APPS RUN THE WORLD Transportation Vertical Applications Market Report 2009-2014, Profiles Of Top 10 Vendors 9/30/2010 Copyright © 2010, APPS RUN THE WORLD 2 Table of Contents Summary......................................................................................4 Top Line and Bottom Line..............................................................4 Market Overview...........................................................................4 Implications Of The Great Recession of 2008-2009.......................5 Customers.....................................................................................6 Top 10 Apps Vendors In Vertical....................................................7 Vendors To Watch.........................................................................7 Outlook.........................................................................................7 SCORES Box Illustration................................................................8 3 Profiles of Top 10 Apps Vendors.............................................................9 SAP 10 Amadeus...............................................................................................14 Sabre Airline Solutions..........................................................................18 Travelport.............................................................................................22 Lufthansa Systems...............................................................................26 TravelSky..............................................................................................30 Oracle...................................................................................................34 JDA 38 Descartes Systems Group.....................................................................42 Infor......................................................................................................46 4 Summary This applications market sizing report examines the 2009 performance of the top 10 applications vendors in the transportation vertical, which includes airlines, railways, postal and package carriers, shipping companies, and logistics service providers. The market was essentially flat in 2009 as recession, coupled with relatively high fuel costs in the first half of the year, hurt the performance of the whole sector. Many transportation companies slashed their IT spending as a result. The tentative recovery did not improve things until the tail end of the year. Still the signs are encouraging as passenger and freight traffic starts picking up once again. Government-funded initiatives, including high speed rail projects that could begin service as early as 2013, will also boost investment in the applications market through the forecast period. Top Line and Bottom Line On the top line, the transportation vertical is one of the most fragmented sectors encompassing different modes of transport for moving people and goods around the world. Hence there will always be a need for not just implementing new applications for new transportation systems, but also upgrading existing ones with the latest technologies to improve speed, performance and scalability. Airlines, for example, are undergoing major expansion as leisure travel picks up in developing world and business travel is rebounding in industrialized nations. The result is an increased demand for agile applications to accommodate airlines’ requirements for real-time booking and ticketing as well as for managing passenger records and departure control. Legacy applications for computer reservation systems are at different stages of being replaced or upgraded as airlines are loath to carry on with the expensive task of maintenance and support so that they can focus on their core competency. Hence new software will need to be written specifically for next-generation infrastructure that leverages the latest mobile technologies. In one example, the Chinese government plans to invest up to $1 trillion by 2015 on infrastructure projects. More than half of that amount will go into new railways, airports and other systems for the nation’s more than 30 domestic airlines. The bottom line is that the transportation vertical is a work in progress because of its inherent challenge of running a distributed network that is always in search of the nexus to accommodate people on the move. In fact there are so many untapped opportunities for new applications including electronic toll collection for the next-generation car to grid system or Web-based portals for clearance of customs forms to meet shifting global trade management compliance requirements. Market Overview The market for applications for the transportation vertical was essentially flat in 2009 as new IT spending was either halted or postponed at the teeth of the recession. As economic outlook began to look rosier, new projects were placed on the front burner. In August 2009 American Airlines announced its plan to develop a new computer reservation system with HP, which has considerable presence in the market through its EDS division. The new system called Jetstream is 5 expected to be phased in over the next four years replacing the Sabre CRS that American has been running for decades. Other new developments have been put into high gears by applications vendors such as Amadeus, Sabre, SAP, Travelport and TravelSky, all vying for the opportunity to sell next-generation applications to airlines and airports to manage their operations and customers over the next few decades. Other vendors have focused on ground carriers, logistics service providers as well as an army of freight brokers, forwarders and other stakeholders helping them improve their operations through optimized profitability by incorporating partner collaboration, transportation network design with the help of RFID and fleet management, as well as the inclusion of carbon footprint analysis for companies that make sustainability a business priority. On the M&A side, apps vendors focusing on the transportation vertical have done their share of deal making. Descartes, for example, raised $38 million in a stock offering to help fund its acquisitions. Its latest one was the purchase of Belgian-based Routing International for its optimized route planning solutions. RedPrairie, following its acquisition by private equity firm New Mountain Capital in March 2010, acquired SmartTurn for its warehouse management applications two months later. The underlying strengths of the transportation vertical, coupled with the heightened interest of institutional investors, are expected to fuel the growth of apps vendors that have every intention of making it easier for companies to transport people and goods around the world. Implications Of The Great Recession of 2008-2009 While the recession has dented the hopes of sustainable growth in the transportation vertical, it did not threaten to take down the entire industry. While the transportation vertical appeared to be more resilient than financial services because of its critical role as a global link, it was not immune from external threats. The spread of the H1N1 virus in early 2009 – and more recently the volcanic ash eruption incident - posed serious challenges to the vertical, underscoring the vulnerability of the system in staving off potentially disastrous outcome. What it remains unclear is whether new technologies and the accompanying applications can be put to the test of securing the system, perhaps limiting the damage done to the entire transportation network. The second half of 2009 appeared to have given the vertical a new lease on life as the transportation vertical was swamped by increased passenger traffic. By the end of the third quarter of 2009, bookings using Amadeus Global Distribution System ended the fifth-straight quarterly decline with only a 2.8% drop. The figure shot up to an 8.8% jump in the fourth quarter of 2009 and continued with a 9.6% jump the following quarter. Amadeus attributed the rebound to strong bookings in Middle East and Asia Pacific. Similar sentiments were echoed by other GDS providers as well as applications vendors that specialize in transportation industry. Descartes, which operates an on-demand service that acts as a federated global logistics network processing everything from carrier selection to cargo freight billing, saw a 35% jump in revenues for its latest quarter ended July 31, 2010, citing improved business conditions and recent acquisitions. That followed a 22% rise in revenues for its preceding quarter even though its network was snared by disruption of cargo traffic due to the Icelandic volcanic activity in April. As the turnaround of transportation vertical was buoyed by heavy infrastructure investment around the world, the threat of a double-dip recession began to recede. Even in mature markets such as Western Europe, Amadeus saw 6 pockets of growth. In its latest quarter, Amadeus sold its Altea passenger service systems to two regional airlines in France and migrated three airlines including Spanair of Spain to new departure control module. What these developments suggest is the resiliency of the transportation vertical fueled by man’s eternal quest for discovery. The applications vendors in turn are doing their part not to disappoint the intrepid travelers. Customers Airlines, railways and logistics service providers in Asia Pacific and Middle East are expected to serve as the catalyst for applications vendors to expand in the transportation vertical. Given the strong fundamentals of