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  • 1. An Industry in Change: The Impact of Technological Advances on Railroad Operations A Frost & Sullivan White Paper
  • 2. frost.com contents Achieving Success in an Evolving Industry.................................................................................. 3 The Impact of Changing Regulations - PositiveTrain Control................................................... 3 The Need for a Change in AttitudeToward “IT” Resources in the Rail Environment........... 4 Changing the Way Railroads Run HowVerizon is Bringing More Flexibility to the Industry................................................................................................................................ 6 Partnering for Success................................................................................................................... 7
  • 3. 3 An Industry in Change -The Impact of Technological Advances on Railroad Operations ACHIEVING SUCCESS IN AN EVOLVING INDUSTRY With a strong resurgence in volume of traffic and shifting customer demands, North American railroads find themselves in the midst of change, with more and more shippers favoring rail over other methods of transportation. And for good reason. Despite rising diesel fuel prices, the cost to transport goods by rail has been cut in half over the past three decades–largely due to greater efficiencies made possible by vast technological improvements in areas like engine design, sensor use, motor development, and more. Technology is fundamentally changing the way the industry works. Newly passed legislation has given rise to more rigid safety requirements,which rely almost entirely on implementing new technologies. At the same time, railway operators are eager to reap the benefits of data to make their fleets more efficient and maintenance more proactive. Like any other field,technology is providing opportunities to push the railway industry forward. But can operators keep up? THE IMPACT OF CHANGING REGULATIONS-POSITIVE TRAIN CONTROL Ongoing railroad upgrades continue to contribute to organizations’ operating expenses. Railroads currently spend more than $11.3 billion annually in renovation efforts, focused primarily on track materials, locomotives, and rail car upgrades and maintenance. They’re also putting more investment toward upgrading signaling systems. This increase can be directly attributed to the positive train control provision found in the Railroad Safety Improvement Act of 2008. The legislation was passed after a Metrolink passenger train collided with a freight train in California that same year. We’ve all heard of positive train control, but what exactly does it entail? It’s a computer-based system designed to prevent train-to-train collisions and derailments caused by excessive speed,train incursions into maintenance zones, or traveling a track switched in the wrong position. The system determines a train’s exact location, direction, and speed, and warns the train operator of potential problems. If the operator fails to respond, the system takes immediate action, slowing or stopping the train remotely in instances that warrant it. Under the Railroad Safety Improvement Act railroad operators are now required to install positive train control systems on any main railroad lines used to transport hazardous or poisonous materials–and all main tracks traveled by intercity or commuter passenger trains.All seven major freight railroads in the U.S.– plus passenger and commuter rail systems like Amtrak–plan to implement these systems over the next few years.The total cost to reach 100% compliance is estimated to be around $9.25 billion. One of the biggest factors contributing to that price tag are the technical requirements of building, operating, and upgrading a signaling system based on a positive train control system. In the past, railroad signaling systems were primarily analog in nature, built using circuit boards and commercial off-the-shelf parts. As long as the necessary components are still available,maintaining these systems is always possible. And even if parts can’t be found, operators can always use spares or breakdowns from other signaling systems to extend overall lifespan. With a positive train control system, there are not as many options for upgrading, but maintenance is simpler and more predictable. Its software was written in assembly language for a specific microprocessor, so no matter how often hardware is customized or changed, the underlying architecture stays the same, a truly future-proof investment.
  • 4. 4 frost.com Operators never have to worry about parts becoming obsolete, because they can easily be swapped out with newer components without requiring a total system upgrade. Technological advances in microprocessors allow for the integration of several hardware components onto a single chip, which means fewer pieces of hardware are needed. In addition, many of the system’s computational processes now take place on the chip, making the overall system less dependent on hardware.The system’s software makes use of intuitive, graphical user interface programming languages that make upgrades simple to create and easy to deploy. Figure 1: Schematic of PositiveTrain Control, North America • Displays authorities and speed restrictions • Warns crew when approaching lights • Reports location to server On-Board Equipment • Constant warning • Responds to radio signal from trains PTC-Activated Grade Crossing • Tracks trains • Monitors track circuits, switches, detectors • Computes authority limits • Transmits movement authority to trains • Computer-aided dispatching PTC Server GPS • Control/authorize movement • Response to radio signal from trains Roadway WorkerTerminal RF Data Link • Total accidents/incidents in 2012: 10,607 • Total accidents/incidents between rail and highway traffic: 1,953 • Total fatalities: 715 Objectives of a PTC System: • To prevent train-to-train collisions • To enforce speed restrictions • To protect workers and equipment Source: AAR; Frost & Sullivan Within a positive train control system,large volumes of data are continually transmitted back and forth between the railroad’s sensor units,back-office applications, and various other parts of the system. The network used to transmit this data must be capable of delivering high bandwidth with low latency to meet the system’s robust technological requirements. This sharing of information provides a number of benefits and information-gathering opportunities for operators, allowing them to learn more about their tracks and trains. Accessing near real-time information also helps operators enhance line capacity, improve service reliability, make more efficient use of rolling stock, control downtimes, and open larger windows to schedule track maintenance. THE NEED FOR A CHANGE IN ATTITUDE TOWARD “IT” RESOURCES IN THE RAIL ENVIRONMENT As you know, the railway industry has not always been as quick as other sectors to adopt new technologies. But there’s a reason for that. Today, there are seven Class 1 railroad operators in North America – defined by the U.S. Surface Transportation Board as any railroad company with annual operating revenues of more than
  • 5. 5 An Industry in Change -The Impact of Technological Advances on Railroad Operations $250 million.Those seven operators control more than two-thirds of the rail track across the continent.Due to this relatively small number of operators, the industry did not garner the initial attention of software solution providers in the same way as other industries,like manufacturing.Because of this,many operators had no choice but to design and develop their own in-house solutions. Union Pacific Railroad, for example, boasts an IT department of approximately 2,000 employees – 400 of which work in telecommunications maintenance, 200 in the data center, and about 1,000 managing the company’s software systems. Union Pacific is actively working to replace a 40-year-old transportation management solution developed by IBM. Many railroad operators now find themselves in a technological stalemate – locked into in-house-built IT solutions merely to pay off the time,effort,and costs that went into that development. Put simply: The solution remains in place solely to justify its costs. Other industries, such as banking and healthcare, also initially managed their IT needs in-house. But most of those organizations have since outsourced their technology requirements to third-party providers,moving away from areas outside their expertise to focus instead on growing their core business. Today’s railroad operators are following suit – and as a result a much-needed shift is happening,with the potential to increase profitability and usher in more flexibility and agility. By taking their in-house software systems outside to a third-party provider, operators are shifting the costs of the software from a capital expense to an operational expense – and implementing a system that can adjust to future needs with minimal costs. Figure 2: Role of Middleware in Application Stack for Railroad Operators, North America • Life cycle, data repository, network, specific hardware, time management • Passenger information, employee tools and information, scheduling • Messaging, fault management, event and timer management • Additional requirements from operators can be met by using middleware and applications: on top of the middleware: APPLICATIONS MIDDLEWARE COMMUNICATION SYSTEM DATA DISTRIBUTION SERVICE CLOUD/GLOBAL DATA REPOSITORY APPLICATION APPLICATION APPLICATION APPLICATION ARCHITECTURE: • Vendor-neutral application programming interface • Optimal predictability and efficiency • Minimized data copying BENEFITS: • A system can have any number of readers and writers • Asynchronous, scalable, and reliable data distribution • Easy to add more protocols Source: UIC; Frost & Sullivan
  • 6. 6 frost.com Outsourcing their software and IT systems provides railroad operators greater flexibility, which allows them to upgrade and customize quickly and easily, without the need for new hardware. Such a system would also include built-in support for existing software and IT solutions, and would allow operators to replaced hardware as needed to keep pace with technology changes. From custom hardware to custom software, this is the biggest shift and opportunity- the ability to create new content as the transit system grows and integrating all these inputs into one giant intelligent mega system -Original Equipment Manufacturer CHANGING THE WAY RAILROADS RUN HOW VERIZON IS BRINGING MORE FLEXIBILITY TO THE INDUSTRY Figure 3: Verizon’s Product Offering for Railways, North America Verizon offers powerful, robust solutions for the demanding railway environment Advanced Communications Mobile Workforce Solutions Dynamic Cloud Solutions Networkfleet EDI and M2M Management Center Intelligent Networking and Security Source: Frost & Sullivan Positive train control isn’t the only technological advancement driving change in the railroad industry. Almost all major freight operators are looking to data to help improve fuel efficiency and keep tabs on potential maintenance issues. By streaming data directly from railways to company back offices, operators now have a variety of new tools at their disposal, including video capture and track monitoring. While implementing these technologies is relatively straightforward, managing the ever-expanding volume of data as a result of it has become increasingly complex – and threatens to steal focus away from more critical aspects of managing a business. Assigning in-house resources to such an onerous task can reduce or eliminate any profitability or efficiency gained from such data access in the first place.
  • 7. 7 An Industry in Change -The Impact of Technological Advances on Railroad Operations Verizon’s cloud computing services are well positioned to meet the growing data storage requirements of North America’s railroads. A leader in cloud,Verizon has years of experience providing critical resources for enterprises and governments around the world. The company’s pricing models allow railroad operators to adjust their technology needs on demand –helping to control costs by paying for only what they use. Operators can also speed up their applications as needed, so they can act faster on data received. Over the next few years, transportation orders are expected to be placed with railroad operators through business-to-business and business-to-consumer e-commerce platforms. Every major North American railroad is currently e-commerce-capable through EDI 810 and 850 invoice transaction sets. These sets replace paper- based invoices in railroad operations and make them available electronically. However, only one railroad has implemented the 856 EDI invoice transaction set, with two more railroads planning to add it within one year. EDI 856 or Advanced Shipment Notice (ASN) notifies operators of impending deliveries and can help them control their overall receiving costs. In an ever-changing marketplace, it helps railroad operators to be proactive and use the latest information standards to remain competitive.Verizon has proven its capabilities in assisting organizations across a variety of industries to meet high-volume EDI requirements and is well- equipped to partner with railroad operators to add new standards to their organization. With Verizon’s M2M Management Center, railroad operators can gain greater control over their technology, helping operators save time and resources by sending engineers to fix non-network problems. Plus,it gives them the ability to activate and deactivate M2M devices remotely. Verizon’s M2M devices and services operate on active 2G, 3G, and 4G LTE wireless networks. This provides railroad operators with multiple wireless networks to meet their data transmission needs. As M2M devices have come to play an increasingly important role in railroad operations, so has the security and integrity of their communications. Verizon Security Solutions can help operators design a comprehensive defense strategy, helping them manage their compliance requirements more easily and effectively. Railroad operators can also track, monitor, and manage their vehicles using the Verizon Networkfleet tracking system. GPS and advanced mapping technologies provide operators with greater insight – helping them make more efficient use of vehicles and control fuel consumption. PARTNERING FOR SUCCESS In today’s dynamic railway market, operators are challenged to offer differentiated services, establish a solid plan for growth, and increase profitability. At the same time, they’re looking to leverage their existing IT infrastructure – growing their technology plan forward without leaving significant investments behind. While positive train control systems have certainly been the driving force behind technological growth in the industry, it doesn’t paint the entire picture. There are many other ways operators can make their railways safer, more efficient, and future-ready. Verizon can help. From managing outsourced software and IT systems to migrating from in-house to third-party solutions to providing training and support to internal IT teams, Verizon gives railroad operators tools and security to help them embrace new technologies confidently – so they can continue focusing on growing their core business. For more information aboutVerizon solutions available for railroad operators, visit: • http://www.verizonenterprise.com/industry/transportation/ • http://www.verizonenterprise.com/news/2013/12/positive-train-control-fra-mandate
  • 8. frost.com ENDNOTES 1. http://www.verizonenterprise.com/industry/transportation/ 2. http://www.verizonenterprise.com/news/2013/12/positive-train-control-fra-mandate 3. http://www.verizonenterprise.com/Medium/sign-in/vec/edi.xml 4. http://www.verizonenterprise.com/products/security/threat-vulnerability/ 5. https://www.icsalabs.com/ 6. http://www.progressiverailroading.com/union_pacific/article/ How-information-technology-helps-connect-the-strategic-dots-at-Union-Pacific-Railroad--36415 7. http://www.progressiverailroading.com/rail_industry_trends/article/ Information-technology-At-freight-railroads-IT-execs-help-lead-the-change-charge--23273 8. http://www.cisco.com/web/strategy/docs/trans/cisco_positive_train_solution_overview_sept_2013.pdf 9. http://www.gao.gov/assets/660/656975.pdf 10. https://www.aar.org/keyissues/Documents/Background-Papers/Positive-Train-Control.pdf 11. http://www.enotrans.org/ctp-blog/positive-train-control-good-idea-terrible-implementation-and-blame-all-the- way-around 12. http://www.scientificamerican.com/article/freight-rail-back-to-the-future/ 13. http://www.worldwatch.org/node/872 14. http://www.aei-ideas.org/2013/04/oil-shipments-by-rail-have-doubled-in-two-years-and-have-helped-the-revival- of-a-new-railroad-age/ 15. http://www.scientificamerican.com/article/freight-rail-back-to-the-future/ 16. http://www.smartplanet.com/blog/bulletin/americas-railroad-revival/ 17. http://www.theprovince.com/news/train+manufacturers+press+more+safety+features+tanker+cars/9500990/ story.html 18. http://www.railcis.org/information-standards/edi-guidelines/edi-introduction-and-overview/ edi-transactions-by-road/
  • 9. For information regarding permission, write: Frost & Sullivan 331 E. Evelyn Ave., Suite 100 MountainView, CA 94041 SiliconValley 331 E. Evelyn Ave., Suite100 MountainView, CA 94041 Tel 650.475.4500 Fax 650.475.1570 San Antonio 7550 West Interstate 10, Suite 400 San Antonio,TX 78229 Tel 210.348.1000 Fax 210.348.1003 London 4 Grosvenor Gardens London SW1W 0DH Tel +44 (0)20 7343 8383 Fax +44 (0)20 7730 3343 877.GoFrost myfrost@frost.com www.frost.com Auckland Bahrain Bangkok Beijing Bengaluru Buenos Aires Cape Town Chennai Colombo Delhi/NCR Detroit Dubai Frankfurt Iskander Malaysia/Johor Bahru Istanbul Jakarta Kolkata Kuala Lumpur London Manhattan Miami Milan Mumbai Moscow Oxford Paris Pune Rockville Centre San Antonio São Paulo Sarasota Seoul Shanghai Shenzhen SiliconValley Singapore Sophia Antipolis Sydney Taipei Tel Aviv Tokyo Toronto Warsaw Washington, DC Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today’s market participants. For more than 50 years, we have been developing growth strategies for the Global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, MegaTrends, breakthrough best practices, changing customer dynamics and emerging economies?