And that\u2019s exactly what Maguire intends to do.\u201cAs CIO, how often do you get an opportunity to build infrastructure from scratch?\u201d Maguire asks. \u201cI get to have a huge impact.\u201dExperience RequiredEnglish entrepreneur Sir Richard Branson has been trying to figure how to break into the U.S. airline industry since the mid-1990s. He founded the full-service transcontinental carrier Virgin Atlantic in London in 1984, but after seeing the success of Southwest Airlines he set his sights on new ways to exploit the low-cost carrier model. That led to his launch of Virgin Blue, a basic-service, Southwest-style carrier in Australia in August 2000. He also considered teaming up with David Neeleman (who in 1993 sold his first low-fare startup, Morris Air, to Southwest for $129 million) to license the Virgin brand in the United States. But those talks never bore fruit, and Neeleman went on to found JetBlue, which sought to keep fares low like Southwest but \u201cbring the humanity\u201d back into flying with creature comforts such as live TV, satellite radio and wider seats. Inspired by JetBlue\u2019s success, Branson\u2019s consultants began examining the prospects for a U.S. carrier that would combine cheap fares with high-end amenities.The first executive to come aboard the as-yet-unnamed venture was CFO Bob Dana, an investment banker, followed soon after by Pawlowski, who came from Virgin Atlantic\u2019s U.S. operations. They developed a bare-bones business plan that was promising enough to attract $177.3 million in startup capital. VAI Partners was created to become the majority owner of the company (the Department of Transportation has rules about foreign ownership, and so Branson maintains a minority interest, and no corporate role). Fred Reid, who previously oversaw operations at Lufthansa and who spearheaded the launch of low-cost Delta subsidiary Song before leaving his post as president and COO of the bankrupt carrier in early 2004, became Virgin America\u2019s CEO later that year.\u201cIt\u2019s always helpful to have a seasoned airline executive at the helm,\u201d says The Boyd Group\u2019s Sieber. \u201c[Reid] may not be able to run an airline, but he sure as hell knows how not to run one.\u201dDiverse experience is a hallmark of the Virgin team (see \u201cWho\u2019s Who at Virgin America,\u201d Page 62), who are all working out of the airport\u2019s official headquarters on Airport Boulevard in Burlingame, Calif.\u2014thanks to more than $10 million in subsidies and incentives that California and San Francisco offered it to set up shop there. \u201cWhat we\u2019re trying to do is create the next-generation airline,\u201d says CIO Maguire. \u201cWe\u2019re trying to create an experience where the passenger will say, This flight is going to be cool.\u201d\u201cVery early on, the perception was that we were going to be a no-frills airline [and] that low-cost equals low frills,\u201d says Pawlowski. \u201cBut we\u2019re trying to give people more for their money and elevate the guest experience...to the extent that\u2019s feasible when you\u2019re stuck in a tube at 30,000 feet. More full service. But we won\u2019t make the customers pay more for it.\u201dIf that turns out to be the case, it will differentiate Virgin America sharply from much of the industry today. (See \u201cFlying for Dollars,\u201d Page 72.) The Frugal CIO To understand what Reid and his team saw in Maguire, one need only glance at the press release that announced his hiring, highlighting the millions he slashed from the IT budgets of various Silicon Valley software companies.\u201cWhen you\u2019re a startup, you don\u2019t have a lot of money to do a lot with,\u201d says Forrester VP of Travel Research Henry Harteveldt. \u201cYou have to do a lot with a little. But airlines are incredibly complex, and you have to be extremely careful about where you put your money.\u201dEvery dollar that Maguire doesn\u2019t spend on back-end IT systems that don\u2019t provide visible customer value can be funneled into things that do, like kiosks in the terminal (which Virgin America, unlike JetBlue, will have at launch).Maguire is getting the most bang for his buck in the infrastructure area. \u201cI\u2019m an expert in designing networks,\u201d he says. He started out \u201cdoodling with computers\u201d in 1969 and worked his way up to managing the U.S. Postal Service\u2019s IT center in San Mateo, where he was responsible for all aspects of computer operations and where he built his own SAN in 1998. \u201cI can save money by the way I design a company\u2019s network infrastructure or negotiate with telcos,\u201d says Maguire. And while that may sound less than sexy, he gets as excited about the fact that he can run his data center more efficiently\u2014by cooling the rack-mounted servers from the top with water-chilled AC units\u2014as he does about the very early implementation of VoIP he oversaw at Legato Systems in 2001. And he\u2019s as jazzed about being able to get Verizon to give the startup a one-year contract (which is less expensive up front than the multiyear norm) as he is about the digital flight deck Virgin will be building into its planes.\u201cWe don\u2019t have a ton of money,\u201d Maguire explains. \u201cSo it\u2019s great when the vendors can come to bat for us.\u201d The one-year contract with Verizon, for example, will allow him to tie the network rollout to the airline rollout \u201cand save considerable dollars.\u201dA huge financial burden for any IT shop is staffing, and Maguire\u2019s tactic here is to rightsize his mix of full-time and contract workers. For example, when implementing an application called AIMS to manage flight operations, he brought on a contractor with AIMS expertise for six months and let him go once the implementation was complete. \u201cTo get the job done, you have to learn how to balance contractor support versus permanent staff,\u201d says Maguire, who plans to operate with just 21 full-time IT employees when Virgin takes off.A Hard Man with SoftwareMaguire is exploiting a mixed bag of tricks to cap his software costs\u2014from creative licensing to making the most of open-source tools. Though he won\u2019t give away all his secrets, \u201cI try hard to develop licensing patterns that use concurrent users instead of named users, which is what the vendors would rather sell. I like to license by size of server or CPU power,\u201d says Maguire, whose contracting savvy may be traced back to the three years he spent in law school before committing to an IT career. \u201cI understand how to size systems and configure utilization so we\u2019re not paying gobs more than we need to. That just gets down to knowing your environment.\u201dIn fact, nothing gives Maguire more pleasure than exploiting lower-cost technologies. \u201cWe don\u2019t typically do that in this country,\u201d he says. \u201cTake Microsoft or Oracle. They\u2019ll spend millions to develop software that we only use 10 percent of. Look at Word. I use a couple of features and that\u2019s it. For me, it\u2019s always been about how we make this server do more, how we make this application do more.\u201dVirgin America is building its own spam filter, load-balancing solution and change management tools, all based on free open-source code. Maguire estimates he\u2019d have to pay more than $80,000 for the traditional version of load-balancing software he now uses for free. \u201cSome will argue that you can\u2019t get immediate support for these tools if you have a major breakdown, but it\u2019s amazing the support these [open-source] communities provide. We get updates to the spam filter every night from the community,\u201d he says. \u201cIt\u2019s way, way awesome.\u201d (For more on support and other open-source issues, go to www.cio.com\/specialreports\/opensource.html.)On the finance side, Maguire\u2019s using Microsoft Dynamic GP (formerly Great Plains). The implementation cost him $500,000, versus the estimated $2 million to $3 million Oracle price tag. Timing, often, is everything. \u201cA few years ago, Great Plains wouldn\u2019t have been robust enough to support us,\u201d Maguire says. \u201cToday it is.\u201d Maguire is also overseeing the custom construction of Virgin America\u2019s Web-based booking engine, with a Web design company called Anomaly working on the front end and Indian software shop NIIT coding the back end. \u201cIt\u2019s a cost-effective way to do it,\u201d he says.And Then There\u2019s CRM...In the CRM space\u2014an area that most airlines have deemed to be cost-prohibitive\u2014Virgin America has the advantage of starting from scratch, unlike most airlines. It plans to implement a hosted customer feedback system from RightNow and will build its own CRM system to manage all the data it collects. \u201cWe don\u2019t care if this guy last Tuesday wanted a scotch neat with ice on the side,\u201d VP of Guest Services Pawlowski explains, but he does care \u201cif we messed the guest around in the past, losing their bags.\u201d The attendants will know that, and the \u201cguests will know we\u2019re paying attention and we\u2019re doing something to improve service. It\u2019s pretty ambitious.\u201dTo avoid the cost of either building a call center or managing its own work-at-home team the way JetBlue does, Virgin is outsourcing its call center to Willow, a provider of at-home agents. It\u2019s a big cost saver, certainly, but for an airline hoping to differentiate itself through customer service, it\u2019s also a big risk.\u201cIt\u2019s an issue that we debated long and hard,\u201d Pawlowski says. The plan is to have Willow recruit specifically in Virgin\u2019s operating markets so the company can invite family members to the airports, let them use the products and services, and \u201cthrow other swag at them\u201d to get them on board, says Pawlowski.White-Knuckle ITThere are risks associated with all of Virgin America\u2019s IT choices\u2014from outsourcing customer-facing roles to utilizing systems just robust enough to support the mission to implementing less-than-proven technologies. Maguire knows all this. When, for example, he first implemented a VoIP system at Legato, he lost power and saw his whole telecom system go down. \u201cYou stub your toes every now and then,\u201d Maguire admits. \u201cBut you learn. And overall, [taking risks] can make a huge difference.\u201dAll told, Maguire estimates he\u2019s saved the company $500,000 in his first six months on the job and says he \u201cwill\u201d save the company $2 million a year \u201cwith the way we\u2019re building, managing and operating our systems.\u201d But, cautions Forrester\u2019s Harteveldt, \u201c[Virgin America] will have to make sure that [these technologies] will support them\u2014not just when they start up with a handful of planes, but in theory when they have 100 or more airplanes. You don\u2019t date technology in the airline industry; you marry it.\u201dNext-Gen ReservationsOne of the most important systems Virgin America will be walking down the aisle with is its reservations system. These systems are the central nervous system of any air carrier. Despite the name, they handle not only passenger reservations but also inventory control, fares and ticketing, schedules, baggage and interface with departure control functions. And they touch every other system an airline runs on, from flight operations to Web-based booking engines. \u201c[Reservations] can have an impact on everything from what you pay your pilots to FAA-mandated maintenance,\u201d Harteveldt says.Established carriers tend to operate on robust legacy systems such as Sabre or Shares (both supported today by EDS).But these feature-rich systems run on mainframes and are expensive to maintain and difficult to customize. Younger, low-cost carriers, such as Airtran and JetBlue, have opted for Open Skies from Navitaire, a less expensive and much more basic Web-based reservations system. What both systems have in common is that, like all software that\u2019s been around for a while, the airlines that run on them face the challenge of upgrades or switching to new systems.\u201cAdvances in tech have given the new airlines the ability to provide as robust a reservation system as something that previously would have been only available through a Sabre,\u201d says The Boyd Group\u2019s Sieber. \u201cAnd as these newer systems become more evolved, they also give management the ability to do some incredible data mining that will enable them to make better business decisions.\u201dVirgin\u2019s new reservations system is called Aires. Development was funded by travel giant Cendant and is being developed by Indian software developer IBS. The system is built on open architecture standards with a database layer, an application layer and a Web services layer. \u201cIt\u2019s fast, flexible and amazingly configurable,\u201d says Maguire. \u201cWe can run the business the way we want to instead of being dictated to by Sabre or Navitaire.\u201d In essence, Aires offers Virgin a hybrid solution\u2014one with the extended functionalities available in a Sabre system on a lower-cost platform. \u201cIf an airline wants to install an extra premium economy section, they can easily make those changes. It\u2019s designed to interface well with kiosks and Web booking engines,\u201d says Harteveldt. \u201cIt\u2019s easy to operate, easy to train on and easy to manage.\u201dBrian Clark, vice president of planning and sales, led the deal with Aires before Maguire joined the team. \u201cWhen I was at US Airways, I was involved in the cutover from an old reservations system to Sabre, and I have a huge amount of respect for what technology can do for us,\u201d Clark says. \u201cFrom a business perspective, new systems like this are fantastic because [they] allow us more flexibility than older systems. We can grow without limitation.\u201d Down the road, Aires could allow Virgin to integrate with travel partners, offering customers the ability to check in for a flight when they check out of a hotel or reserve a rental car when they check in for a flight.The only other customers signed on with Aires are Virgin Blue in Australia and WestJet, a low-cost Canadian carrier, so Virgin America will have a first-mover advantage stateside. Of course, it will also assume first-mover disadvantages.\u201cYou\u2019ve heard the old saying, no CIO ever got fired for buying IBM? Well, no airline CIO would ever be dismissed for going with Sabre,\u201d says Harteveldt. \u201cThere\u2019s always risk with a new product that\u2019s just proving itself. There will be hiccups,\u201d he predicts.No one knows that better than Maguire. \u201cIf [Aires] doesn\u2019t work, we don\u2019t fly,\u201d he says, just back from a late summer trip to Delhi, India, to check on the system\u2019s progress. His mission there was twofold. \u201cFirst off, I wanted to build a relationship with the developers, let them know who I am, how I think, what my expectations are. I wanted to meet them face-to-face and talk to them about how critical this is to us,\u201d Maguire says. \u201cI also went over there to talk to their VPs about where we were with the implementation and changes we\u2019d like to see before going into production. And how they will support us on a 24\/7 basis once we\u2019re in production.\u201d It went well, he says.But everyone\u2019s expecting some turbulence with the implementation. \u201cThe reservation system presents the highest risk to the business,\u201d says Maguire. The Aires system infrastructure has multiple layers of redundancy to minimize unscheduled outages. But to minimize risk overall, Maguire\u2019s team is working closely with Cendant to ensure that performance, stability and scalability are more than adequate to meet Virgin America\u2019s load requirements.\u201cSabre is a great product, and they\u2019ve spent millions of dollars putting lots of makeup on that old technology,\u201d says Pawlowski. \u201cBut they\u2019ve pushed it as far as they can, and it\u2019s time to start thinking about what\u2019s next.\u201dReady for Takeoff?As of September, Maguire and his team had turned on the first big piece of the network and had the data center and its monitoring tools up and running. HR, finance and flight operations applications were live. \u201cThe only thing left is the reservations system and our production website,\u201d Maguire says, knowing those are two critical pieces of the puzzle. The goal was to have them both in production by the end of this year.Virgin America is planning to begin flying early next year, after it receives approval from both the Department of Transportation and the Federal Aviation Administration (see \u201cFlight Delays,\u201d Page 68), and most industry watchers expect a successful takeoff. \u201cThey\u2019re flying a very competitive route, and it\u2019ll be stiff competition,\u201d says John Kasarda, director of The Frank Hawkins Kenan Institute of Private Enterprise at the University of North Carolina. \u201cBut Virgin America will come off the blocks capturing a portion of the market and doing very well.\u201d\u201cVirgin America has an advantage right out of the gate because of the brand, which will get people on the first time,\u201d says The Boyd Group\u2019s Sieber. \u201cThe question is, do they have a product that can compete long term? That remains to be seen. At one time Pan Am had the most recognized brand in the industry, and that didn\u2019t keep them out of trouble.\u201cDon\u2019t get me wrong,\u201d Sieber continues, \u201cif I were starting an airline, I\u2019d certainly want to have that brand advantage. \u201cBut I\u2019d still use my ex-wife\u2019s money.\u201dWhat\u2019s also up in the air is how the competition will respond. Legacy carriers, which have finally figured out that they can\u2019t compete on price, may be forced to improve the service that they\u2019ve whittled away over the past five years. Some, like Delta, may put their emphasis elsewhere, like the Chinese market, leaving the domestic routes largely to the low-cost carriers.JetBlue, no longer the new kid on the block, may invest further in the customer experience. Its wholly owned subsidiary recently won a Federal Communications Commission auction for a very hot commodity\u2014a slice of radio airwaves devoted to air-to-ground communication\u2014that, if it gains approval by the FAA, could enable the company to provide Wi-Fi in the sky. \u201cIt\u2019ll be interesting to see how JetBlue responds,\u201d says Harteveldt. \u201cIf Virgin sells meals on board, will JetBlue sell meals on board? If they go to a two-class service offering, will JetBlue go to a two-class service offering? JetBlue has marched to its own drum for six years, but you can\u2019t ignore the competition.\u201dIn fact, Virgin America has gotten many of its best ideas from its soon-to-be rivals, including what Pawlowski insists must be a guiding principle if the airline is to succeed: \u201cDon\u2019t over-promise or under-deliver. You look at Southwest, they under-promise and over-deliver. Or look at JetBlue\u2014there are a lot of fans here of JetBlue. We can learn from those airlines.\u201cIt\u2019s a bit of a challenge because there are going to be expectations with a Virgin brand. But we hope to compete on value, the ability to customize the customer experience, and the bells and whistles of the more established airlines. Hopefully that adds up to a differentiated product that people will embrace.\u201d Senior Editor Stephanie Overby can be reached at firstname.lastname@example.org.