ETR Insights presents an interview with the Chief Information Technology Officer for a large regional transportation authority. The authority’s relatively secure funding cushions the impacts of inflation, though our guest still emphasizes a cautious stance, particularly when it comes to technology-related expenditures and consultant costs. They discuss the impacts of international conflict on supply chains, and how “Buy America” regulations may delay the electrification of their fleet. Generative AI will face challenges in heavily-regulated California; any implementation must address concerns about labor, safety, and data privacy. Read on to learn more about AI-powered solutions like IBM Maximo for asset management, why this agency stores their video and IoT data in a propriety government cloud, and why all companies must now prioritize mobile-friendly solutions for a younger workforce.
Vendors Mentioned: ADP / Apple / Clever Devices / Google / IBM (Maximo) / INIT / Meta (Facebook) / Microsoft / Oracle / Paycor / SAP / State of California (CalCloud) / Tesla / Trapeze / Workday
Economic Overview
ETR survey data reveals an anticipated average growth of 3.8% in IT budgets for 2024. Our guest is generally aligned: “3.8% might be a little aggressive or optimistic for me, but I could really see a 3.2% or maybe a 3.5%. If I were asked without seeing this chart, I would have put down 3%.” Anchored in Silicon Valley and serving numerous tech heavyweights, this transportation authority benefits from robust sales and property tax revenues, which sets it apart from peers. “We are not predominantly fare box revenue-driven like others; the macro trends that you might see at other transit agencies may not be applicable to what we do here.”
Vendor-Specific Commentary
Inflation. Well-funded but still wary of inflation, the organization has adopted a conservative approach in certain areas, such as consultant expenditures. A major civil infrastructure developer, they report surging prices across construction, labor, and vehicles, though perhaps less so in technology itself. “Year-over-year for IT, I’m not seeing things more than a 3% to 4% difference.” They credit the organization’s consistent budgets and relative stability to long-term contracts, a common practice in government where contract negotiation is a drawn-out process.
International Conflict + Cyberattacks. Conflict-driven disruptions to the supply chain affect vehicle part acquisitions and necessitate increasingly complex regulatory compliance. “There are a lot of ‘Buy America’ clauses in grants now; there are hard stops on China and Russia. Before we could get a bunch of programmers and do a quick custom job out of Russia, but now there are clauses, restrictions, compliance issues around some of these hotspots.” These are of particular concern in light of the organization’s goals to electrify their fleet by 2040. “There aren’t very many ‘Buy America’ manufacturers of [electric] vehicles right now. The ones that are the most aggressive with pricing are being built in China.”
Anticipated 2024 Industry Trends. Our guest points out the growing prominence of generative AI in business applications. “We’ve seen lots of interest in serious evaluations for different business use cases, and then about half as many are actually into production. This is all continuing to grow.” However, they highlight the challenges posed by regulatory agencies and labor representation, particularly in states like California. “We’re going to dip our toe into it, but I’m in California, a heavily regulated blue state with a labor push. Anything I do with AI, I’m probably going to have to agree that it’s not going to affect overall headcount or decrease jobs.” They struggle to balance public accountability and accessibility with concerns about data privacy and security within AI, and underscored the need for clear data ownership policies and security measures to protect against potential misuse of data. “The law always follows technology by years, if not decades, so it’s going to take a while for the lawyers and the regulators to catch up with some of this stuff.”
Security Trends. Given the nature and working conditions of their staff, our guest stresses the importance of finding a balance between user-friendly access and robust security. “I have bus drivers, train drivers, and mechanics. I can’t have them having multiple multi-factor authentication, iris scans, and stuff to get into their system, but at the same point, I can’t have their password be ‘password’. It’s difficult to train these folks.” They are focusing on practical security measures like physical log-in badges and backend restrictions to prevent unauthorized data access, as well geographical fencing to block suspicious access attempts.
Standout Vendors. For enterprise asset management, they are shifting away from traditional methods to AI-powered solutions, such as IBM Maximo. Our guest recognizes the need for improved HR information systems, focusing on self-service models to streamline annual processes; they will be trialing SAP for HR IS, but have made no commitments. Mobile access will be key. “The folks coming that we’re hiring right now, they don’t sit at a desk behind a keyboard. They’re all millennials and Gen Z, and they’re all on their mobile devices. All the solutions I want to present are going to have to have that mobility, and kind of small screen and user-friendliness.”
Pointing out the inefficiencies in maintaining multiple transportation-focused IT systems like INIT and Trapeze, they hope to consolidate various systems under Clever Devices. The goal is to enhance operational efficiency and reduce the administrative burden. “Instead of tracking seven different contracts for renewal, I’d only have one or two. Another niche player might do it a tiny bit better or have a prettier screen, but that doesn’t negate the fact that you have to set up another contract, another invoice, another SME, another support channel. It’s just not worth it anymore.”
Cloud Adoption. Faced with exponential data growth—particularly high-definition video and IoT devices—and constrained by budget and infrastructure limitations, a move to the cloud was inevitable. “It needed to become someone else’s responsibility. Let them deal with cybersecurity and disaster recovery, the generators, the fire suppression, and having data centers all over the country. I am no longer in the position to be able to do that for myself.” Currently 30% of their workloads are in the cloud, slightly lower than the industry average of ~40%. They work with both the public cloud and the state’s proprietary CalCloud, which offers enhanced security, service levels, and cost predictability. “I can’t think of an example where I’m bringing things back off the cloud and putting it back on-prem, but I can think of places where I’m switching from public to private [cloud], or private to public [cloud], or to this CalCloud.”
Data Analytics. They see the value of value of mining this copious data, but to date have made few inroads. “We’re going to have to do some sort of coordination or cooperative agreement to do this, because we can’t afford a $300,000-a-year or $500,000-a-year data scientist.”
Overhyped Trends. Autonomous vehicles will have a transformative impact on the transportation sector, though our guest thinks we are a long way off from wide-scale adoption. “Transportation and transit is a very conservative industry. We are not on the edge. We don’t want to do a beta test of AI, put it into every traffic signal in town, and have them turn every signal green on the intersection. For 2024, it’s not there yet.”
