Optibus optimizes bus lines worldwide with algorithms

Amos Haggiag and Eitan Yanovsky Credit: Optibus

With operations in 500 cities worldwide, the Israeli company allows bus companies to achieve optimal results with fewer buses, and less mileage and driving hours.

At the end of 2018, Israeli cloud native AI platform for public transportation Optibus completed a $40-million Series B financing round. Many were surprised to see Chinese retail giant Alibaba among the investors in the company dedicated to streamlining public transport systems.

Optibus' CEO Amos Haggiag explains Alibaba's investment serves one crucial goal for Optibus: penetrating the Chinese market. "Alibaba is a powerful player in the Chinese market. Where public transport is critical. This is different, for example, from the US, where public transport is relatively minor compared with the size of the population. A single Chinese city has more electric buses than any other country with the smaller bus companies running as many as 3,000 buses."

So, why hasn't Optibus entered China?

"Entering China is complex since foreign companies need to work alongside state companies. But it will happen, at some point," he says.

Saving mileage for the bus companies

Optibus was cofounded by Haggiag and his former schoolmate, Eitan Yanovsky. They came into the business by chance, following a conversation between Haggiag and his father Kavim bus company CFO Nissim Haggiag, on the considerable difficulties in streamlining the bus company's operations.

Amos Haggiag and Yanovsky, both of them with a background in mathematics and computer science, decided to try their hand in developing an algorithm that would optimize existing methods. Their breakthrough development provided the foundation to a side business of consulting to the bus companies. In 2014, they co-founded Optibus, which so far has raised $160 million in three rounds.

Although there are specific difficulties that delay entry into the Chinese market, Optibus' presence is felt in numerous cities and countries. For example, the company estimates it is involved in running half the public transport in the UK including 80%-90% in Scotland. Optibus operates in 500 cities, including collaborations with bus companies in Israel [but not with Israel's Ministry of Transportation).

Optibus streamlines and optimizes the operations of public transport organizations, primarily bus companies. The company achieves this in various ways, including fewer buses, smaller mileage, fewer driving hours, and charging plans for electric buses.

How come a company from an under-developed transportation market advises the entire world?

The answer lies in technology. "We have hundreds of competitors, but they are developing topical solutions," says Amos Haggiag . "A Brazilian company may have developed a solution for a Brazilian bus company or a similar scenario in Spain. However, in most countries, the industry is outdated and in serious need of technology solutions as the demand for service grows in real-time. Optibus is the only company that offers an algorithm on a global scale."

The real-time challenge commits the company to find the solutions: the cost-effectiveness of buses "available" to respond to real-time assignments and the radius they are supposed to cover. In addition to the economic calculation (revenue), Optibus' algorithm allows feeding all rigid requirements (employee benefits, mileage, off-service days, and more). Hence, the deliverables of the planning carried out for public transport operations include more solutions and a higher rate of "out of the box" solutions.

Taking a different direction: moving from country to city-level transport

Israelis may find it challenging to understand the need for a company that helps other companies' systems. One reason is that in Israel, the state determines public transport routes. Optibus managers say this is yet another example of an area in which Israel is a dinosaur. "The way Israel's public transport works is unique," says Yanovsky.

"In Europe, the US, South America, South Africa, Hong Kong, and Australia, the municipalities are responsible for the city or metropolitan transport. For example, we work with the City of Los Angeles. London has 12 public transport companies that issue bus line tenders. San Antonio, another city where we work with the municipality, operates its own transport network. There are many models, but to date, we never encountered a state-level model," he says.

Would the situation in Israel improve if it adopted a similar model?

"Many decisions take longer to implement when it comes to Israel," says Amos Haggiag. He explains the reasons include the use of older systems and the long-standing employees who know no other ways except for using a manual sketch board. "In manual planning, you assume there's a line traveling from point A to B, always on the same route. But there are many other options: for example, when the bus reaches the final stop, it continues to another destination, earning us efficiency. Unfortunately, since the number of options is immense, manual planners opt for the easier alternative of driving back and forth, which is inefficient. As a result, you end up with buses standing idle or using buses that are unnecessarily too big."

While this description makes one think about frustrating bureaucracy, be aware that other places across the globe suffer from similar ailments. "Every day, hundreds of thousands of San Francisco employees look for ways to reach Silicon Valley, where Facebook, Google, Apple, and other mega-corporations are located. Try to take a bus there, and you will discover the only way is by changing 3-4 lines and that it would take you three hours to commute in each direction," says Amos Haggiag.

As a result, the mega-corporations established their private bus systems. "Thousands of buses are run by Facebook, Apple, Google, Amazon, Microsoft, and others. Their private transport systems are similar to the public ones and may be as large as 100 lines per company. One line leaves from the railway station, another from San Jose, and so forth. They do so because they cannot trust public transport, let alone create parking space for so many employees. Even Mark Zuckerberg rides a Facebook bus," they say, not bothering to hide their pride in co-architecting the transport systems of some of these companies.

Optibus is also responsible for the transport system of a civilian nuclear reactor in the UK, and a gold mine in Papuan New Guinea and three months ago, the transport to an event of a global company in Saudi Arabia. It also works with tram operators, including Egged, as part of the Tel Aviv light rail Red Line.

The next challenge: electric and autonomous vehicles

Optibus' managers used to say they will consider issuing stock when the company crosses the $100-million-line in annual revenue, perhaps by merging with a SPAC. "We're in no hurry to become public, but we raise funds to enable our fast growth. Most companies grow more steadily by 10%-20% a year, whereas we doubled our size over the past year, including entering new markets such as South America."

In addition to company projections, we asked what trends Optibus managers believe are here to stay. "Electric transportation is first on the list. Just recently, the London mayor announced that all the city buses must be electric," Haggiag explains. However, they say electrification of the buses is a challenge in itself. "As route and system designers, we must take into account the customers who ride the bus in snow or on mountains. These conditions impact battery life. Autonomous vehicles are another trend."

Yanovsky said, "Autonomous buses will trigger a significant behavioral change. When a vehicle is cheap to run because no driver is involved, you have no incentive to keep a car. So I expect keeping a car will become more expensive than taking a taxi. I estimate expenses will fall by 60%-70%, which will start a huge transformation of our life."

What about Israel's public transport?

Yanovsky rides the bus daily from his house in the Sharon region. He says the dedicated public transport lanes built recently make using the bus quicker than using a car. However, Nissim Haggiag says, "Israel's public transportation has improved, but buses are still perceived as an inferior option. For this reason, people still prefer driving their cars instead of taking the bus."

The technology is there. Drivers pose a global challenge

On taking office as minister of transport in June, Merav Michaeli said she intends to invest not only in public transport infrastructure but in the drivers too. "We will invest in public transport employees, their employment terms, training, and physical conditions, so they become part of safer, more effective, and more accessible transportation," she said.

Michaeli's words fail to describe the current situation. Last month, bus drivers demonstrated on a busy junction in Tel Aviv, disrupting the traffic. The drivers, supported by the Workers Federation and the Bus Drivers Association, protested their low wages and the loss of social benefits when switching bus companies.

Yanovsky says drivers pose a global challenge. "I've discussed it with our US and French customers. The driver shortage is the biggest problem today."

Why does it happen, in your opinion?

"Ultimately, it boils down to wages. Since companies worldwide have agreements and subsidies in place with public authorities, they are limited in the scale of salaries they can offer. They are not free to raise their drivers' salaries. One solution is recruiting part-time employees. It's astounding to realize you can solve the biggest, most complex problems just to discover the drivers' problem is the hardest to crack."

Published by Globes, Israel business news - en.globes.co.il - on October 25, 2021.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.

Amos Haggiag and Eitan Yanovsky Credit: Optibus
Amos Haggiag and Eitan Yanovsky Credit: Optibus
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