Machine-to-machine telematics: Ready to grow, part II

M2M is hardly new to the telcos. The first fleet management solutions, for example, emerged some 15 years ago. And the telcos have been providing the underlying connectivity for years.

But it was not until a few years ago, that the M2M space captured the imagination thanks to a variety of factors, including falling prices of tracking modules, the need to diversify beyond traditional voice and data, and strong regulatory pushes around the world to make basic telematics available on new vehicles.

Another factor is growing demand for multi-country M2M solutions, which is forcing mobile network operators into alliances to provide the necessary coverage. Deutsche Telekom and France Telecom-Orange formed one such alliance in early 2011 and later expanded it to include Sweden’s TeliaSonera.

Long-term relationships

And then there is the prospect of things like smart meters and connected medical devices being put to service in the not-so-distant future, each requiring a new SIM card to send data.

M2M "is absolutely [lucrative]," says Jürgen Hase, vice president M2M Competence Center, Deutsche Telekom."People only  look at the ARPU [average revenue per user]. Of course, the ARPU for [handset] Internet data is clearly higher than for a machine. But, on the other hand, you are talking [to somebody] who is using hundreds of thousands of SIM cards to connect his machines for remote monitoring. And the churn rate is near zero. That means that M2M suppliers can build really long-term relationships and work with a customer to grow business."

According to a recent report by Machina Research, the growth of M2M connections in the manufacturing and supply chain sector will be chiefly driven by the need to improve margins. But it will ultimately become a must-have for effective competition, the report predicts. Manufacturing and processing will lead the way in the number of M2M installations, but transport and distribution—not counting passenger vehicles—will be a close second, though hobbled by continued fragmentation of services.

Untapped opportunities

There are hundreds of locally active players in the commercial telematics industry alone, according to ABI Research. While the increasingly global market for M2M solutions is unlikely to be able to support all the current players, there still appears to be plenty of opportunity for those who know what they are doing—even in mature markets of the United States and Western Europe, not to mention the developing world.

According to Machina Research, M2M penetration for heavy commercial vehicles may be around 20 percent in many parts of Western Europe. In Spain, it is still only two percent. Another largely untapped opportunity is the tracking of rail freight. In one of only a few projects in this area to date, T-Systems has been working with Deutsche Bahn to develop a tracking solution for the German rail company’s 10,000 freight cars.

Also in demand are end-to-end fleet management solutions capable of viewing the entire supply chain, not just one of its many verticals. “They’re not particularly stitched together and one of the dynamics that will be interesting to watch is how horizontal this can become,” says Matt Hatton, director at Machina Research.

OnAsset Intelligence may just have the solution. The Texas-based company claims its SENTRY FlightSafe asset tracking solution is the first in the world for all modes of transportation. Equipped with a wide variety of sensors, high-accuracy GPS/AGPS and quad-band GSM connectivity, the SENTRY FlightSafe tracking modules are even allowed on planes, since they can detect when they are on an operational aircraft, turn off all their radio transmissions but continue to gather data on the cargo, and resume transmissions upon landing.

Cultivating niche markets

Navman Wireless, a Glenview, Illinois-based provider of online fleet management services, focuses on construction, municipalities and student transportation in the United States. It is also pursuing lucrative growth opportunities in emerging markets, such as China, a new market for fleet management solutions, where Navman started signing customers late last year.

Ditto for MiX Telematics, a global provider of driver safety, vehicle tracking and fleet management solutions. Rather than trying to compete with dozens of low-end tracking companies, the South Africa-based company focuses its United States solutions on the oil and gas extraction sector. In the United Kingdom, Ireland and Singapore, the bus and coach industry is a major focus.

Continued innovation and focus on customers is key to maintaining an edge over the competition, says Werner du Plessis, international business development manager at MiX Telematics. That’s why future solutions must be much more than a black box under the hood of a car. They must be mobile, well integrated, tailor-made, user-friendly and sexy to reflect the latest trends in consumer electronics, he says.

MiX Rovi, the just released in-cab device from MiX Telematics, for example, features a high-quality 7-inch touch screen, turn-by-turn connected navigation, audible driver performance feedback, fuel capture and fully customizable data input functionality. "If you look at the applications that we provide nowadays, they are made for mobile and they are made to give relevant information visually and clearly,” saysZoe Jenkins, product manager at MiX Telematics,“rather than providing  reams of data that the customer has to work through to see trends or answers to their operational problems."

"We will see how successful [telcos] are,” says Thomas Schmidt, managing director of TomTom Business Solutions, whose WEBFLEET online fleet management system recently exceeded 200,000 connected vehicles. “They have difficulties to stay in focus and what we have learned in the last six years is that focus is a very important element of success. If you have focused sales guys, focused partners, they perform much better than people who have a whole menu card of products they [are trying] to sell.”

Jan Stojaspalis a regular contributor to TU.

Read Machine-to-machine telematics: Ready to grow, part I.

For more on M2M telematics, see Special report: Telematics and machine-to-machine communications.

For all the latest telematics trends, check out Insurance Telematics USA 2012 in September in Chicago, Telematics Brazil & LATAM 2012 on Sept 12-13 in Sao Paulo, Telematics Japan 2012 in October in Tokyo, Telematics Munich 2012 on October 29-30, Telematics for Fleet Management USA 2012 in November in Atlanta, and Content and Apps for Automotive USA 2012 on Dec. 4-5 in San Diego.

For exclusive telematics business analysis and insight, check out TU’s reports on In-Vehicle Smartphone Integration Report, Human Machine Interface Technologies and Smart Vehicle Technology: The Future of Insurance Telematics.

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