Thursday, June 13, 2013


Some background info: In Sept 2011, Citigroup + Bloomberg hired a partnership of two companies, Alta and PBSC/Bixi, to create a bike share program for NYC to be delivered in July 2012. PBSC/Bixi is a private non-profit company started by the city of Montreal to create their bike share program back in 2007. After Montreal's success, PBSC/Bixi started expanding internationally, with the aid of Alta, a US company. In the US, Boston and DC are two examples of successful Alta-PBSC/Bixi systems that went off without a hitch. In all those cases (Montreal, Boston, DC), PBSC/Bixi hired a company called 8D Technologies to develop the hardware (terminals, docks, etc) and most importantly, software to manage the thousands of bikes in a typical large city bike share system.

However, in a surprise move, PBSC/Bixi fired 8D Technologies in 2012 and decided to create its own software from scratch. This is the main reason why the NYC program was delayed for a year, despite what they may claim about the effects of Hurricane Sandy. 

It seems that Mayor Bloomberg knew it was the software that caused the delay. In July 2012, Bloomberg said of Citibike: "its software isn't working yet. And just rest assured we're not going to put out any program here that doesn't work." Well, with an estimated 10% of Citibike docks failing every day (according to WNYC), it looks like they did.

Although NYC officials knew that software was the cause of the delay, they didn't know that the true reason was a complete bait and switch of the promised product: "We thought that there would be a substantial transfer of the Washington/Boston software capabilities, not a total rewrite, which is why we thought a July [2012] launch was feasible. But it turned out it's not just a software upgrade." - Gotham Gazette

Not only was NYC left out of the loop, but it seems that their partner, Alta, was unaware as well. "In January [2013] , records show, Alta filed a lawsuit in an Oregon circuit court against Public Bike System Company [PBSC], saying it delivered 'nonconforming goods and faulty goods' to New York's bike-share program. Alta said this week that the suit was never served and that the groups remained partners." - NYT

The main question is, why was 8D Technologies fired? As in all things business, the answer comes down to money. 8D has sued PBSC/Bixi for $26 billion and in response, PBSC/Bixi has countersued $2.5 billion claiming that 8D overbilled for their products. However, if 8D truly overbilled, why was PBSC/Bixi okay with using 8D for Montreal, Boston and DC? You would think that buying another license for a software you've already used several times would be much cheaper than creating your own code from scratch.

It gets even more interesting when one looks closer at PBSC/Bixi. Although it's a private company, it is implicitly backed by the City of Montreal. In 2012, Bixi "was on the brink of collapse and the City of Montreal provided a $37 million loan and guaranteed $71 million in credit. At the same time, the city auditor told BIXI to sell off its international programs since a Quebec municipality cannot participate in commercial activities." Apparently, PBSC/Bixi has had financial issues for years. thetransitwire

I think I know what's going on.

PBSC/Bixi is bleeding money and thought it could save costs by cutting out 8D. They've been working together for so long, PBSC/Bixi figured it could reverse-engineer 8D's software from their previous projects together. This raises major issues concerning intellectual property, as 8D stated in their lawsuit

In order to meet previously promised deadlines, the new software was delivered before it was a fully functioning product, even with its additional one year of development. Amazingly, it has only been previously launched in one other city, Chattanooga, Tennessee (which also suffered delays), which is hardly comparable in scope to NYC's program, which is the largest in the US. Chattanooga seems to have suffered the bait and switch as well: "In Tennessee, the break between 8D and PSBC caught officials off-guard. 'That was not clear to us when the initial contract was awarded'".

Next month, Chicago will get a very similar version of our bike share program. Unsurprisingly, it has been delayed by two weeks. San Francisco has signed on with Alta-PBSC/Bixi as well.

TL;DR: an essentially bankrupt Canadian semi-public company promised NYC one product, but instead delivered an inferior beta version of an untested clone. Furthermore, it's unsure whether they will commit to fixing anything, since PBSC/Bixi's international operations are being sold off and Alta is being sued for unpaid wages by its employees. The only upside is that, unique to all implementations of bike sharing programs, the costs of our's has been completely privately funded by Citigroup.

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