Uber – over here and stirring up the European taxi market

Some nine months ago, my friend and colleague Jason Busch wrote a post on Spend Matters US that wasn’t his usual insightful analysis of some exciting new procurement idea or technology product. Rather, he talked about a new taxi service in Chicago, driven by an 'app', called (rather oddly I thought) Uber. The angle for Spend Matters was that it seemed to be a disruptive technology-based innovation in a spend category that was relevant to both corporate buyers and many of us as individuals.

That post has become one of the most read and commented on in Spend Matters history, a sign of how disruptive, interesting and controversial this new player in the taxi market has become. And not just in the US. Uber are now firmly in London, and other major European cities, causing much angst particularly to the London black cab fraternity, who staged a protest in London the other day, blocking streets for several hours. Similar protests have been held in Paris, Madrid, Berlin and other cities, although apparently this has succeeded mainly in drawing public attention to Uber, driving better sales!

I had dinner a few weeks ago in West London (near Twickenham) with friends who live in North London. They’d decided to treat themselves to a taxi home, and took great delight in showing me the Uber app on their i-Phone. You book the car, and the very neat feature is that you can see on a map exactly where your taxi is at any moment. You are told how long it will take, the registration number of the car, the driver’s name, and you can even look up past client comments on him / her.

Pricing is also provided; it is not totally dynamic, but does increase at busy times. But at most times, it seems to be perhaps 10-20% cheaper than a London black cab, according to our friends. And there is no booking ahead, which of course reduces the overheads compared to a normal taxi firm who have an office full of call handlers / bookers. You book your Uber car when you want it, and you are told how many minutes you will have to wait.

Without a doubt, Uber has very smart technology. And for the customer, what’s not to like? Black cabs are expensive, they don’t like going beyond a certain range, and you often can’t find one just when you really need it. And as procurement people, we instinctively dislike and mistrust monopolies or oligopolies, which is of course what the black cab system is. Our friends are early technology adopters (he was one of the first IBM PC resellers in the UK, more than 20 years ago), and they love it.

But when we come to really analyse whether Uber is a “good thing” in the wider sense, the debate is less clear. There have been arguments around the status of the drivers, and issues concerning insurance. Most Uber drivers use their own private vehicles; would they or their passengers be insured in case of an incident? But the Uber website certainly suggests that in London for instance, you must already have a private hire licence to sign up as a driver. (However, that doesn’t seem too big a hurdle to surmount, from my basic research on the subject).

And when we look at all the regulations and licensing that a black cab or even a registered mini-cab firm has to go through, how can this competitor be allowed to compete without similar controls? Black cab drivers take years to gain “the Knowledge” – their mental road map of London. But who needs that with Google Maps and Satnav anyway? Uber are also accused of creating certain corporate structures to avoid paying tax in certain countries, like many other tech firms it should be said.

The New York Times described this as a fight between "consumer choice and convenience versus traditional workers' rights". European taxis, as in London, are a "heavily regulated and closed-shop way of doing business." Usually, in these situations, consumers win out in the end.

It’s a tough call, and as I haven’t used the service myself, I wouldn’t like to make a firm judgement either way. Some cities and their taxi drivers are fighting back against Uber, whilst other competitors are also emerging. But talk of Uber floating with a market value of some $18 Billion shows how quickly this upstart has taken the market by storm. Whatever happens, this is going to be a text-book, business school example for years to come of how disruptive technology can rapidly shake up a very established market.

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