Railinc, IT provider to the rail industry, rides a growth wave

Cary-based company provides software to freight rail industry

dranii@newsobserver.comSeptember 15, 2012 

— When Railinc shifted its headquarters to the Triangle in late 1998, the company never imagined that nearly 15 years later it would be growing like a young startup.

Over the past two years the Cary-based company, which provides software and information services to the freight rail industry, has added more than 60 employees, bringing its total workforce to 265. Railinc’s recent growth is being fueled by an uptick in rail traffic as well as the company’s own investments in new and existing products that have become indispensable to its customers.

“They’re a key cog in the rail industry wheel,” said Andy Sutherland, a logistics manager for GE Railcar Services, a major player in the rail car leasing business.

Railinc is a one-of-a-kind company. It’s a for-profit subsidiary of a nonprofit freight rail industry trade group, the Association of American Railroads. The company got its start as the Washington-based association’s information technology department.

Although half of Railinc’s revenue comes from software products that help industry players – railroads, owners of rail equipment, shippers and others – operate more efficiently and effectively, the rest comes from its unique position as a central repository of industrywide data.

One of its products is a gigantic database containing the height, length and other physical characteristics of more than 2 million freight cars in North America. Customers access this data for mapping out routes and matching cargo to the appropriate car.

“By necessity, there needs to be one entity that maintains that database,” said Allen West, Railinc’s president and CEO. “If that were not a centralized function, there would be a risk, there would be safety issues.”

For example, knowing a car’s height is crucial when it comes to underpasses and tunnels. That information prevents a freight car full of SUVs “from becoming convertibles on the other side of a tunnel,” Railinc spokesman Patrick O’Neil said.

Railinc’s other products include a system that pinpoints the location of rail freight cars as they travel on more than 530 railroads in the United States, Canada and Mexico, a system that lets railroads know where trains have to be rerouted as a result of natural disasters, accidents and other issues, and a system that is used for distribution of revenue when a shipment travels on track owned by different railroads. Each of those railroads gets a piece of the pie, which totaled $15 billion last year.

Those products and others, about 40 in all, added up to $50 million in revenue last year, up from $43 million in 2009. This year, the company is on track to generate $53 million in revenue.

Part of that increase in revenue can be attributed to expanding rail traffic. After a recession-induced drop in 2009, freight traffic is again rising.

A little more than 27 million freight cars and intermodal units – containers that can be shifted between trucks and trains – were shipped in the United States last year, up 4 percent from the previous year, according to the Association of American Railroads. The 2011 total was about 3 percent below pre-recession levels.

The fuel-efficiency of trains in an era of high gasoline prices is helping to spur that growth, said Holly Arthur, a spokeswoman for the association.

“We are four times more fuel-efficient than trucks,” she said.

Expensive data

GE Railcar’s Sutherland said that, for some of Railinc’s products, there’s no good alternative.

Take Railinc’s RailSight software for tracking cars. GE can go to the individual railroads – Norfolk Southern, CSX or whomever – and access software over the Web that allows it to trace a freight car on their track. The problem: “We don’t necessarily know what railroad our car is on, so we don’t know what railroad to ask,” Sutherland said.

As for the cost of Railinc’s products, Sutherland admits it’s not cheap.

“In my mind, you get what you pay for,” he said. “… The data is good. The reliability is good.”

West, who also is chair-elect of the N.C. Technology Association, views the railroads themselves as Railinc’s chief competition. If there’s a key service that Railinc doesn’t provide or doesn’t do well, he said, the railroads will build it themselves in-house.

Filling a need

Railinc’s constant quest for new ways to help its customers does have a downside: After West, 51, was promoted from chief information officer to CEO in 2006, he pulled the plug on a product designed for smaller railroads, known as shortlines, that failed to gain sufficient traction.

Since then he’s overhauled the company’s product development process.

Rather than collect a boatload of information from customers upfront and then go off and develop software in isolation, Railinc now uses a process that incorporates regular feedback from customers to determine whether the software is on course and fulfills a need.

It also helps that Railinc, which historically had outsourced much of its software development, pulled it back from India in 2007 after determining that the difference in cost wasn’t worth it.

Indeed, Railinc left Washington for the Triangle more than a decade ago because of its abundance of workers with high-tech skills, and West said that the region has delivered in that respect.

“I would match (Railinc employees) with any other company in the Triangle,” he said. “With all due respect to the Red Hats and the IBMs and the Citrixes, we have great people, and they do fantastic work.”

Ranii: 919-829-4877

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