Reflections on the past year, insights onthe future and thoughts on the key drivers for change from FARA CEO Ørjan Kirkefjord.
2018 was a good year for FARA. We got four new customers, both counties and PTOs (Public Transport Operators), we renewed the platform for some of our existing customers, and we won four reference projects. As a result, we achieved an all-time high in sales for the second year in a row, ending the year with a revenue of MNOK 160, with an EBITDA of MNOK 23 and an all-time high order backlog.
We have started delivering our newest solutions. Our validator has been very well received in the market, where we have already sold over 4,000 units since its launch in September 2017. The next step for the validator is to have it EMVco L2 certified. This validator is an OEM (Original Equipment Manufacturer) product, so it can be sold separately to any interested party.
Last year we took a major step in our internationalization process. In the spring of 2017 we redefined our strategy, replacing our former scattered bidding approach with “focus markets”. We chose these markets based on their market potential and our competitive advantages. We have built up our understanding of local conditions, created awareness of our products and developed local infrastructure (representatives, local entity etc.). We carried out a successful pilot, outperforming the customer’s existing solution. We signed three international contracts in 2018, but they are yet to be initiated due to local processes and politics. We came in second in two other tenders, beaten by very tiny margins, in close runs with local competitors playing on their home field.
We will continue with what we believe is one of the keys to our being a preferred supplier: our method for developing solutions. We work together with the customer and the end user, staying within the customer’s scope. See the diagram to the below.
The last couple of years we have been preparing our next-generation solutions, taking into account the change in technical possibilities, as well as the changing roles and responsibilities for both management and operations in public transport.
We have called this new generation of FARA tools “SMART” – Smart Mobile Application for Realtime and Ticketing. Our SMART tools bridge the gap between generations of solutions, utilizing and building on what our customers already have.
To visualize where in the operations the SMART products operate, we have defined four core concepts:
- SMART:myCloud – contains the services
- SMART:myTravel – focuses on passengers
- SMART:myDrive – focuses on the driver and onboard functions in the vehicle
- SMART:myOperation – focuses on operational/backoffice functions
What do we offer? Why should customers, third parties or other stakeholders partner with FARA?
- We are an organization with extensive experience and domain competencies related to public transport, and we have a tradition of strong customer relations.
- We have products with open APIs/architectures, built on local and international standards, that are flexible for integrating with third party solutions and/or mobility providers.
- We are hardware-flexible, adapting to different needs.
- Our products are ready for international growth – though there is a need for investment related to local requirements and regulations.
- We have a complete, integrated and modular product portfolio (onboard, real-time information, ticketing, cloud solutions, web etc.), allowing customers to use the “LEGO” principle: mixing and matching according to their own needs and finances.
- We have proven solutions serving an innovative market, bridging the customer’s technology gaps by implementing new technologies.
So, where is the market heading, and what or who constitute the market for our products in 5 to 10 years?
Urbanization, climate and environmental focus are key drivers for change.
The speed of urbanization will accelerate, resulting in increased congestion and negative effects on the climate. Statistics and prognosis predict that by year 2050, 6.2 billion – 67% of the world population – will live in urban areas, compared to 3,6 billion (52%) in 2010. Today, cars supply around 82% of the passenger transport, and that is not sustainable.
Urban traffic handling already happens in a very unfavorable way. Time spent, cost and investment, greenhouse gas emissions, air pollution, noise pollution and land use (in cities, space is the only true finite resource) – all these are areas that have a constant negative development. It is no longer the case that society faces a choice – that time has passed. Now, the international focus is on finding good solutions as fast as possible.
The sharing economy combined with road crowding are motivations for an ever-quicker transition to coordination, and the end of personal car ownership. This fact will be of great importance to the automotive industry. We already see that producers increase their focus on new varieties of vehicles, and invest tremendously in them and in technology to facilitate public transport/replacement of private cars.
Existing infrastructure, daily investments, and the contract system for public transport will be essential factors in the speed of this transformation. The technology and the solutions will be available before they can actually be implemented in the market. Almost every day contracts are signed between PTAs (Public Transport Authorities) and the different PTOs (Public Transport Operators), and they normally have a 10-year timeframe. These contracts involve huge investments by both PTAs and PTOs and are therefore too costly to cancel.
Public transport will be the hub in any mobility concept. We see that the largest players in industry and governments have started a process of adjusting to major changes in the mobility industry in the coming years. There are many challenges that need to be overcome before the market can align itself to provide an expanded mobility service: outdated business models, conflicting roles and responsibilities, technological challenges on various platforms, too many small service providers, public attitudes about private initiative, limitations in funding and in infrastructure (roads, location for service), and clearing of cash flows between the players are some examples.
Urbanization is one of the toughest challenges, and there will be huge investments in both ITS (Intelligent Transportation Systems) and infrastructure. The consumer’s preferences for transport, easy mobility and multimodal content are constantly changing. Another issue is a growing and ageing population that creates new demands for both public transport and ITS solutions.
People, devices and “central systems” are more connected today than before. This connectivity, together with availability and analysis of big data, create opportunities for new innovations in ITS and concepts for public transport. The common goal is to have more transportation of people on public means of transport.
Software integration will be an important element in enabling smooth functioning of multiple systems provided by different suppliers. ITS providers to public transport need to focus on maximizing compatibility with third- party systems, by developing open architecture systems and utilizing APIs. Recent years have shown an increasing collaboration between public transport providers and private shared-mobility providers, such as ride- hailing and bike sharing companies. There has also been an increasing availability of real-time data and interoperability between systems, brought about by using open system architectures and standards for exchange of data. We expect a long-term trend of public transport stakeholders increasing their investments in integrated mobility solutions.
Developments in the payment industry have created opportunities for modern solutions, utilizing contactless bank cards and mobile payments in fare collection. Open payment systems have been adopted by many major European cities, e.g. in London. Several parallel technology developments are currently transforming the public transport market.
However, within our horizon for product development, where we are looking ahead to 2025, we see public transport remaining a relatively constant, manned mobility service, which gradually begins to orient itself towards mobility alternatives. Our product approach to this scenario is to supply an app with a service-oriented back-end system for ordering the mobility service.
Still, ITS in public transport is expected to enter a growth phase which, based on a number of factors, will last for several years. Many of the existing ITS installations (ticketing and real-time information solutions) are nearing the end of their lifecycle, and replacements will be needed. Many public transport organizations are therefore currently investing, or planning to invest, in replacing outdated IT environments with modern solutions. As described, travelers change their preferences, and their demand for convenience and real-time passenger information also contribute to the positive market situation. Other major factors are urbanization, congestion, climate change, demography and the current low use of public transport. Finally, global cooperation such as UITP, as well as central authorities, also see the importance of an effective multimodal and cross-border public transport for an efficient infrastructure. The authorities will also ensure that public transport is running “green”, which they will include as a part of their contracts (“green compliance”).
FARA has defined the way going forward with a product and market roadmap that will ensure satisfied, innovating customers – and thereby growth. FARA takes the full responsibility for a complete delivery.
Our ultimate goal is to make travel easy, and it is only together with all stakeholders that we can make this happen, for the benefit of travelers.