Ethiopian has grown rapidly over the past four years; the number of passengers it transported grew by 16.4pc in three years beginning 2003, and surpassed the one million mark. Its cargo volume increased by 19.3pc during the same period. Yet the airline is galloping further to meet its strategic aim of becoming a one billion dollars company in 2010. It will acquire 10 Dreamliner aircrafts bought from Boeing in the next two years, although there is a delay by the manufacturer.   

This requires Ethiopian to harmonize all the software its various departments have procured to date. The airline is now planning to invest over 300 million Br to install a grand IT project known in the industry as Master Systems Integration. The project will comprise four automated components: Maintenance Repair Overhauls (MRO), Enterprise Resources Planning (ERP), Customer Relationship Management (CRM) and other sections, such as Reservation and Flight Operations. Since the company has already installed the database bought from Oracle, it would only require IT firms to provide the application, according to IT experts.

Ethiopian's strategic advisor, Ernst & Young, has hired an Indian IT firm, SATYAM, as a supervising consultant in the procurement process. The airline subsequently issued public tender last year inviting IT companies to bid for the two components of ERP and MRO. In November and December 2008, the technical committee short listed the bidders found qualified for both components, sources disclosed.

The four international companies to make the list are the German SAP, in partnership with Fairfax Global Investment; the US Oracle, with its partner TCT; SAP partnering with Delloite & Touche; and Marketel, a Canadian company. All competed for the ERP component.

SAP is known for developing the application for Lufthansa, while Oracle did so for major American airlines, such as United. Marketel provided its application to Emirates.

However, only Oracle and SAP made it to the short list for the technical evaluation, sources disclosed. The two IT giants are now in a price war in their negotiations over their financial offers. Both companies have also been short listed for the other component, MRO, where six companies bid.
 

Senior officials at Ethiopian, including Girma Wake, its CEO, declined to comment on the bids before a final decision has been made as to whom the contracts will be awarded to. However, the process can hardly be free of controversies.

The nature of relationship between Fairfax Global and Zemedeneh Negatu, managing partner of Ernst & Young in Ethiopia, is being questioned by the other bidders, sources disclosed to Fortune.

Zemedeneh serves as a point man for the American consultancy firm in its contract with the airline to provide strategic advice. If indeed he has any business interest with Fairfax, other bidders claim, the bid process would be marred with a potential conflict of interest, as Zemedeneh could have privileged access to information on the evaluation process that could benefit the contender.
 

Nine months ago, Ernst & Young and SATYAM, as a consortium of companies, signed an agreement with Ethiopian under which SATYAM became the IT Consultant and System Integrator for the airline's IT and business transformation programme. It is a two to three-year project, in which SATYAM provides staff resources and IT experts to ensure that the various technology equipment and software Ethiopian procures to upgrade its entire IT system are standard, efficient and properly installed. SATYAM has assigned one programme director and deploys subject matter experts periodically.

Zemedeneh, however, denied any relationship with Fairfax and refused to comment further. Wondwossen Mesfin, chief of TCT, a partner with Oracle, also declined to comment when approached by Fortune.
 

Officials at Ethiopian, however, see the issue differently, according to informed sources. They seem to worry less about a potential of conflict because an old internal procurement regulation of the company strictly limits them to direct negotiations with manufacturers or primary vendors of products the company buys. Whether or not these manufacturers have local or international partners they work with, the secondary vendors are not included in the negotiations, these sources said. Accordingly, bidders were informed about the airlines' procurement rules that prohibit agents or brokers from the process, according to these officials.

By OMER REDI
FORTUNE STAFF WRITER