The transport industry in the UK is undergoing a huge change. In the past the sprawling public transport system was derided as the worse in Europe and although privatisation has improved some services, they are not as efficient as they could be and the companies running them are still having to deal with IT legacy systems. Cost is still a big issue for many IT departments in transport companies but updating and consolidating systems is reducing operating costs for many.
On the positive side, those transport industries that are getting it right are the ones that have grasped technology and begun to use it to get the best out of their established services and to bring new ones online. Many transport IT departments are still looking at using technical innovation to improve internal capacity and are working closely with partners on this. This is a huge historical change for the industry but is likely to continue over the next decade.
The main competition will be amongst the most innovative transport companies, according to Darin Brumby of FirstGroup. “There will not be new money for this but people will begin to think about innovation with what they already have. Legacy is still a huge issue for the sector and it can’t just throw that away, they have to use the current portfolio to make things work.” There is likely to be some M&A activity in the industry over the next 12 months, as some of the larger transport companies look at growth through acquisition, both in the UK and Europe. This obviously has repercussions for IT departments who will be responsible for integrating any merged organisations’ systems.
One of the main targets for many companies in the transport industry will be the 2012 Olympics, which are expected to bring billions of pounds into the UK economy.
“Opportunities will be vast,” says Brumby. “The 2012 Olympics will stretch solution thinking in transport even more and will bring with it demand for new skills and developments.” The industry is relishing the challenge the 2012 Olympics will bring, and is hoping the event, where £17 billion will be spent on London transport alone, is likely to pay huge dividends. Environmental issues are having an increasing impact on the industry, as evidence of global warming continues to mount up. This is becoming a major concern and most transport organisations are very aware of the environmental issues, particularly in the airline industry, as it tries to balance growth in passenger numbers with increasingly vocal environmental lobbyists.
- Reducing costs: Many transport companies are still trying to update ageing legacy systems so that they can cope with the changing transport environment. While oil price rises and increasing competition mean their budgets are tight, being able to consolidate and streamline systems to reduce operating costs is a top priority.
- Managing data: Better data management and increasingly agile business intelligence models are having a profound effect on some transport companies. Not only are they able to reduce operating costs but they are also using information to provide innovative new services that offer the organisation new revenue streams and a wider breadth of services.
- Regulation: The transport industry is closely monitored by government regulators, as well as operating in the increasingly bright spotlight of the green lobby. Heads of IT have to work hard to provide the right business information to enable their organisations to move forward, while at the same time keeping the regulators and environmentalists happy.
The aviation industry has been changing very quickly, driven by increasing passenger numbers from the low cost carriers, raised security concerns and more aircraft movement. This has had a major impact on IT departments at airlines and airports, moving them from the back-office to the forefront of operations. Online organisations like EasyJet, as well as traditional carriers like BA, are all using technology to drive their companies forward.
The effective use of business information and handling the vast amounts of data that the industry produces is key to success, according to Martin Smith, head of group IS at Manchester Airports Group. Manchester Airport handles 22 million passengers a year and Smith says IS is at the core of the airport. The company has just begun a major rewrite of its core operational database using a service oriented architecture to more closely integrate process operations, increase efficiency and allow more detailed analysis of data.
The private transport companies have to work within the government regulatory framework for transport operators and this can sometimes limit their activity. This may see some predicted M&As stopped but it is the organisations using the most innovative technology that are likely to have the edge in this sector.
Manchester Airports Group
- Headquarters: Manchester
- Number of employees: 2,600
- Last full-year revenues: £385 million
- Head of IT: Dr Martin Smith, head of group IS
Manchester Airport is the UK’s third largest airport, handling 22 million passengers a year and offering direct flights to over 200 global destinations by 100 airlines.
It is part of the Manchester Airports Group (MAG), which is the second largest airport operator in the UK and comprises Manchester, Nottingham East Midlands, Bournemouth and Humberside airports. The airport and airline industry has changed significantly over the last few years, says Martin Smith, head of group IS.
“There has been steady growth but the industry now faces a raft of new challenges like environmental issues and changing revenue streams that it will have to address over the next few years,” he says.
IT is at the core of the business at MAG and what the department aims to do is to provide a really good experience for both sets of customers – the travellers and the airlines. “We are addressing customer service, improving revenues and streamlining processes, by using technology appropriately,” says Smith.
"There has been steady growth but the industry now faces a raft of new challenges like environmental issues and changing revenue streams "
Martin Smith, head of group information services, Manchester Airports Group
A good example of this is Manchester’s check-in systems, where it has considered the whole process, looking not just at conventional check-in but also at internet home check-in, fast bag drops, queuing and outbound control. “We recognised there are substantial inefficiencies in checking-in and have used technology to improve processes.”
Manchester’s streamlined ‘Express Check-in’ comprises the largest UK installation of self-service check-in kiosks. It has the capability to handle 70 per cent of its departing passengers, using 58 kiosks.
“With the kiosks and fast bag drops we have significantly increased speed from end-to-end. If we can speed up people getting to airside it has the added advantage of increasing our retail revenue there, helping to compensate as our revenue from airline landing charges continues to be challenged in the competitive market.”
The airport operational database (AODB) is at the heart of operations and is heavily integrated with other systems that MAG operates like flight information display, invoicing and the allocation of gates and stands. “It’s a very robust central repository and gives us good data to run our day-to-day activities and manage our business. It also is a key source for our business intelligence tools which helps us understand the value of the business generated by different airlines,” he says.
The AODB was originally developed by Manchester airport but is now supported by a third-party and is being used at other airports in the UK and China. The system offers both dynamic and customised information for different displays used throughout the airport terminals for passengers, airlines and ground handling companies. The database also feeds Teletext, information kiosks, the website, a flight enquiries call centre and SMS mobile phone messaging. Smith has just begun a technology rebuild of the AODB to refresh the underlying infrastructure.
“We are moving to a SOA type approach to refresh the product where operations will become even more closely integrated and we will be able to increase efficiency,” says Smith. The system will go live in Manchester by April 2008.
The IS strategy is to offer information so that senior management can make better business decisions for the MAG. “We use innovation to improve service for all our customers. The AODB rebuild we are doing is back-office but it will allow us to extract information and use business intelligence for better decisions, to streamline our operations and processes and leverage that investment in our other airports,” says Smith.
He adds the operations are very extensive and an increasing part of the IS role is to provide services for their partners at the airports.
At Manchester Airport 2,000 people work on site for MAG but there are 18,000 working at the airport in total. “We offer network and telephone services to the partners and this can assist them in containing costs and having high availability services. Our WAN offers quality services at Nottingham East Midlands, Bournemouth and Humberside airports and its use is increasing enormously. Our partners need a secure network. We can provide that as a service and it offsets our own costs.”
- Headquarters: London
- Number of employees: 74,000 (UK and North America)
- Last full-year revenues: £3.7 billion
- Head of IT: Darin Brumby, group IT director
Bus and train operator FirstGroup is in the midst of a major business transformation programme. At the same time it is bedding into the infrastructure important new rail franchises, like the Greater Western and Capital Connect, according to Darin Brumby, group IT director. It is now the largest rail operator in the UK, carrying around 250 million passengers each year.
At FirstGroup franchises and a full portfolio of businesses means IT is already very busy. Brumby says that because the sector itself is changing, there is lots more work to be done because the business is becoming increasingly complex.
“The pace of change has been very fast this year. We have won more new rail and bus business and so we have been juggling these additions as well as handling our larger strategic plan,” says Brumby. “We have had to adjust a few things to our infrastructure plan and although it is behind the original schedule, we are making great progress.”
"The pace of change has been very fast this year. We have won more new rail and bus business and so we have been juggling these additions as well as handling our larger strategic plan"
Darin Brumby, group IT director, FirstGroup
The infrastructure at FirstGroup was not dealing with a stable environment before but now is under even more pressure, says Brumby.
“This means what we are doing is business transformation and then some. We are the leader in our market and have some momentum already but the challenge is greater and there is a lot of dialogue going on between our businesses and their IT managers.” He believes that IT targets are better aligned to the businesses now and there is better engagement between the two groups. He says there always has to be constant communication and dialogue because of the constantly changing business needs.
“The connection between business and IT is better than it was previously,” he says. “The potential for IT is way beyond pure cost reduction now and the change in the corporate culture has been very significant in that time.”
This progress includes reducing overall IT maintenance costs from 60 per cent of budget, down to 40 per cent and turning around project execution so that they are completed on time and to budget. At the end of last year FirstGroup announced a five-year infrastructure deal worth £46.9 million, with BT and HP. The deal included the company’s global network, a refresh of its servers and desktops, thin client architecture and a service desk for the global organisation.
It is also carrying out a SAP unification programme. “We use SAP for many parts of the business – engineering, maintenance, finance, HR and payroll,” says Brumby. “We are looking at shared services, common business processes and systems rationalisation, which will all lead to improvements in service to the business.”
He is constantly looking for cross-divisional synergies. “Achieving group-wide licensing agreements without losing flexibility is important,” he believes. “We are very strong in negotiating and managing partner relationships. Getting more creative while growing productivity and revenue through business led innovation is increasingly important.”
He believes that the transport market in the UK is likely to change. “I believe there will be some M&As. There are currently 25-28 operators and that seems a lot. In terms of marketshare, the five or six at the top have 80 per cent of the market, so the potential for dialogue is huge. I wouldn’t be at all surprised to see movement in the UK and the rest of Europe and it could radically change the market.”
For the future Brumby sees some stiff challenges. “Oil has had a significant impact on the market over the last 18 months, although it is beginning to stabilise. We are now operationally efficient, so although we did well, our profits would have been in the extra millions if it hadn’t been for fuel prices.”
Most transport companies are now more operationally efficient, he believes, but the difference will be between those who use technical innovation not for squeezing cost management, but for building, delivering and finding new revenue streams in different spaces.