Blue sky for the Fleet Telematics Industry
Greg Miller, President and CEO of FleetLogik LLC
The future of fleet management includes strong growth in GPS technologies. The number of GPS based fleet management systems deployed in commercial vehicle fleets in North America is growing at a compound annual growth rate (CAGR) of 12.6%, according to analyst firm Berg Insight. The installed number will grow from the 2.1 million last reported in the final quarter of 2010 to an estimated 3.8 million by 2015. In Latin America, the number of installed fleet management systems is expected to increase from 0.9 million to more than 2.3 million in 2015, an impressive CAGR of 20.6%. The market is becoming extremely competitive and filled with a variety of options and approaches that are being influenced by early adopters and end-users.
We have observed that today’s clients and customers of GPS products have evolved, with far greater expectations of system functionality, placing a heavy emphasis on quantifiable financial benefits. This has indirectly led to a lack of standardization and shared protocols. Customers are demanding very specific requirements, with the relatively small but nimble providers all too eager to customize solutions to make the sale or extend a service agreement. Few have adopted more sustainable indirect sales models based on distributors and integrators focused on standard product offerings across broad platforms. The market is maturing but still very fragmented. It is estimated the largest GPS telematics provider has less than 8% of the installed worldwide market.
Vendors such as Qualcomm, Xata and Peoplenet remain largely focused on the high-end trucking segment. Non-trucking segments such as delivery, utility and consumer services are addressed by another group of vendors including Fleetmatics, Networkfleet and Wireless Matrix. A third group that includes Synovia and Zonar focuses their development on student transportation, and Navman has been highly successful in the off-road equipment sector.
The truck manufactures too are quickly aligning themselves to one or more telematics providers, with rumors of potential acquisitions and in-house developments. Isuzu penned an agreement with Teletrac and Freightliner announced recently they will offer a Telogis factory pre-wire option that focuses primarily on five industry segments; utilities, waste/refuse, construction, government and food/beverage.
"As a truck manufacturer, it's absolutely critical that we do everything we can to help our customers reduce operating costs by reducing idle times, reducing emissions and streamlining their operations through advanced fleet management and routing," said David Hames, general manager, marketing and strategy, Daimler Trucks North America. "Offering a telematics pre-wire option to our customers will make it easier for them to achieve these efficiencies, including the integration of planning and operational data, field variables and location-based intelligence to make informed business decisions in real time."
Investors and private equity interest is clearly on the rise. At FleetLogik we are seeing many our clients include telematics in their near term strategies. Late last year, Fontinalis Partners, the private equity group led by founding partner William Clay Ford, Jr. purchased a controlling stake of Everyday Wireless.
The report by Berg Insight, "Fleet Management in the Americas" cites the maturity of customer awareness related to the benefits of telematics as the factor driving growth. "Today, managers in North America generally know that fleet management technology can help their businesses reduce costs and improve efficiency," said Rickard Andersson, telecoms analyst at Berg Insight.
"In Latin America, an educational process may, however, be needed to increase the awareness among prospective users about the benefits that fleet management brings beyond mere security related features."
Consultants at FleetLogik, like many others, believe it is not a matter of "if" but rather "when" a particular fleet operator will adopt telematics into their management systems and disciplines. In fact it is likely to become the single largest near-term differentiating factor among fleet operators. Those who master the integration of the technology and use it to drive business efficiencies will have a distinct competitive advantage in the next few years.
New commercial vehicle regulations will also have a major impact on the market. The recently implemented CSA safety scoring system to identify high-risk motor carriers is but only the beginning. The hours-of-service regulations are further being revised and a mandate to use electronic on-board recorders to log hours is likely to require technology implementation in 2012, eventually to include all commercial vehicles. Brazil already has mandated the installation of tracking devices on all new vehicles. Insurance companies throughout North America are already factoring the safety benefits of telematics installed by carriers, similar to the "anti-lock" brake system discounts first introduced in the ‘80’s. Telematics suppliers who are able to demonstrate multi-tiered integration and vertical market approaches may be those who survive the inevitable shake-out.
Regulations and cost benefits aside, the carrier’s customers are aware of the safety and security benefits of telematics and have begun including in contract requirements on an increasingly more frequent basis. In fact, in several market segments it is not uncommon for the telematics providers to circumvent the carrier and sell the benefits of their systems directly to the carrier’s end-customer; a tactic that clearly has a short life in the market place but is contributing to growth and demand.
So what does the future hold for the market? It is unlikely we will see a mass consolidation among the providers. The technology platforms are so dissimilar that synergies from a consolidation would be limited. Organic growth from a well-funded provider or a vertical entrance into the market by an existing software giant is more likely. Google already offers consumer based GPS for free, dramatically changing the landscape of the personal GPS device. One such provider, TomTom shifted their focus towards commercial fleet telematics as the demand for personal devices and related revenue continues to drop. The TomTom solution represented about 4 percent of group sales last year, but it ranks second in Europe overall with a 10 percent market share. TomTom has the fastest growing fleet telematics business in Europe and in a very short period has increased their market share from negligible to major. TomTom competes with Garmin, which is stronger in the North American market, and in the commercial digital map market with Google and Navteq, which is owned by Nokia Corp. All of these companies are reportedly targeting commercial fleet applications to bolster dwindling revenues.
Clearly, there is blue sky for the telematics industry and the fleet operator who uses the technology to see the future more clearly.
About the author: Mr. Miller is a well-respected leader in the transportation, automotive and fleet industries. Having served in highly responsible executive positions for top tier public, private and municipal organizations, he has in-depth industry insight into the complexities that drive the global fleet industries. Formerly Mr. Miller was responsible for the Deutsche Post DHL Americas-wide fleet and the operation of more than 18,000 vehicles for the world’s second largest student transportation enterprise, National Express. He is currently the President and CEO of FleetLogik, a specialized fleet consultancy firm based in Chicago. For more information go to www.FleetLogik.com