Tech Industry

Railroad companies lay tracks online

Melding one of the oldest industries with the Internet economy, four railroad companies plan to build a Web service to arrange freight transportation for their customers.

In a move that melds one of the oldest industries with the Internet economy, four major railroad companies plan to build a Web service to arrange freight transportation for their customers.

Railroad giants Union Pacific, CSX, Norfolk Southern and Canadian Pacific said they have each invested in Arzoon, a closely held Internet company.

Details on the sizes of their investments were not released, but the railroad companies said that when the new service is fully developed, it will be possible for rail customers to procure, execute and track freight movements using the Internet.

The move shows that several old industry players are "trying to get a piece of the obvious business-to-business pie," said Laurie Orlove, an analyst at Forrester Research. "But, as we've seen with the auto industry, it's not an easy pie to get. There are many hurtles that need to be overcome" before these online purchasing ventures can get off the ground.

An online exchange unveiled in February by Ford Motor, General Motors and DaimlerChrysler is being reviewed by the Federal Trade Commission for possible antitrust violations and other anti-competitive issues. Analysts and auto-parts supply insiders say that most suppliers interested in the exchange are putting their plans on hold to avoid getting caught in any legal problems that may stem from the government's inquiries.

The automaker exchange, dubbed Covisint, would create a single auto-parts exchange for the companies' thousands of suppliers and dealers.

Arzoon builds Internet-based transportation management technology. The company has developed a communications system that assists transportation professionals in procuring, executing and tracking freight movements online.

Using the San Mateo, Calif.-based company's technology, customers will send see story: Will B2B's magic last? requests for services to their select transportation carriers, which will then respond over the Web. When actual transactions occur, customers and carriers will monitor the freight shipments through Arzoon. The performance of each carrier involved will be monitored and analyzed.

"Together, we have the expertise to make an unqualified success of this marriage of the old and new economies," Dick Davidson, CEO of Union Pacific, said in a statement. "This is exactly the right partnership with a perfect balance of Internet expertise coupled with the fundamentals of transportation provided by our railroads."

The alliance comes after Burlington Northern Santa Fe, a railroad based in Fort Worth, Texas, in December proposed combining with Canadian National Railway in Montreal. The venture has been delayed after a 15-month moratorium was imposed by the federal Surface Transportation Board.

Separately, Burlington Northern last year created a subsidiary, FreightWise, to provide an online marketplace for buyers and sellers of transportation services.

More details on the Arzoon deal are expected at a press conference in June.