The market has not yet entered a mature stage, and projections of size and growth are hard to pin down. But one thing that is certain about the future, and which is driving global IT services companies’ interest in the market, is that most of the major transportations systems, especially in the US, are in need of an upgrade from their existing payment and ticketing programs to an integrated smart card system.
Services providers such as EDS, IBM, and Accenture are working together with teams of hardware, software, and network specialists, to bid for large, complex transport ticketing contracts, which can be worth several hundred millions dollars at the top end of the scale. These projects give service companies a chance to do what they do best – systems integration, application development and maintenance, back-office work, and clearinghouse functions.
Many IT services suppliers have won projects to roll out proprietary ticketing systems for individual transport operators, such as Atos Origin implementing its Avantix mobile ticketing system for Virgin trains, and Fujitsu Services installing its Star ticket issuing system for South West trains.
But the big rewards for vendors lie in managing projects where local and national government want to roll out unified ticketing systems covering several different forms of public transport
These big contracts typically run from at least five to 10 years and include add-on options, according to the experience of Mike Boushka, a partner in Accenture’s North American public transportation business. Most contracts include a build/design phase, usually at a set price, and then a separate operational component, where prices can be based on factors such as transaction volume, Boushka said. As for size, he said Accenture sees deals in the area of $50m to $100m, with larger contracts pushing over $200m.
In many cases, service companies will bid for the project as the prime partner of a consortium, although some transit operators will award the contracts on a piece-by-piece basis. Either way, the team working together on the contract will most likely include a services company, a hardware company or ticketing equipment manufacturer, a fare software specialist, said Mike Hulley, president of EDS’s Transportation Global Industry Solutions. Including these three or four major partners in a deal, there may be a total of 10 to 15 vendors, such as network operators, web systems companies, smart card firms and information screen providers, Hulley said.
He also said that EDS will normally join forces with its preferred partners for these bidding consortia, since they have demonstrated joint experience in transport projects and because each partner’s price points are well known to the other. Accenture, for instance, regularly partners with French electronics and engineering firm the Thales Group. The companies compete for contracts under the name the East-West Consortium and have had some recent success in the European market with an award this month for the Danish national ticketing project and its system currently underway in Holland set to be tested in Rotterdam later this year.
For EDS’s flagship deal for the London transit system, which spans at least 15 years, the company teamed up with Cubic Transportation System, the nation’s largest provider of automated fare hardware systems. Cubic, which lists Thales as perhaps its only true competitor in the market for the actual hardware upon which these fare systems are built, has also recently moved into the software and services line, Boushka said.
It now can provide full end-to-end systems for transit authorities, according to Mark Kroncke, director of business development for Cubic’s Western US region. The strategy appears to be paying off – Cubic recently won the entire contract to integrate all the transportation systems serving Brisbane, Australia into a single smart card service, and it began its first phase of testing in August. The company will provide the computers, other hardware, software, and relevant services. Kroncke said Cubic is handling the vast majority of the work and subcontracting some parts of the deal.
The company also recently won a contract to provide the entire technology infrastructure for Los Angeles’ transportation system, a deal which includes integrating the city’s metro area and 11 of its municipalities into one payment system, Kroncke said. The services component of the contract, including customer support, call center operation, card distribution, and point-of-sale management, is still up for grabs and is drawing bids from Accenture and other global integrators, Accenture’s Boushka said.
One smaller service companies that has recently entered the ticketing market is Keane, which this summer won a large $367m contract to develop and operate a public transit ticketing system for the Australian state of Victoria. Laurence Shaw, Keane’s senior vice president for international operations who is heading the Victorian project, said current smart card transportation system offerings are heavily defined by the proprietary systems with heavy legacy structurethat the larger service companies have invested in, as well as the functionality of the fare hardware, and to a lesser degree, the smart cards themselves. Keane is putting its hopes on a more open system that can support a wide range of transactions and systems with real-time transaction and back-office support. The company plans to announce another major ticketing contract this year and will begin work on several prototypes for other transportation authorities worldwide.
Overall, only about 10% of the worldwide market for new transport ticketing work has been tapped, estimated EDS’s Hulley, and he expects the market to pick up steam in the next three to 10 years. As major transit operators looking to shave costs, Hulley said one big source of savings will be the 10% of all transit costs that are sunk in the back-office transactions work, an area where these operators have neither the expertise nor the desire to run on their own or with outdated systems.
