Background
Deutsche Bahn (DB) is the German state railway. It has shrugged off a 'last century' image to become a powerful force in the European transport infrastructure of the future. A revitalised company with a credit rating of AA1, it is investing heavily in its physical infrastructure to meet the twin challenges of European integration and possible deregulation of its markets.

Challenge
DB is taking action to put right many of the 'physical' issues associated with a state-owned rail operation and has committed to invest some $35.6 billion in infrastructure and rolling stock between 2000 and 2005. But the company also needed to find ways of transforming its people and processes to match external changes – and to achieve industry-leading levels of productivity, efficiency, and customer service.

It has now turned its attention to the possibilities offered by web technology. Already, its web site boasts a sophisticated travel planning tool with pricing information, and reservation and buying functionality – integrating all other public transport including buses, underground trains and regional trains. Dr Karl-Friedrich Rausch, Board Member for Technology, says: "The greatest prize lies in utilising Internet-based ways of working to transform our internal efficiency and galvanise our people." This aim has in turn led to a web enablement partnership with Cisco Systems and its IBSG team.

Solution
In just a few months, a world-leading business travel management system has been implemented. Both a global personnel database and an e-learning application are under development.

The business travel management system (christened daGama) is the first fruit of the partnership with Cisco. It incorporates an IP call centre replacing several call centres and other administrative facilities distributed around Germany. A built-in CRM customer information database is providing advanced features and functionality to help DB better serve its internal and external customers.

The next daGama phase went live on 1st January 2002 with the implementation of web-based modules covering online travel agent, online travel management, and online hotel booking. Web collaboration is an intrinsic part of the system, allowing direct connection to the call centre and remote onscreen guidance by operators to resolve problems.

The system is providing a number of inward-facing applications. It captures all data regarding travel expenses and journey profiles, and an interface is being created to enable reporting.

As a direct result of an IBGS workshop, a company-wide personnel database is being created. Deutsche Bahn is in discussion with Cisco about e-learning to help customer-facing personnel deal with a complex (and frequently changing) pricing model and to train around 30,000 DB people to use a planned new profit-oriented pricing system.

Results
The daGama system is showing a projected ROI of 500 per cent from expected annual savings of $20 million. Considerable industry interest has been generated. An outsourcing deal with Lufthansa has been closed and several other negotiations are in the pipeline.

Measurable savings are being achieved in four key areas: bulk discounts, administration, transaction charges and more productive use of time.

In respect of bulk discounts, Deutsche Bahn AG is able to aggregate the business in respect of particular suppliers by putting all of its travel needs through daGama. That aggregated business is used to drive significant discounts with chosen suppliers. On a total annual spend of around $65 million savings of more than 10 per cent will be achieved.

In terms of administration, notional savings of $2.5 million will be achieved through implementation of the single daGama IPCC and administration centre. In the area of transaction charges, previous manual transaction fees of $10 per transaction have been reduced to an online cost of 50 cents. Booking an average of 1 million business trips per annum, DB will save $11 million each year through daGama.

Because trips organised via daGama are more efficient, real savings of over 50 per cent are being realised in more productive use of time. That is calculated at a value of $20 million.

Karl-Friedrich Rausch says: "We're looking at a return on investment of at least 500 per cent per annum – and that's not including the value of the incremental business from outsourcing deals and system sales."

Next Steps
Deutsche Bahn has taken the lead in utilising the power of the Internet right across its operations. So much so that other industry players are sitting up and taking notice of the financial and cultural impact as well as the measurable improvement on its customer satisfaction levels.

Work is ongoing. A daGama e-procurement interface is being developed to enable suppliers to input their bids for travel service online to DB with no physical RFP-type paperwork changing hands. The daGama IPCC is soon due to offer 24 x 7 service. The IP-based technology will enable agents to work at home during unsocial hours.

A mobile daGama interface is under development that will enable people to be tracked during their trips – allowing, for example, SMS warnings of potential missed connections and passenger-requested automatic changes to a flight itinerary if delays occur on an interconnecting rail link.

Finally, multi-language daGama versions are under development, culminating in Japanese and Chinese versions by 2007.

Reporting on the first six months of 2001, Deutsche Bahn AG noted improvements in all financial indicators. Compared to the same period in 2000, EBITDA was up 11 per cent at $1,012 million. Operating income after interest was $58 million – compared to $17.6 million for the same period in 2000.

What Cisco Offers
Cisco has set the standard for using Internet technology to transform business processes. Its Internet Business Solutions Group has vast experience in helping companies to make the transition from old-world business to New World e-business.

From helping companies determine their Net Readiness to installing networks for the integration of voice, video and data the experience and expertise of Cisco can help a business interested in any level of e-business implementation. Cisco offers:

• Internet-powered business methodologies
• Internet-powered application frameworks
• networking reference architectures
• alliances with best-of-breed companies with proven experience in building e-business applications and solutions.

Further Reading

Deutsche Bahn AG snapshot
Key statistics (2000 figures, except where shown) are as follows:

• Revenue $13,764 million (1.1 per cent down on the previous year)
• EBITDA $2,227 million (23 per cent up on previous year)
• Profit $33 million (60 per cent down on previous year)
• ROCE 1.6 per cent (targeted to reach 10 per cent as a 'long term goal')
• Total assets $35,126 million
• 1.7 billion passengers carried
• 74.4 billion passenger kilometres
• 80.6 billion freight tonne/kilometres
• 219,339 employees as at 30th June 2001(5.7 per cent down on same point in previous year)
• 5,794 passenger stations
• 36,588 kilometres of track

December 3, 2002