Large amounts of material are used for rail infrastructure causing significant environmental impact. At the same time the industry’s motivation to innovate is low and the lowest price is the main driver for selecting a tender. Integrated Product Service Offerings, or IPSO, have the potential to reduce the environmental impact of products and services, increase cost efficiency and quality, and act as a driver for change.
This paper aims at explaining the benefits and challenges from the provider and buyer perspectives regarding IPSO for rail infrastructure.
Theories such as product development, information asymmetry, knowledge integration, networks and innovation are used to complement the literature focusing on IPSO. The empirical part has been collected using individual interviews, group interviews and a survey approach.
A benefit with IPSO is the holistic life-cycle perspective that provides incentives for dematerialization, resulting in a more resource-efficient and durable infrastructure. IPSO requires improved information transfer, something which stimulates innovation as well as processes for evaluation of the contracts. Providers would get involved in the design phase and they hope that IPSO contracts will make buyers focus less on e.g. the initial purchasing price and more on the total life-cycle cost in relation to quality in order to get the best solution.
Several challenges with IPSO are discussed, and most of them are derived from the risk and uncertainty aspects that come with long-term contracts and inexperience with a new business model. Other challenges relate to organizational issues such as the fact that the actors see themselves as parties with opposing interests. At the same time IPSO calls for common interests, shared risks and flexibility. The lack of information transfer and knowledge integration is a barrier for innovation and the buyer’s conservative business culture makes it difficult to implement new types of contracts.
IPSO provides several benefits for the rail infrastrucutre industry but an implementation faces several challenges mostly due to organizational issues.