January 2001 | Commentary | IT Matters

Transportation Software: A Guide for the Perplexed

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Making the right transportation software choice is harder than ever. More than 60 Internet transportation dot.coms have launched in the last 12 months alone. If you're like most people, you're wondering: "How can I make sense of all these companies?"

The good news: the Internet can provide enormous productivity gains for transportation and logistics companies. The average non-automated 3PL generates $500,000 in revenue per person. In contrast, a top-tier, highly-automated 3PL can generate as much as $7 million in revenue per person. The difference is technology. The dot.com frenzy is based on a real opportunity to add bottom-line value.

The bad news: it's harder than ever to separate the winners from the losers. Of the 60-plus companies that launched last year, most will either fail or restructure due to unsustainable business models. Some have great software, while others have great teams. But to be a long-term winner, you need the full package.

Here's a guide to separating the winners from the losers on the Net. If you're thinking of using an Internet company, evaluate these four primary areas:

1) Transportation team. Does the company have real transportation expertise, or is it an opportunistic newcomer? Less than five of the 60 companies draw a majority of their senior management team from the transportation industry. This is a problem. Left to their own devices, their technologists may create products that don't meet real market needs.

2) Great technology. Does the company have great technology that can sustain high volume on the Net? More than 40 of these 60 companies have simple bulletin board technologies that can't manage contracts or solve complex logistics problems. Of the remaining 20, 12 are old-world legacy software companies that are transitioning, slowly and painfully, to the Internet. None has yet reached critical mass.

3) Real customers. Does the company have customers who recommend them highly and pay for their software? Less than a dozen of the new software companies have paying customers. Some are vaporware companies with big marketing machines but aren't yet ready for prime time. Others are "giving it away" in an effort to get scale. Happy, paying customers are the ultimate litmus test.

4) Financial endurance. Will they be around in a year, or is their backing uncertain? Particularly susceptible are those who are backed by "fair weather" investors who haven't seen a down cycle in the market, and industry-sponsored companies planning to pull the plug on the project if they don't see results.

Technology can help boost your productivity and profitability dramatically. Now is a great time to implement a great Internet strategy with a great Internet partner. Ask the right questions and make an informed decision.

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