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Outsourcing: nothing to fear but fear itself?

July 15, 2011
Author: Eve-Marie Morgo

The outlook for the European rail sector is positive. The opening up of the market, the investment in high speed rail infrastructure and increasing demand from travellers combine to create a very dynamic opportunity for rail companies.

Today, millions of passengers are choosing to travel at least part of their long distance journey by rail, encouraged by the expansion of high speed networks, a greater focus on environmental credentials and the rising cost of fuel. The recent EC whitepaper, Roadmap to a Single European Transport Area, is also placing rail in pole position.

Nonetheless, the rapid development of the market is forcing all of us to look at how best to maximise these opportunities and overcome the barriers to growth. One area threatening to hold back progress is technology.

With the majority of rail companies still dependent on legacy systems, it raises the question of how rail companies can organise their data, identify passenger needs, sell more effectively and build their capabilities in responding quickly to customer demand.

The challenge with legacy systems is that not only do they not allow organisations to adapt as quickly as the commercial environment demands, but they also cost a lot of money to maintain and develop. At a time of intense competition and market upheaval this can mean the difference between success and failure.

When speaking with rail companies, it is clear there is a real appetite for further exploration of how best to modernise systems in readiness for the significant growth opportunities that exist today. As always, the challenge of modernisation is how to do it in a straitened economic environment. Therefore, the discussion needs to be both focused on how best to limit the impact on capital expenditure as much as it is on the technology options available. And this is where outsourcing comes in.

Lessons from the airline industry

The airline industry provides a model for how to successfully do this. Many of the world’s leading airlines have migrated to next generation systems in the last decade. By using a community IT platform it has allowed the airlines to benefit from the latest systems to manage customers and their operations on a pay-per-use model. Any initial fears about outsourcing have been overcome by the productivity, cost and revenue generating benefits offered by the latest future-proof systems.

In the autumn, we will be focusing on how the rail sector can step up to the challenge of the next ten years and the role that technology outsourcing can play. To this end, we will be launching a paper we have commissioned, authored by Professor James Woudhuysen, to stimulate further discussion about how we can turn the promise of rail in the twenty-first century into reality.

The question for rail companies may well be: is now the time to feel the fear of outsourcing and then do it anyway?


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