The current procurement model for large-scale advanced transit technologies such as automatic vehicle location (AVL), real-time passenger information (RTPI) and electronic fare collection (EFC) is a capital, resource and time-intensive exercise. Many industries outside of transit are migrating to a service provider-based architecture where advanced technologies such as these are “hosted” by a third party that provides end services to its clients. This model is prevalent in our everyday lives: it is how many of us receive our mail online, our cell phone service and a variety of other services.
The transit industry is not known as an early adopter, but with the prevalence of cloud-based software hosting and ubiquitous Web-based applications, the industry should be pushing technology providers to offer these technologies as a service.
Example through Analogy
Suppose during the 1980s that a large U.S. multi-national firm realized the potential of using cellular technology to enable its employees to wirelessly talk and share data with one another. Let us assume that at the time, while there were cellular providers, the company performed an internal make/buy analysis and determined that the best course of action was to contract with a cellular construction firm and build its own cellular infrastructure, applications, phones and back office software to run the system. In four years, the project is completed (one year late and significantly over budget), and handsets are rolled out to employees.
Due to funding limitations, the cellular network is only deployed at the main corporate office campus; as a consequence, coverage from the network is limited to the office location and a 10-mile radius surrounding the offices. All employees receive new phones and instructions on how to use them. The cellular system goes live and employees are able to roam around the corporate campus and surrounding towns and utilize the cellular network to wirelessly talk to their colleagues. What an amazing marvel of technology for the mid 1980s!
The company shifts from its capital expenditure budget to its operational expense budget. The firm hires a staff of 30 developers, maintainers and field engineers to maintain the back office code, the handset hardware defects and the cellular sites. Additionally, an unforeseen relationship with another large multi-national firm with local offices requires integration of that firm’s unique cellular network. The yearly cost of maintenance is significant and the ability to move quickly and integrate new technology is almost non-existent. Other smaller local firms look on the cellular system in awe, they wish they had the capital to implement this cutting-edge technology; instead they are stuck using “lower-tech” landlines.
What Lesson Can We Draw From This Example?
Sitting from our vantage in 2011, we see how foolish the firm’s choice was. What firm would choose to spend millions of dollars developing a private cellular network if there were cellular carriers and wireless providers who would build, maintain and expand a nationwide cellular network and offer the use of that network as a service? Any firm could pay a fixed monthly service fee and receive nationwide coverage, ever-increasing technology innovation, guaranteed service levels and outsourced infrastructure maintenance. In the face of these cellular provider efficiencies — who would choose to build their own cellular network, handsets and software and then choose to maintain that network? What if, in this example, those cellular providers didn’t exist? The firm might have had no other choice than to pursue the path they did.
Transit Industry Technology Procurements
Three of the larger technology procurements an agency might pursue are automatic vehicle location (AVL), real-time passenger information systems (RTPI), and electronic fare collection (EFC) technologies. Let’s take the above example and create an analogy between a service provider model and the transit technology model; from this exercise we see some interesting things: