TUI Travel lost key booking systems after merging First Choice and Thomson, it reported in its full year results.

The two firms became TUI Travel which carried out IT integration and standardisation projects following the merger. A post-merger enterprise application integration is one of the most complex IT operations however TUI also outsourced parts of the system.

Its CFO, Paul Bowtell, resigned after revealing that the organisation had been forced to restate its 2009 financial results to £117 million due to an accounting error in the sysyems.

TUI said in its preliminary results for the year ended 30 September:

“As part of a drive for further cost savings and efficiencies, processes around the two systems were streamlined, roles were consolidated and parts of the process were transferred to an outsource provider in India.

“As a result, it is now understood that control weaknesses arose and the level of differences between the two systems grew.”

Dave West, Forrester analyst, said businesses should who use cost-cutting as a main driver for outsourcing should see TUI as a warning.

“Cost should not be a primary reason for outsourcing. This case highlights that when you focus on cost without thinking about the implications of the cost, you can have lots of problems.

“With £117 million, you could have got some great software engineers in,” he said.

“When you try these integration activities, it is very risky – it needs to be managed in-house. Outsourcing is like giving away your core competencies. The outsourcer does not know how it [the system] is supposed to work.

“It highlights that integration testing is really important to do. It tends to be done at the end, when it should be done at the start. You can’t integrate first and then get it to work.”