How AerCap’s CIO has been a catalyst for a robust M&A strategy

In the press coverage of aviation leasing company AerCap’s 2021 acquisition of General Electric Capital Aviation Services (GECAS), there was much talk about how bold a move it was. AerCap CEO Aengus Kelly gambled that merging two market leaders in the aircraft leasing industry, one of the biggest M&A deals in recent years valued at around $30 billion, would pay off as the sector bounced back from a slump caused by the pandemic. The financial mantra that market volatility is a good time to invest would be thoroughly tested.

So far so good. Today AerCap has $74 billion in assets, 300 customers, and is posting record incomes. The successful execution of AerCap’s growth through acquisition strategy involved many moving parts, among them merging two IT departments, a process that has plagued other high profile M&A projects in the past.

AerCap CIO Jörg Koletzki recalls how he had six months’ notice of the GECAS acquisition — not a lot of time to make big decisions about how to integrate complex technologies. His own ‘buy before build’ strategy was very different to GECAS, which relied on the back-office infrastructure of parent company GE while running proprietary software on Amazon that was core to its business processes.

There were many other components to pick and choose from as Koletzki looked to shape a single IT environment for the expanded business that would emerge from the acquisition. He acted fast and decisively. “You have to make decisions on your systems as early as possible, and not go down the route of paralysis by analysis,” he says. “The best thing in AerCap is that our CEO is of exactly the same opinion, not just in IT, but across the business. We wanted to get to the status of one company, one direction as soon as possible.”

Such speed in decision making requires confidence and experience, hard-earned by Koletzki in a blue-chip CIO career with companies likes Volkswagen and E.ON. When first informed of the acquisition, he wasn’t even sure if the CIO role of the merged company would go to him or the CIO in GECAS. His response was to reach out to his counterpart: “I said, ‘Look, we both know only one of us is going to survive this, but in the interest of the future company, we can do two things: we can fight each other, or we can work together and make sure one of us gets a decent opportunity to implement this and the other is looked after respectfully.’”

Both came from a results-driven culture of delivering for their boards and they shared the belief that skilled people are always more important than technology. They worked well together and set about laying the groundwork for a merged IT environment Koletzki would eventually be appointed to run.

Business strategy must drive IT decision making

Business-first pragmatism is the key to understanding what makes Koletzki tick. “The strategy at AerCap is growth through M&A, to become the biggest aircraft leasing company in the world by far,” he says. “I always keep it in mind that we’re here to do the business, not to do IT. It’s not important what an IT person thinks; the business strategy is what’s important and the environmental factors that influence your decision making.”

Those environmental factors at the start of the merger were two vastly different IT estates. Koletzki had taken AerCap through many technology iterations since he was headhunted for the CIO role in 2015. The company had completed a first acquisition (International Lease Finance Corporation in 2014) and was relocating its headquarters from Schiphol in the Netherlands to Dublin, Ireland. Koletzki would use the move to upgrade the IT environment from a small data room to something more scalable. At the time, AerCap management had concerns about the shared infrastructure of public cloud, so the business was run out from dual data centers.

Every three years, Koletzki reviews his strategy, and in 2018 decided it was time to move to the cloud. He knew that scalability was a big win for a company in aggressive growth mode, but he just needed to be persuaded that the platforms were more robust, and the financials made sense. “The running cost for a data center plus the purchase price of the tin should roughly be the same as the run cost of your cloud,” he says. “The saving you make in the cloud is that you no longer have the change project costs you incur when you refresh your systems.”

Already a Microsoft house, with .NET used for inhouse software development, Azure was the chosen destination. The migration was well underway before the GECAS acquisition; it just became a lot more complicated. Moving data from legacy systems was also a mammoth project, along with migrating document management processes to Azure. A GECAS Oracle ERP system was upgraded and now runs in Azure, managed by a third-party Oracle partner.

Core applications inherited from GECAS are still hosted in Amazon and supported by inhouse developers, which means Koletzki is effectively managing a multicloud environment. He’s very clear it’s a holding maneuver before they’re moved to Azure. “We’ll do this move in good time, but only when we’ve finished the adaptation of all the GE processes to AerCap processes,” he says. “It’s not cheap or easy to migrate from one cloud to another, but I don’t want my internal team to compete on one technology over another. The main driver for moving to a single cloud provider is skills. I have 60 people in my team and can only afford to have one skills base.”

He plans to retain and reskill inhouse Amazon developers who have deep knowledge of how the corporate asset database links to different applications, reiterating his belief that people are more important than technology. “Skills are one of the most important elements of running an IT organization,” he says. “Technology you can buy. More critical elements are business analysts and project managers who understand your business processes.”

Accelerating decision making with analytics and AI

With CEO Aengus Kelly talking publicly about AerCap being a data company, a big part of Koletzki’s forward planning is around data analytics, finding a way to harvest knowledge hidden in databases that can benefit the business. Last year he was planning to build a data warehouse in Azure when Microsoft Fabric was announced.

Ordinarily, Koletzki would be wary of ‘buggy’ new products, but because Fabric reuses existing Microsoft components and makes data analytics available as a service, he was comfortable signing up and becoming the first Fabric customer in Ireland. “Microsoft is very clever in connecting their products together. It meant I didn’t have to build my own architecture,” he says. “I just subscribed to their service.”

While there are AI components in Fabric, the wider use of AI by AerCap is still under evaluation. Koletzki has strong views on the hottest topic in tech. “Let’s be very clear, AI has to be controlled,” he says. “Generative AI is a probabilistic, not a deterministic system. For the last 40 years, we’ve been interacting with computers as human beings and been trained into believing that a deterministic answer will be repeated when you ask the same question twice. That’s not the case in AI. It’s a probabilistic system, and it can hallucinate.”

He makes the distinction between gen AI and machine learning for the analysis of existing data. The latter is particularly enticing for a business that’s constantly analysing risk, and he’s exploring ways to introduce multi-agent systems for workflows that’ll enable the business to make better decisions faster.

Once again, it’s about serving the business. “We sit in the business, the IT team next to the finance team, next to the HR team, and I walk the building every day,” he says. “I have regular conversations with my colleagues on the management committee. Only when I understand their challenges can I come back and say, ‘Have you thought about building another report?’ or ‘What about having a system to automate that process?’”

Everything Koletzki delivers may be business driven, but there has to be an appropriate budget set aside, a realistic timeframe to deliver, and buy-in from the board. Unless it’s a top-down initiative, fully backed by the CEO, it’s more likely to run into trouble.

He also offers a salutary warning to any business undertaking a merger that thinks there’s a shortcut: “If you try to do something like this in a year and the business doesn’t care what systems you use, you’re going to get problems that will follow you around for the next five years,” he says.