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May 2010

Rail News: Rail Industry Trends

Information technology: At freight railroads, I.T. execs help lead the change charge


— by Pat Foran

From telecommunications and the Internet to hardware/software development and maintenance to systems integration to next-level, as-yet-unimagined applications, information technology (IT) is embedded in the soul of today's railroads. IT bridges the communication gap — any number of gaps, actually — between the various railroad departments. And the IT chiefs at North America's largest freight railroads are in a unique, arguably unprecedented leadership position as a result.

Corner-office confabs on what it'll take to toe the bottom line and boost the top one? IT strategists are there. Brainstorming sessions to come up with a strategic approach to improving that elusive thing called "service"? They're front and center. Discussions on how to develop and implement the mandated positive train control (PTC) plan? They're smack-dab in the middle of that one, too.

In the IT world, virtual thinking is a virtue; one of IT chiefs' charges is to stay a step ahead of the technology game without always actually taking a step. To that end, they must be visionaries and managed-risk-takers. It helps that they've got the CEO's ear, although they wouldn't mind a bit more love (in the form of dedicated IT funds) at capex planning time. But there's no mistaking it: IT chiefs are helping to shape, even change, the course of North American railroading.

"It's all about driving efficiency in the business, and leveraging technology to do that," says Jo-ann Olsovsky, vice president of technology services and chief information officer for BNSF Railway Co.

"But it isn't about any one new emerging technology that's being chosen," adds Alan Capes, CN's director of IT business development and strategic planning. "Those organizations that are able to look at all the technology out there and apply the ones that are relevant are the ones that are going to be able to differentiate themselves."

Never 'Bleeding Edge'

The point of differentiation begins with the routes IT execs from North America's five largest freight railroads — Union Pacific Corp., BNSF, Norfolk Southern Corp., CSX Corp. and CN — took to reach their respective leadership positions.

Lynden Tennison, who was named UP's senior VP and CIO in 2005, joined North America's largest Class I in 1992 from American Airlines Inc., where he'd been responsible for the Knowledge Systems organization. Tennison was recruited by his former American Airlines boss, Joyce Wrenn, who'd been hired by UP to serve as CIO.

"From the '80s into the mid-'90s, because of mergers and everything else, I don't know that there had been a lot of investment by the railroad in information technology," Tennison says. "For traditional IT, a lot was still based on investments made in late '60s through the early '80s, and a lot of it was done to drive productivity through bookkeeping. To a degree, the railroad had been a [technology] leader, but when I came onboard, they were in maintenance mode."

By 1998, Tennison had risen to the position of president/CEO of Nexterna, a UP technology subsidiary that develops applications and hardware solutions for the mobile asset marketplace. In 2001, he was tabbed to serve as UP's VP of IT and chief technology officer. Today, as SVP/CIO, Tennison is responsible for organizing and managing the development, implementation and operation of the Class I's information and telecommunications technology.

Tennison's department employs about 1,400, some 400 of which work in the telecommunications organization. The unit's responsibilities include maintenance and support of 1,700 towers, radio repair, the PBX system, all local area networks and wide area networks, and "a lot of the PC configuration and installs," he says, adding that plenty of those PCs and other devices are out in the field, which afford a whole new set of support issues.

Meanwhile, the UP data center is staffed by up to 250 workers, and about 800 employees are responsible for "all of UP's software systems — from writing code to managing SAP and vendors," says Tennison, who reports directly to UP Chairman and CEO Jim Young.

"When I started here in 1992, the CIO reported to the CFO," he adds.

More evidence signaling IT's rising organizational significance during the past decade: "What I've seen, at least within UP, is a kind of re-emergence of that desire to be more of a leader," Tennison says. "We're never 'bleeding edge,' but there's more of a drive to be more 'leading edge.'"

Eliminating the Noise

Edginess in a technology context wasn't quite Olsovsky's first thought when she was cold-called by a BNSF recruiter four-plus years ago.

"They were looking for someone to head up the telecommunications unit," says Olsovsky, who had spent 10 years with GTE/Verizon Communications and 13 years with AT&T prior to joining BNSF in 2006 as AVP of telecommunications. "When the recruiter called, and started talking about technology, I thought: Technology at the railroad? Those two don't jive."

Then she visited BNSF headquarters in Fort Worth, Texas.

"I saw everything from 40-year-old analog microwave to the use of lasers and acoustical detection and PTC," says Olsovsky.

In other words, challenges abounded. Intrigued, Olsovsky signed on. By 2008, she was promoted to BNSF's top IT job. Today, she's responsible for delivery of telecommunications services, data center infrastructure, system applications and all other IT services. The technology services team supports more than 40,000 BNSFers in 28 states at more than 2,000 locations.

"My goal is to streamline the business, eliminate the noise — that's anything that diverts our focus from what we're working on," she says.

BNSF's technical services department comprises about 1,000 employees, 450 of whom are "scheduled employees in the field and provide telecommunications support," Olsovsky says, adding that a contingent from IBM Corp. ("probably a couple hundred") provides data center infrastructure support. BNSF also enlists the services of InfoSys Technologies, an India-based consulting and software company.

Olsovsky reports to BNSF Chairman, President and CEO Matt Rose.

"We're not out there to be on the leading edge or on the bleeding edge, but Matt does expect us to identify opportunities that drive business efficiency," she says.

Connecting the Dots

At NS, Tom Werner is expected to do the same, however he inherited his responsibilities.

"It's a complete mistake that I'm working here," says Werner, VP of IT.

Not if you connect the dots and follow where they lead, as Werner's done. He began his career at Andersen Consulting, where from 1987 through 1992 he served as a consultant and manager for the Management Information Consulting Division's Advanced Systems Group. After a brief stint as a technology associate with Bankers Trust, Werner in 1995 joined KPMG as senior manager in the firm's information systems consulting finance and transportation groups.

In 1996, Werner's boss's boss met Wick Moorman, who at that time was NS's CIO. Moorman talked about some projects he had under way that he could use some help with.

"My boss asked me to go down [to Norfolk] for a day," Werner says. "One day became six weeks. Six weeks became six months."

Then came the Conrail carve-up: In 1999, the railroad was absorbed by NS and CSX, and that absorption presented significant IT (and a host of other) challenges. That same year, Werner signed on permanently as NS' director of electronic commerce, data warehouse and security; he held that post for about a year. He then served stints as AVP technology and operations (2000-2003) and AVP application development (2003-2007) before being named to his current position.

Today, the NS IT department comprises about 425 employees and about 150 contractors.

"We've definitely grown," says Werner, who reports to NS Executive Vice President and CIO Deb Butler. "If you had come here 15 years ago, IT focused on keeping the big offices — Roanoke, Norfolk, Atlanta — fed with financial information. We were not nearly as integrated with operations at that time. Slowly, that's changed."

So has the applications focus.

"In the late '90s and early 2000s, decision-support apps became a big thing — we wanted to get information out into the field ... so they could make decisions," Werner says. "Now, we only want to bring the employee into the fold when something strange is going on. We're letting more and more systems make the decisions for them so that employees are more involved in the exception, rather than the routine."

Frank Lonegro knows a thing or two about exceptions. And his circuitous, perhaps even improbable route to the top IT spot at CSX Technology (a CSX Corp. business unit) was anything but routine. But this is IT — where varied backgrounds can be invaluable, particularly when coupled with solid problem-solving skills, an eagerness to learn and a willingness to see how things connect.

Lonegro began his journey in 1993 as a litigator at Holland & Knight in Jacksonville, Fla. A bit of soul searching prompted Lonegro to shift legal gears ("I was more suited toward making the deal than fighting about old deals"), switching to the firm's transactional group. In 1999, he switched gears again, this time heading to another Jacksonville law firm, McGuire Woods.

A few months later, he received a call from a recruiting agency: CSX was looking for "a mid-level lawyer," as Lonegro puts it. "I was ready to start as an employee, but that was right before the Conrail split date, so the company was in a hiring 'slush' — not an official 'freeze,' but they said they could only bring me on as a contractor, at least for a while."

Lonegro took the contract job. In 2000, CSX named him assistant general counsel. For the next five years, he served internal clients from a range of departments and began to get to know CSX from the inside out. In 2004, Lonegro applied for a newly created CSX position, a gig titled "assistant to the chairman." Up for the uncertain challenge, Lonegro got the job.

The year-long stint afforded an invaluable education. Lonegro witnessed the leadership styles of the executive team, and interaction between the CSX board and the execs. He saw how decisions were made.

"It turned out to be a really great opportunity," he says.

Meanwhile, his education — and organizational contributions — continued. In 2005, Lonegro's career path took another turn when he was named VP-internal audit. And when CSX VP of Engineering Don Bagley retired in 2007, CSX Technology President John West was tapped to head the engineering unit. Lonegro once again was ready to wear another hat: He assumed West's role at CSX Technology.

"I knew the operations and I knew the culture," says Lonegro, who reports to CSX EVP and Chief Financial Officer Oscar Munoz.

CSX Technology has four "major branches," as Lonegro puts it: application development, IT operation, enterprise services and, the most recently developed limb, PTC.

"Other railroads have it in different places, but I have a line item for PTC," he says. "I own it."

CSX Technology currently employs about 400, including 30 recent PTC-related hires, Lonegro says, adding that key "outsource" partners include Verizon, Keane Inc. and Enterprise Integration.

"Making sure we stay true to the service nature of the business is important," Lonegro says. "So is making sure we deliver value at the end of the day."

Managing Expectations

Delivering value is also a core value of Jim Bright's. As a 36-year veteran of CN, a railroad renowned for its service-plan discipline, it's stamped into his soul.

"I started [in 1974] as a CN file clerk right out of high school," says Bright, the Class I's VP of IT and CIO. "In 1976, they were looking for programmers, so I took an aptitude test and passed it. I was an analyst/project manager for the next 10 years."

Bright held a variety of positions, working in marketing, operations, accounting, financial planning, and even CN Hotels. In 1989, he rejoined the IT realm to serve in a newly formed business systems group.

"That group was the interface between IT and the customer," Bright says. "Our job was to translate what the customer was asking for, and then deliver systems."

He continued working his way up the ranks, serving stints as director of SRS (service reliability strategy), director of business systems, then AVP of IT. In 2006, he was named VP of IT after completing CN's railroad MBA program, during which he spent the better part of a year in the field at various locations throughout the company's system.

When longtime CIO Fred Grigsby retired in early 2009, Bright added three more letters to his title. He currently is the only IT chief among North America's five largest Class Is who's been with his railroad his entire career. Meanwhile, Director of IT Business Development and Strategic Planning Capes, who reports to Bright, has been with CN for 25 years, toiling in engineering and operations before entering the IT fray in 1995.

Today, CN's IT department has 800 full-time employees. At any given time, there also are 200 contractors and/or consultants working on IT projects, particularly when time is of the essence. Then again, in the IT world, it always is.

"We know that our customers want things really quickly," says Bright, who reports to CN EVP and CFO Luc Jobin. "On the IT side, we also know how much trouble you can get into if you don't build it right. It's managing expectations — and not putting the company at risk."

That's a challenge IT leaders certainly are facing as they set out to complete their 2010 to-do lists.

UP is in the midst of a multi-year project to replace TCS, a 40-year-old IBM mainframe-based transportation system. The new system — NetControl — is based on a service-oriented architecture platform and should be fully operational by 2013's end.

"That's a big deal for us this year," Tennison says, adding that another decent-sized deal on this year's docket involves replacing a "really old" analog microwave system with a new one that features an IP [Internet protocol] backbone. "Telecom is now a foundational backbone of everything we do in IT — we're intrinsically joined at the hip. Even our data center backbone is IP."

BNSF's Olsovsky cited several key 2010 projects, including three SAP-related software projects: the implementation of life-cycle management, learning management and enterprise asset management systems. Offering more tools to BNSF workers in the field — anywhere, actually — also is a top priority.

"How do we provide applications and functionality to our workers who are highly mobile?" she asks rhetorically, adding that sending Blackberry voicemails to email is one option. "I want people here to be able to work any time, any place. Wherever there's connectivity."

Driving Value

NS's IT crew, too, continues to focus on field workers' needs, now and over the longer haul.

"More granular information needs to be in the hands of the conductor, engineer, mechanical workers, whoever's out there," Werner says. "But if we're pushing thousands of new devices in the field, you better have a support operation handling it. People need to access all that information, seven by 24. That's probably one of the bigger challenges — evolving our support model."

At CSX Technology, Lonegro's team is developing a customer relationship system for the railroad's sales and marketing organization.

"We're also trying to find ways to make yard movements safer and more productive," he adds.

At CN, the IT contingent is rebuilding the crew management system. IT team members also continue to try to leverage SmartYard, an application that incorporates information from different CN systems, combines the data, then provides the "best sequence" for processing cars in the yard, according to CN's website. The idea: If you give operations workers better information, they'll be able to make better decisions.

And the IT leaders at all five Class Is put PTC at or near the top of their near-term priority lists.

"It's huge," Olsovsky says. "It sucks up a lot of energy and a lot of dollars."

Adds Lonegro: "We're going to have to figure out ways to benefit from PTC. At the end of the day, there's got to be a way to leverage this effort."

And that's what IT is all about.

"PTC isn't about meeting the mandate, it's about figuring out how to drive value to that investment," says CN's Capes. "To me, that's the nugget."



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