Telematics: The partnership imperative

Partnering is a matter of practicality. OEMs are out to sell cars, and telematics features, at least in some cases, have been proven to sell vehicles and expand market share. However fervent the OEM’s desire to sell cars, though, their “competencies are not in the realm of wireless and telephony, and they’ve become aware that partnerships can get them into those realms,” says IHS iSuppli’s senior analyst Mark C. Boyadjis.

There is also an inherent mismatch between the speed at which the telematics business moves and the pace of R&D in the car-manufacturing world. An automotive project typically develops over six years, whereas telematics and IT services are ready for market in 18 months. Without a TSP partner, OEMs “would come out with an already outdated product,” adds director for business development Alex Weiss Von Trostprugg of Altea Deutschland. “And they know this.”

Plus, there’s no sign that automotive telematics technology is slowing down. In Europe, Latin America, and the United States, carmakers are feeling a lot of pressure to enhance vehicle safety with telematics services. Telematics no longer means just vehicle tracking; it now means automatic emergency calls and features that provide both impact recognition and avoidance.

But isn’t GM’s OnStar proof that OEMs can do it on their own? Yes and no. GM structured OnStar as a company subsidiary, but it still took them five or six years before they reached any kind of success. “There’s no one else doing it that way because now it’s less expensive and much faster to market to partner with a TSP,” says Boyadjis.

What a partner provides

That’s not to say that OEMs haven’t grown wiser in telematics management. All the majors, including GM, Ford, Toyota, BMW, and Nissan, are now very well aware of how to manage a telematics system. And they want to maintain managerial control. But when it comes to implementing the systems and actually providing the services, a partner is perfect.

Partnerships are particularly beneficial to OEMs (at least, where traditional telematics services are concerned) because it falls to the TSP to integrate with automakers and their hardware capabilities. “Whatever services they’re interested in, the TSP has to work to deploy,” says Boyadjis. The TSP must also work to meet the OEM’s demands for data, whether that’s diagnostics, subscription information, or subscriber demographics.

The data management component of the OEM/TSP relationship is actually the most potentially rewarding. Beyond its uses for the OEM and TSP involved in the partnership, aggregate data gathered from vehicles using telematics services can be resold to third parties, including insurance companies, governments, and municipalities, for a variety of purposes, the most obvious being traffic information. “Data collecting and resending means if [an OEM] doesn’t make money, they can break even on a telematics project,” says Altea’s Weiss Von Trostprugg. (For more on driver data, see How to profit from telematics driver data.)

And the more open the system, the better. Otherwise the data remains segregated by proprietary automotive system or TSP and is much less useful than it would be as an open-source whole. In fact, Weiss Von Trostprugg has even proposed “eCall Plus,” a program that would use the same device and technology as the universal eCall safety system intended to be deployed in all European vehicles by 2015. With eCall in place, cars would be constantly connected via GSM, so they’re “generating data that could be collected and sold,” he explains. He believes this model to be the best hope for making automotive telematics “if not a very profitable business, at least a positive business model.” And many of the eCall partners are on board with this idea, he reports. (For more on open-source telematics, see Telematics and app development: The advantages of open innovation.)

The future of partnerships

As the telematics market continues to grow and diversify, IHS iSuppli’s Boyadjis believes partnerships will also take increasingly different forms. From a hardware perspective, there’s a choice between embedded or mobile-based services, but examine the larger telematics ecosystem and “the TSP is just one note.” There will likely be more and more systems designed that don’t require a traditional TSP, such as Hyundai’s Bluelink, which uses voice recognition technology rather than a traditional call center for customer service, except in crash notification alert situations or cases where the driver specifically requests a human being. (For more on embedded versus mobile-based services, see Telematics and the ‘built-in’ vs. ‘brought-in’ debate; for more on voice recognition, see Can voice recognition make telematics services safer?.)

This is not to say TSPs won’t remain important, but Boyadjis sees their role evolving. A call center might be an option an OEM partners with a TSP to provide individually, rather than as part of a larger telematics service package.

Boyadjis also believes that as the telematics industry goes global, OEMs will need more partners to help them deploy telematics services in their vehicles, no matter where they’re sold. Partners, including TSPs and wireless carriers, will be essential in helping OEMs meet different technology standards in various countries, comply with local privacy and business laws, and provide infotainment content in another part of the world. (For more on partnerships, see Telematics and the connected vehicle value chain.)

Even after coming this far, automotive telematics is still just getting started, adds Weiss Von Trostprugg. “It’s close to defrosting,” he says. “But not hot yet.”

Jessica Royer Ocken is a regular contributor to TU.

For more all the latest telematics trends, join the sector’s other key players at the Consumer Telematics Show 2012on Jan. 9, 2012 in Las Vegas, V2X Safety & Mobility 2012 USAon March 20-21 in Novi, MI, Content & Apps for Automotive USA 2012on April 1 and Content & App for Automotive Europe 2012on May 28 in Frankfurt.

For exclusive business insights into the telematics market, read TU’s reports In-Vehicle Smartphone Integration Report and Smart Vehicle Technology: The Future of Insurance Telematics.

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