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:
• Transit authorities historically contract out to build their own “cellular networks” (the fare collection back office and vehicle hardware, the CAD/AVL back office and vehicle hardware, the real-time passenger software)
o Typically there is a lack of interoperability with surrounding agencies and technologies
o The project is time consuming, resource consuming and capital consuming
• Each system has its own unique features and “phones” (building RFP’s for customized software and hardware requirements during the procurement of the systems)
o Large up-front capital expenditure on unique features and hardware rollout
o Some of the most advanced technology is unavailable to the smaller transit authorities due to cost and complexity of deployment
• Transit authorities maintain their own systems (procurement of these systems means the authority owns the hardware and the vendor supplies on-going services, maintenance and warranty fees)
o Software and hardware is locally maintained; software patches need to be pushed out to the local versions of client/server software applications
o System is maintained until the next capital procurement and “fork-lift” upgrade The example isn’t a perfect comparison, but it should make us consider if there are alternative ways in which vendors can offer these technologies. Utilizing a service model approach, agencies could save money, time and resources while receive cutting-edge technologies in a more efficient manner.
What a Service-Based World Would Look Like
Consider a service provider model for the above procurements. As they do today, the agency would still need to research the technology need, go out for a grant and issue an RFP. Instead of creating a unique technology RFP though, the agency would create a service-based RFP. In a service world, the vendor would build and maintain an enterprise class instance of their software preferably at a hosted facility. Network connectivity, server requirements and network management services would all be provided as a service level agreement with high availability and redundancy requirements.
Additionally, the vendor would deploy a large disaster recovery site — a full back-up site that would be capable of backing up all data, customer information and configuration files. As the vendor deploys a large-scale implementation of its central software, every agency would enjoy the benefits of this large-system deployment. An agency with 25 vehicles and an agency with 250 vehicles would have the same system availability, features and functionality. Through a secure network connection, agencies would be able to access the features and data of the CAD/AVL, RTPI or EFC through a Web browser.
Instead of the typical server/client software deployments where the applications are loaded onto individual computers, the hosted model supplies all of the content, functionality and features through a standard Web browser. The vendor service offering might include the supply of on-board hardware for either a nominally reduced rate, or subsidized as part of a monthly service charge. Because the back office software would be shared, updates would be pushed out and available to all subscribing customers providing constantly evolving feature-rich software to all agencies.
The agency would not need to own the on-board hardware, which would be refreshed every five years as part of the overall system health process. Similar to cell phone providers offering their subscribers discounted handsets every few years, this process ensure that the field hardware stays up to date and in good working order. Up front, the vendor would take in all agency configuration data and ensure a clean mapping between operational requirements and software features. This might only take a number of months, as opposed to a number of years as we see in the industry right now.
The fee for the service would be significantly less than if the agency were to procure a similar system and deploy it. Consider that it is always less to pay a monthly cell phone bill than it is to build a nationwide cellular network! The software is centrally managed and with fewer unique software features to maintain, the service model allows the vendor to achieve economies of scale and hardware/software synergies, thereby allowing them to provide the service at a lower overall fee per user.
Lastly, if multiple local agencies have signed on to receive EFC, AVL or RTPI as a service, the use of the hosting environment enables inter-agency usage, sharing and interoperability. Data is centrally stored and managed so it is an easy technology leap to create multi-agency shared instances of the technologies. Now, a single smartcard can be used across multiple agencies and authorities. Intermodal or inter-agency real-time passenger information can be made available to the ridership. The transit ridership will also realize benefits from the technology service model.
Benefits of Service Strategy
From the above model, it is easy to see that transit agencies can realize a host of benefits from the service-based product offering, including:
• Lower total cost of ownership for cutting-edge technologies with constantly increasing feature sets
• Cutting-edge technology availability — any size agency can enjoy the benefits of a large-scale, feature-rich CAD/AVL, RTPI and EFC implementation.
• Greatly reduced IT management and maintenance requirements for the agency.
• Higher system level availability through the use of centrally hosted software and hardware resources; enterprise class disaster recovery sites and 24/7/365 hardware monitoring
• Quicker implementation of technologies through the use of standard software and feature mapping to transit agency needs.
• Easily introduce regional interoperability between agencies and the use of these technologies to provide value to the ridership.
While reading the example, we wondered why the firm didn’t go to a cellular provider, purchase the handsets, and provide each employee with a monthly cellular service plan. Instead of building its own cellular network, the firm could have accomplished the same thing quicker, cheaper and with more features. Thankfully, cellular providers like ATT, Verizon and Sprint do exist. If it is makes sense to go with a cellular provider, then why does the transit industry continue to purchase unique, custom-built solutions for AVL, RTPI and EFC systems? Transit authorities should be asking the vendors in the transit space who sell AVL, RTPI and EFC systems to offer their technologies as a service.
Vendors would host the technology and offer a complete range of advanced features to all subscribers for a monthly fee. Vendors would maintain the infrastructure and refresh the hardware during the life of the service contract. All on-going software development would be brought into to the core software, thereby offering an ever-increasing feature set to the subscriber agencies. Agencies would not have to provide a large staff for maintenance as the system is completely remotely hosted and monitored.
The overall total cost of ownership burden should be significantly reduced for these agencies over the life of the system’s use. Cloud computer and software as a service architecture are becoming more and more prevalent in our daily lives. Technologically speaking, there is no reason why vendors could not supply these technologies as a service to transit agencies. In this time of economic challenge, where cost awareness and procurement efficiencies are sharply in focus, this model introduces numerous benefits and advantages over the historical procurement strategies. Vendors exist to serve the needs of the agencies, and should offer this technology procurement to agencies just as agencies should push vendors to pursue this model and realize all of the inherent efficiencies that come along with it. Craig Daniels is a business development manager with VIX Technology USA and can be reached at firstname.lastname@example.org.