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Case study 2

For this section, please first read chapter 8 of your textbook. Then read the following case study about a Brazilian firm that is considering expanding abroad: 

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Case Study – Compsis at a Crossroads

When you have finished reading the case study, answer the accompanying case questions:

Questions to Compsis at a Crossroads x


In 2-3 pages (1.5 spaced lines), make a recommendation for Compsis. That is, should they go abroad or not? Use the exhibits and information presented in the case study to justify your answer. If you believe Compsis should go abroad, be as specific as possible about which markets they should enter and why. 

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Submit your response as a file upload to this assignment by Sunday.


  • .
  • December 15, 2009

    This case was prepared by lecturer M. Jonathan Lehrich and MIT Sloan students Paul John Paredes and Ramesh Ravikumar
    (MBA Class of 2005).

    Copyright © 2007, M. Jonathan Lehrich, Paul John Paredes and Ramesh Ravikumar. This work is licensed under the Creative
    Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported License. To view a copy of this license visit
    http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to Creative Commons, 171 Second Street, Suite 300, San
    Francisco, California, 94105, USA


    Compsis at a Crossroads
    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    2004 had not been a good year for Compsis. Founded in 1989 in the Brazilian industrial city of São
    José dos Campos, Compsis had grown steadily and successfully. In its largest service line, systems
    integration for electronic toll collection (ETC), the company had gained the dominant share of the
    Brazilian market and had even managed projects in Australia and India. Compsis had developed
    strong relationships with the Brazilian government and toll road operators, as well as an international
    reputation among industry competitors for quality and technological expertise. By 2003, the
    company’s founders could take pride in reaching a height of 165 employees and US$4.2 million
    (R$11.1 million) in revenue.

    In 2004, however, it appeared that Compsis’s success might be in jeopardy. Revenue fell to US$3.3
    million, primarily due to the Brazilian government’s prolonged delay in awarding new toll road
    construction rights to concessionaires (road operators). Despite considerable efforts by the business
    development team, Compsis had been unable to win new ETC projects outside Brazil, not only in
    Latin America but in Europe and India as well. True, Compsis was making progress in turning its
    ETC software –

  • – into a simpler, more flexible product, but the senior managers knew that
    even after the new version was completed in April 2005 it would not be easy to convince existing
    customers to upgrade.

    Therefore Compsis stood at a crossroads. CEO Ailton de Assis Queiroga and his fellow Compsis
    leaders anticipated that 2005 would be a better year: the Brazilian government was expected to award
    more concessions, the new SICAT version would be completed, and Compsis would be ready to test
    new products ranging from traffic management systems to magnetically guided buses. On the other
    hand, Compsis could ill afford to depend solely on the vagaries of the Brazilian market for its long-
    term financial future. The company could continue to pursue expansion elsewhere in Latin America

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 2

    and other developing ETC markets, recognizing however that the highly price-sensitive buyers might
    not be willing to pay for Compsis’s technologically sophisticated services. Or Compsis could turn to
    a mature market, a country where experienced toll system buyers demanded and paid for cutting-edge
    technology from industry leaders. Among all such countries, one stood out for its sheer size: the
    United States.

  • The Electronic Toll Industry
  • Transportation tolls date from at least the fifth century B.C., when the Greeks told stories of Charon,
    the ferryman who charged a toll to convey the dead across the river Acheron. The earliest recorded
    U.S. toll road was the Lancaster Turnpike, built in the 1790s to link the Pennsylvanian cities of
    Philadelphia and Lancaster. As automobiles became popular in the 1920s, tolls were often instituted
    to obtain government revenue and to manage high traffic volumes by creating limited-access
    highways. By 2004 drivers were paying tolls on the majority of expressways and major inter-city
    roads in the U.S., China, Singapore, and Western and Central Europe. These governments used tolls
    to pay for the road maintenance, supplement their coffers, or reduce congestion by discouraging

    A modern toll plaza often featured multiple lane types, broadly classified into three categories:
    manual, semi-automatic, and fully automatic. A manual toll collection booth accepted either coins or
    cash. A semi-automatic toll lane allowed cash collection, credit cards, coupons, and drive-through
    using RFID transponders. A fully automatic, unmanned toll booth only permitted vehicles that were
    RFID-equipped. Linking the various lanes was a complex and integrated system of wires, detection
    devices, and software, both to monitor drivers and employees and to audit the receipts.

    These receipts were collected by the toll road operator, the company or agency that usually paid for
    the detection and auditing technology. In some countries, including Brazil, most operators were
    private concessionaires, companies who won a contract from the government to manage (and
    frequently build) a toll road. In return for paying annual fees or revenue percentages and for
    maintaining certain price and service standards, the concessionaire operated the road for its own
    profit. In other countries, such as the United States, the operator and the government were one and
    the same; perceiving the road as a public good, the government managed the road either through a
    transportation department or ministry or through a quasi-independent toll agency.

    Serving these public and private operators was a multi-billion-dollar international toll industry. In
    ETC alone, companies based in the U.S., France, Spain, and elsewhere competed for contracts
    throughout the world with local suppliers of tags (RFID transponders), hardware, integration and
    software, maintenance, and back-office (customer support) services. Some firms offered one area of
    service, others a suite; some positioned themselves based on price, others on quality, technical know-
    how, or local knowledge. It was not uncommon for a major international player to manage a contract

    1 http://www.answers.com/topic/toll-road, reviewed February 28, 2005.

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 3

    in a new country, then lose its foothold to international or local competitors who won more of the
    available projects. Depending on the number of operators in the market, there might not be enough
    roads and contracts to go around.

  • Compsis: Company History
  • Compsis was founded in 1989 by engineers from the Brazilian aircraft firm Embraer, also based in
    São José dos Campos (see Exhibit 1 for the founders’ biographies). Initially the founders planned to
    develop and integrate aircraft embedded systems for the Brazilian Air Force, but when these efforts
    proved fruitless Compsis shifted to new applications for its technologies. In 1991 Compsis found its
    launching customer, General Motors Brazil, and from then on devoted its systems integration
    expertise primarily to the broad field of automotive products. (See Exhibit 2 for revenue by business

    In 1996 Compsis decided to expand its technology strategy into a new area: intelligent transportation
    systems (ITS). Rather than manufacture transponders or run customer service centers, Compsis stuck
    to its core skills: integrating complex hardware and software systems. As system integrators, Compsis
    sought contracts for a range of Brazilian ITS projects, including:

    • Advanced Traffic Management (ATMS). These systems would enable efficient operational
    management of highways or public transport corridors in cities. Numerous subsystems
    connected to an Operational Control Center would monitor and control traffic conditions.

    • Vehicle Monitoring System (SMV). Using GPS positioning integrated with a data center,
    SMV would enable officials to efficiently manage and deploy the public fleets: buses,
    garbage transport, police vehicles, fire engines, and ambulances.

    • Magnetic Guidance System (SGM). To increase the efficiency and safety of mass transport,
    SGM would use a computer-controlled system to automatically guide a city bus on
    exclusive lanes or corridors.

    • Electronic Toll Audit (SICAT). The product would provide integrated real-time
    management of all the processes of automation, accounting, and auditing of revenues at
    highway toll plazas.

    Of these four concepts, SICAT proved the most attractive to buyers. By the close of 2004, Compsis
    was deriving the majority of its revenue from SICAT implementation and maintenance. SICAT was
    entering its sixth major revision and had consolidated the market’s greatest needs. Compsis did expect
    ATMS solutions to play an increasing role in its ITS strategy, and it looked forward to rolling out its
    first SMV and SGM solutions in São Paulo in 2005. Nonetheless, SICAT remained the company’s
    flagship and cornerstone.


    Compsis designed its own SICAT software in-house and sub-contracted the hardware manufacturing
    to local suppliers, who provided vehicle sensors, high resolution cameras, toll gates, signaling

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 4

    elements, RFID sensors, etc. Compsis would install both the hardware and software, then integrate
    the two at the level of the booth, plaza, and multi-plaza auditing system (see Exhibit 3).

    In 1996 Compsis developed the first version of the toll collection system – SICAT 4 – specifically for
    the Brazilian toll collection market. Over the next six years Compsis’s C++ developers responded to
    customers’ requests and expectations by gradually improving on SICAT 4 and developing four levels
    of functionality.

    • Level 1: Lane Level. As a vehicle drove into a toll collection lane, the SICAT system read
    the tag or sensed the axles, sent the information to the individual toll collector, printed the
    receipt, and did some basic security (e.g., whether the car had a tag at all). It could even
    detect any suspended axles, although no client had yet taken advantage of the feature.2 The
    current system offered exceptionally high accuracy (99.4%) in detecting the vehicle’s
    category based on number of axles. Compsis considered the Level 1 application a
    commodity product, not significantly better than competitors’ software.

    • Level 2: Plaza Supervision. SICAT separated the collection processing from the Automatic
    Vehicle Classification (AVC) algorithm, putting the algorithm on a central computer where
    it was easy to audit. The supervisor could give permission or instructions to collectors in
    the booths to obtain information, recognize hardware breakdowns, correct mistakes in
    reading the vehicle type, and see a graphic depicting traffic flow through the plaza (“Fluxo
    Horario”). With the exception of the hardware fault messaging feature, Level 2 too did not
    distinguish SICAT from the competition.

    • Level 3: Auditing. Level 3, on the other hand, Compsis considered a major breakthrough,
    the first real accounting system for ETC. Level 3 could audit the amounts declared by the
    toll collector at the end of the shift – the cash-up – by comparing data from Levels 1 and 2.
    In a human-operated or manual lane, Level 3 could determine whether an operator was
    over- or under-counting, either by error, hurry, or deliberate violation; in an automatic lane,
    Level 3 would spot violator drivers (for example, those who used a small-car transponder in
    an eighteen-wheeler truck). As late as 2004 Compsis found that few competitors offered
    these accounting and auditing services, for one or many plazas.

    • Level 4: Overall Financial Supervision. As Level 3 tracked the moneybag, Level 4
    provided the auditing tracks. By rolling up information from multiple plazas that had
    different systems (including non-Compsis systems), Level 4 gave the finance and
    accounting departments direct access to all the revenues being generated at different toll
    lanes at one or more toll plazas. This deep management of operations was not possible on
    most competitors’ systems.

    In the fall of 2001, Compsis began to upgrade SICAT 4. For a large toll road project in New Delhi,
    Compsis used early Java tolls to develop SICAT India, which introduced business intelligence tools

    2 In an effort to evade a toll based on the number of axles per vehicle, some truck drivers temporarily suspended an axle or two, drove through the tollbooth
    and paid a lower toll, then dropped the axles down again at the other side.

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 5

    to ease the operator’s tasks. SICAT India would be succeeded by SICAT XP, which was scheduled
    for release in April 2005 and which promised to incorporate all the lessons learned from developing
    toll collection systems. To be sold both as a stand-alone product and as an upgrade for current
    SICAT 4 customers, SICAT XP would be Web-based, layered on an inexpensive SQL or MySQL
    database, and most importantly flexible enough to be sold in modules. Compsis envisioned selling
    each customer a full SICAT XP package, installing the software with a minimum of front-end
    interface customization, and then switching on or off whichever functions and levels the buyer had
    chosen to license or forgo. For the first time Compsis could sell SICAT not as a project that required
    building and customization, but as a product that would approach the convenience of plug-and-play.

  • The Expansion of the Compsis ETC Business
  • Compsis developed its first version of SICAT in 1996 to capture the growing Brazilian market for
    ETC systems integration. Eight years later, Compsis had done precisely that: 39% of Brazilian toll
    concessionaires had contracted with Compsis for installation and software (see Exhibit 4).
    Moreover, since 2002 Compsis had aggressively pursued and won contracts for ongoing updates and
    maintenance (U&M), contracts that had become a profitable and rapidly growing segment of the
    firm’s business. Compsis also expected to gain additional market share after the launch of SICAT
    XP, as it intended to persuade toll operators nearing their system license renewal date to switch to the
    more powerful, flexible, user-friendly SICAT XP product.

    Yet Compsis refused to rely solely on its Brazilian SICAT business. Ailton and the other founders
    strongly believed that any technology-based company in Brazil would be vulnerable if it were to
    depend solely on a single product line. A European competitor might be able to succeed with just one
    product, since the European market was much more stable, but Compsis had to allow for significant
    variation in demand (see Exhibit 5). Therefore for the last four years Compsis had invested
    significantly in new product lines, largely using SICAT profits. The strategy was to broaden both the
    product and geographical ranges of Compsis: even as it developed new offerings for the Brazilian
    market (particularly ATMS), Compsis strove to expand into new markets throughout the world. In
    each new country Compsis would lead with its most mature product, SICAT; then, once its brand was
    established, Compsis could introduce its other products as well.

    Indeed, Compsis had adopted this SICAT-first approach in both its projects outside Brazil thus far. In
    1999 Compsis collaborated with Philips, an American technology firm, to implement SICAT 4
    systems for a toll plaza in Australia. This partnership worked extremely well. Philips handled the
    hardware, Compsis the software, and Philips had both the local commercial contacts and the technical
    sophistication to win the business and quickly learn to install the SICAT system. True, Compsis had
    had to send an employee to Australia for several months to train the operator to use the software, and
    subsequently Philips was purchased by Tyco and lost interest in the toll business, but Compsis could
    point to Australia as a successful model of international expansion.

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 6

    In India, however, the technological advances of the project were overshadowed by the financial
    losses. After Compsis was called into the project by Intertoll, a respected South African construction
    consulting firm, Compsis had sought to reduce its costs by searching for a local contractor to install
    and test the hardware and SICAT system. Unfortunately, the Indian contractor Compsis selected
    proved unable to do the job competently, necessitating four complete re-installations. Moreover,
    unlike the Australian customers who could afford high-cost systems, the Indian toll highway
    authorities were so sensitive to price that they would probably have been satisfied with a system far
    less sophisticated than the one they received (SICAT India). Lacking the experience of working in a
    developing economy so different from their own, Compsis ultimately completed the project having
    written a new iteration of software, but also having overrun the engineering segment of the budget by
    100 percent. Instead of the comfortable margin Compsis customarily achieved on its other ETC
    implementations, the India project was a wash – no losses, but no profits either.

  • Latin American Markets for Compsis
  • As Ailton and his fellow Compsis leaders considered possible markets for expansion, they knew that
    Brazil would continue to be fertile ground for their services. As Exhibits 5 and 6 indicate, research
    conducted and purchased by Compsis showed that whenever the Brazilian government began
    awarding toll highway concessions again, the concessionaires – all of them well-known to Compsis
    and its business development team – would generate systems integration projects that could keep
    Compsis extremely busy. Typically Compsis would be alerted to an upcoming project and possibly
    consulted on its design, then submit a technical proposal to prove that it could meet the minimum
    performance standard. Once the small number of qualified vendors received notice that their
    technical proposals had been approved, Compsis would submit its cost proposal and prepare for a
    lengthy negotiation to find the right price. Although no contract was ever a sure thing, Compsis could
    count on its past performance, strong relationships with key decision-makers in the operator firms,
    and reasonable balance of price and quality to help it win a reasonable segment of the available
    business, both for new projects and for the follow-up U&M.

    Outside Brazil, the Latin American market was projected to be small but growing rapidly. The six
    countries Compsis considered targeting all had relatively little experience with toll roads, so they
    would probably want simple, inexpensive solutions that would be easy for the systems integrator to
    implement. Compsis executives had visited Bolivia, Peru, and other key countries and had returned
    advising that Compsis identify a local commercial partner, someone who knew the right people, could
    maneuver around the complex and corrupt procurement systems, and would obtain information about
    upcoming projects before they were openly announced. Similar partnerships were also being
    considered, although in different political and commercial climates, in such countries as Great Britain,
    India, and Pakistan.

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 7

  • The United States ETC Market
  • Meanwhile Compsis was also turning its eyes north to the United States, an ETC market larger than
    all of Spanish-speaking Latin America put together (see Exhibit 6). The ETC industry in the United
    States was mature, growing steadily, and dominated by several well-established providers. (See
    Table 1 below.) Potential vendors seeking to enter the ETC market found themselves competing for
    the favor of experienced buyers, not merely on price but on credibility, competence, and proven

    The ETC customer base in the US was comprised mostly of transit agencies and transit authorities.
    Transit agencies, such as Departments of Transportation (DOT), were line agencies of the federal or
    state government, such as USDOT (Federal) and TxDOT (Texas). Transit authorities, such as the
    Massachusetts Turnpike Authority, were quasi-governmental bodies that worked alongside transit
    agencies but had independent boards of directors and the authority to issue bonds. As of 2004, a total
    of 64 toll agencies were distributed among 26 states, of which the largest toll road builders were
    Florida, New York, Texas, and Illinois. (See Exhibit 7.) Though there were a few private companies
    who operated toll roads and bought ETC products and services, the majority of the ETC projects in
    the US were handled by public organizations that also constructed and operated the roads.

    Table 1 Major Competitors in Electronic Toll Collection

    ETC Contracts* Significant Players Comments

    Tags MarkIV, TransCore These two firms shared 92% of the

    Hardware TransCore, MarkIV, Raytheon,

    Raytheon was particularly big in Canada,
    SIRIT in California.

    Integration and Software TransCore, ACS State and
    Local Solutions, VES Systems,
    CASETA Technologies, ETC
    Inc., Iteris

    TransCore and ACS each earned over
    $100 million in revenue on ETC. The
    others were far smaller: $10 million or


    ACS State and Local Solutions,

    Back-office (Customer
    Service Center)

    ACS State and Local Solutions,

    ACS was perceived as dominant in this

    * Each ETC project customarily required all of these contracts, although some might be combined.

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 8

  • The ETC Sales Process in the United States
  • Throughout the 1980s and early 1990s, public agencies had tremendous difficulty procuring ETC
    products and services, as government officials had neither sufficient knowledge of the product and
    service offerings nor previous experience procuring them. Several trade organizations therefore
    emerged in order to promote procurement of ITS technologies by creating a network of vendors and
    providing them the necessary exposure to potential customers. For ETC specifically, the
    International Bridge, Tunnel and Toll Association (IBTTA) served as the primary trade organization.
    The IBTTA included among its members virtually every toll authority and the most significant
    vendors, and organized the industry’s most prominent conferences, seminars, advocacy initiatives,
    and list of current open Requests for Proposals (RFPs).

    Membership in a trade organization might help a firm ensure that it heard about a project, but the firm
    then still needed to win the bid in an open process that evaluated multiple criteria. Although a firm
    might encounter a number of methods of awarding ETC projects – sealed bid, a 2-step sealed bid,
    competitive negotiation (RFP/RFQ), sole source, or unsolicited proposal – since the majority of
    customers in the U.S. were public agencies, the majority of projects were procured through public

    The RFP was a competitive, well-regulated bidding process with clear guidelines and procedures,
    designed to ensure fair competition among vendors. Typically the entire RFP process involved a few
    months, from the day the RFP was published in a trade journal or online source to the day a vendor
    was awarded a specific project. Once an RFP was announced to the public, vendors would respond to
    the announcement and obtain a copy, typically including the background on the agency and the
    project, project description, scope of required services, proposal requirements, submission
    requirements, and selection process. It also specified the evaluation criteria, such as:

    • The quality of the employees who would work on the project.
    • The ability of the vendor to maintain high-quality human resources for the duration of the

    • The past performance on similar tasks.
    • A demonstration that the task was well-understood and the needs could be met (the

    technical proposal).
    • The cost of the solution.

    Typically the issuing agency predefined the evaluation criteria and assigned a weight to factor into
    the decision-making process. For example, experience in providing similar services might be
    weighted 25%, approach to deliver quality technical resources 40%, management approach 10%,
    maintenance approach 10%, and cost 15%.

    Within a few days after the RFP was issued, a pre-proposal, in-person conference, open to all
    respondents, would be held to address the questions of the vendors. All of the questions and answers

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 9

    would be published to make all relevant information public. The deadline for vendors to submit
    multiple printed copies of their proposals fell four to eight weeks after the pre-proposal conference.
    The agency would then evaluate the proposals according to the announced scoring system. It was not
    uncommon for the vendor(s) that seemed most qualified to be given an oral interview before the
    project was finally awarded. Throughout the process the agency would devote great care to
    demonstrating the objectivity and defensibility of its decision, recognizing not only its public duty but
    also the risk that an unsuccessful bidder might file a public protest.

    Entering the U.S. Market

    In light of the size and complexity of the market, the Compsis directors knew that it would be no
    trivial matter to find and obtain ETC projects in the United States. Despite its strong quality
    reputation among industry competitors, as a market entrant Compsis would be virtually unknown
    among the transportation agency and authority buyers in the U.S. Sales resources too could pose an
    issue; at the close of 2004, the Compsis sales team consisted of five people, all with engineering
    backgrounds. The head of the sales group managed three salespeople as well as a person covering
    commercial applications, who was in charge of linking the engineering and sales teams in
    commercialization efforts. The sales office sat in the same building in São José dos Campos that
    housed the developers, the finance officers, and all of Compsis management, and did not add
    significant office costs compared to the rest of the organization.

    In contrast to the work with Philips and Intertoll, in Brazil Compsis had not formed commercial
    partnerships, although it did have strong relationships as a supplier to highway construction and
    maintenance companies. Additionally, the company had strong ties to such leading Brazilian
    engineering universities as the Instituto Tecnologico de Aeronautica (ITA) and the Universidade do
    Vale do Paraiba (UNIVAP). To enter the U.S., however, Compsis was considering a broad range of
    approaches, including opening its own sales office in the U.S., partnering with a U.S. firm, pursuing a
    preferred vendor status with a construction company, or selling through a value-added reseller

    Sales Office. Compsis had no physical presence in the U.S. market, and indeed most of the
    executives had not visited the U.S. more than once. In order to open a U.S. office, Compsis would
    need to invest in hiring both sales staff and engineers, leasing office space, and maintaining the office
    itself. Through 2004, the company had not had any offices outside its headquarters in São José dos

    Partnerships. Compsis could look for a partnership with different types of participants in the
    transportation industry, ranging from pure-play toll collection providers to vertically integrated
    transportation infrastructure companies.

    • Dominant ETC players. Some of the companies that competed in ETC and ITS specialized
    solely in systems integration or software development, while others competed in all areas,

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 10

    including toll collection, advanced traffic management, and GPS technology. Several
    competing companies even operated in segments of the same system, such as the E-ZPass
    toll collection program. The single largest player, Transcore, had an established name in all
    major important markets, and all of Compsis’s products overlapped with Transcore
    products. Another key player, Affiliated Computer Services (ACS), was a large provider of
    business process and information technology outsourcing solutions, offering customer
    service centers related to the E-ZPass electronic toll collection system. (See Table 1 above.)

    • Smaller toll industry players. Numerous smaller ETC providers specialized in either
    product or geographic niches. International Road Dynamics (IRD), for example, was a
    small Canadian company that sold primarily in the United States. IRD had established
    relationships with DOTs for ITS products in selling weight motion systems, but had had
    limited success in entering the ETC industry with a strong collection systems offering.

    • Equipment manufacturers. A different segment of the market manufactured the equipment
    used in toll collections systems and ITS, but stayed away from systems integrations. Mark
    IV, for example, as the largest toll transponder manufacturer in the U.S., had developed
    strong relationships with government buyers and all levels of toll suppliers in the industry.

    • Large technology firms. Big players in the technology sectors – Cisco, Raytheon, Aecom,
    and others – were developing offerings in ITS and to a lesser extent in toll collection. Cisco
    had already teamed up with Transcore, resorting to partnerships to extend its product
    offerings and achieve efficiencies in the selling process.

    • Highway suppliers. Many firms had established relationships with DOTs by providing
    equipment and systems unrelated to toll collection. A U.S. firm like Daktronics might have
    developed strong engineering expertise and ties to transportation authorities by selling its
    display systems (variable message signs) for highways and cities – not products for which
    Compsis had any intention of competing.

    • Large non-U.S. competitors. Several European ETC leaders, close competitors to Compsis
    in Brazil and abroad, had no presence in the U.S. market. Although companies like GEA
    and CS Route (France) and SICE (Spain) had product overlap with Compsis and little or no
    experience in the U.S., they did have extensive experience competing for public RFPs
    outside their home market and possible interest in entering the United States.

    Preferred Vendor for a Construction Firm. In some cases, it was not the DOT or toll authority
    that made purchasing decisions for ETC, but the construction company that had won the contract to
    build a toll road. Moreover, even when decisions were made directly by the public agency, the
    construction companies could influence the purchasing process. Rather than set up a partnership,
    such companies would treat Compsis as a preferred vendor, to be used at their convenience whenever
    an ETC project arose.

    VAR (Value-added Reseller). If Compsis formed a commercial partnership with a VAR, it would
    obtain contacts and local business development expertise but no technical expertise or complementary
    services. In Pakistan, for example, in order to obtain vital personal contacts with government

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    Rev. December 15, 2009 11

    officials, Compsis was exploring a relationship with a well-connected VAR who would receive a
    commission for all sales. In the U.S., former state Department of Transportation employees, highway
    construction company officers, or other government-connected individuals could potentially act as
    VARs for Compsis.

  • The Crossroads
  • As 2004 drew to a close, Ailton knew that Compsis had several months of operating cash in the bank.
    Perhaps the best option was to wait out the current drought, expecting that the Brazilian government’s
    funding for toll concessions would rebound as predicted. On the other hand, once the government
    announced the reopening of concession grants, Compsis would have to wait for those contracts to be
    awarded, then delay while proposals were solicited by the concessionaires, then negotiate the prices
    and start the projects – assuming that Compsis won the bids at all.

    It might be that Compsis had focused too intensely on electronic toll collection. Were Compsis to
    widen its product suite by focusing more on ATMS, SMV, or SGM, it could broaden its portfolio and
    spread the risk, albeit among much the same government and concessionaire buyers as for ETC.
    Compsis could even get away from its traditional higher-quality, higher-price strategy and
    aggressively pursue contracts for less expensive projects, such as setting up a series of emergency call
    boxes along a major highway.

    But if Compsis really wanted to grow, then Brazil was ultimately a limited market. True, Compsis
    hadn’t been perfectly successful in its earliest international projects, but the team had learned crucial
    lessons about project management, cultural differences, and the complexities of finding a local
    partner. Yet Compsis had a small sales team, relatively inexperienced with international, public RFP
    processes. Was Compsis ready to expand to the United States, where it could probably match the
    quality and beat the price of its competitors? If so, how should it enter? If not, should it go
    elsewhere instead – Latin America, Pakistan, Western Europe – or stay at home? Standing at this
    crossroads in the company’s history, Ailton evaluated the options. Which road should Compsis

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 12

  • Study Questions
  • 1. Imagine that you’re Ailton and you’re applying to host a team in MIT Global Entre-
    preneurship Lab (G-Lab). What should be the team’s project scope?

    2. Now imagine you’re on the G-Lab team. How will you set out to complete the project?

    • What will you do, in both October-December and January?

    • What will be the components of your project workplan?

    • What challenges do you anticipate and how will you prepare for them?

    • How will you organize your team?

    • What do you want to accomplish in your first conversation with your sponsor (Ailton)?

  • Case Write-up Questions
  • What do you recommend that Ailton do? Should Compsis expand? If so, where and how? If not, what
    should Compsis do instead?

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Exhibit 1 Biographies of the Compsis Founders

    Ailton de Assis Queiroga, electronic engineer, M.Sc., has been the CEO of Compsis since its
    foundation in 1989. He has wide experience in systems engineering and real-time software
    development. Some of Eng. Queiroga’s main involvements have included: design of universal
    Programmable Logic Controllers – PLC (Philips, Holland, 1980-81); design of a MIL-STD-1553B
    remote terminal, AM-X Aircraft Avionic Integration and Validation Test Facility System (Aeritalia,
    Italy, 1982-85); conception and early design of the AM-X aircraft Operational Flight Program-OFP
    Maintenance and Test Support System, according to DOD-STD-2167A; and design of the EMB-120
    Brasilia aircraft Mechanical and Pneumatic Systems testing facility (Embraer, 1985-1989).

    Hélio Ikedo, electronic engineer, graduated from ITA (Instituto Tecnologico de Aeronautica). He
    did his post-graduate work on control systems for real-time systems, with large experience in projects
    and development of industrial and aerospace systems, and an emphasis on system engineering, special
    equipment, and software. Eng. Ikedo has worked with system and software development for on-
    board computing, MIL-STD 1553B bus controller network, equipment test and control and
    supervisory system based on mini and microcomputers. He has also participated in a joint program
    with MBB Aerospace Division München (Germany) and AMX Program with AERITALIA – Turin
    (Italy). Eng. Ikedo is one of the founding members of Compsis, developing the first Brazilian Toll
    Collection System.

    Exhibit 2 Revenues by Division, 2002-2004

    2002 2003 200


    Revenues (Total; US$ millions) 3.21 4.171 3.32

    Division (%)
    SICAT 44.2 18.0 10.4
    ATMS 0.0 6.0 0.


    SMV 0.1 2.0 0.0
    SGM 0.0 26.0 0.3
    Automotive 23.1 9.0 23.


    Aerospace 0.0 0.0 0.0
    Updates & Maintenance (U&M) 32.6 38.0 65.7


    Source: Compsis.

    Rev. December 15, 2009 13

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Exhibit 3 The Compsis ETC and ITS Product Lines

    Toll Plaza near São Paulo, Brazil, operated by Compsis client Viao Este

    The Compsis SICAT software

    Control Center equipped with Compsis
    ATMS (Advanced Traffic Management)

    Rev. December 15, 2009 14

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Exhibit 4 Shares of ETC Integration Market in Brazil (2004)

    Concessions (36) Lanes (1,698)
    Compsis 39% 31%
    CSRoute 17% 20%
    GEA 6% 14%
    TESC 14% 9%
    Sainco 8% 8%
    Servotron 8% 6%
    Telectronica 3% 6%
    Tecsidel 3% 4%
    DM 3% 2%

    Sources: Compsis, ABCR (2004).

    Exhibit 5 Highway Concessions Awarded in Brazil (1994-2007)








    1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

    Source: Compsis, ABCR (2004). 1994-2004 actual; 2005-2007 projected.

    Rev. December 15, 2009 15

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 16

    Exhibit 6 Projected ETC Revenues in Latin America and the U.S., 2004-2008
    in US$ Millions

    2004 2005 2006 2007 2008
    New Projects 0 52 42 41 0
    Upgrade & Maintenance 18 18 23 25 28
    Total 18 70 65 66 28

    Latin America (outside Brazil)
    New Projects 18 6 0 20 21
    Upgrade & Maintenance 1 1 1 2 3
    Total 19 7 1 22 24

    United States
    New Projects and U&M 49 54 60 66 73

    Notes: Latin American projects are projected to be divided as follows: Chile 31%, Bolivia 20%,
    Argentina 19%, Peru 16%, Ecuador 8%, Colombia 6%. Other Latin American countries are projected
    to have virtually no ETC expenditures.

    Source: Compsis, ABCR, Entrevistas Itelogy, IBTTA, FHWA (2004).

    M. Jonathan Lehrich, Paul John Paredes, Ramesh Ravikumar

    Rev. December 15, 2009 17

    Exhibit 7 Toll Road Projects in the United States, by State (2001-2004)
    Toll Road

    State Mileage (2003) 2001 2002 2003 (proj.) 2004 (proj.)
    Alabama 6.0 – – – –
    Alaska 0.0 – – – –
    Arizona 0.0 – – – –
    Arkansas 0.0 – – – –
    California 95.8 126.5 92.7 224.3 69.0
    Colorado 48.0 152.4 223.3 115.3 47.6
    Connecticut 0.0 – – – –
    Delaware 49.3 193.4 51.2 54.7 20.0
    District of Columbia 0.0 – – – –
    Florida 657.0 262.4 574.0 513.5 773.7
    Georgia 6.2 – – – –
    Hawaii 0.0 – – – –
    Idaho 0.0 – – – –
    Illinois 282.1 153.3 104.6 257.0 358.0
    Indiana 156.8 26.0 – – –
    Iowa 0.0 – – – –
    Kansas 236.1 28.8 26.3 23.3 21.9
    Kentucky 248.5 – – – –
    Louisiana 1.5 2.4 9.6 12.8 10.9
    Maine 106.2 53.2 39.5 44.5 19.1
    Maryland 0.0 53.1 129.6 167.8 –
    Massachusetts 135.6 38.8 44.2 32.0 –
    Michigan 0.0 39.2 37.0 35.1 –
    Minnesota 0.0 – – – –
    Mississippi 0.0 – – – –
    Missouri 0.0 – – – –
    Montana 0.0 – – – –
    Nebraska 0.0 – – – –
    Nevada 6.4 – – – –
    New Hampshire 97.1 10.1 11.7 38.2 –
    New Jersey 356.0 187.4 289.8 318.3 61.0
    New Mexico 0.0 – – – –
    New York 574.6 574.1 627.2 587.0 699.7
    North Carolina 0.0 – – – –
    North Dakota 0.0 – – – –
    Ohio 392.2 152.1 74.0 76.0 60.8
    Oklahoma 596.7 44.7 45.3 43.5 48.8
    Oregon 0.0 – – – –
    Pennsylvania 508.2 267.3 231.0 221.0 –
    Puerto Rico N/A 24.5 57.4 54.0 –
    Rhode Island 0.0 6.5 3.0 3.5 –
    South Carolina 23.5 – – – –
    South Dakota 0.0 – – – –
    Tennessee 0.0 – – – –
    Texas 145.6 198.4 556.6 1,095.8 686.3
    Utah 1.0 – – – –
    Vermont 11.9 – – – –
    Virginia 65.1 6.2 3.7 14.6 11.4
    Washington 0.0 – – – –
    West Virginia 86.8 – – – –
    Wisconsin 0.0 – – – –
    Wyoming 0.0 – – – –
    United States, total 4,894.2 2,601.0 3,231.5 3,932.3 2,888.1

    Source: Survey by the International Bridge, Toll and Tunnel Association (2003).

    Total Toll Road Projects (US$ millions)

      The Electronic Toll Industry
      Compsis: Company History
      The Expansion of the Compsis ETC Business
      Latin American Markets for Compsis
      The United States ETC Market
      The ETC Sales Process in the United States
      Entering the U.S. Market
      The Crossroads
      Study Questions
      Case Write-up Questions

    • Control Center equipped with Compsis ATMS (Advanced Traffic Management)

    Carefully read the case study “Compsis at a Crossroads” (posted in this module). In 2-3 pages (1.5 spaced lines), make a recommendation for Compsis. That is, should they go abroad or not? Use the exhibits and information presented in the case study to justify your answer. If you believe Compsis should go abroad, be as specific as possible about which markets they should enter and why.

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