Telematics Update interviews Gartner’s Thilo Koslowski

Precksha Saksena: We've been using the term ‘telematics' for almost a decade, but every year the term reinvents itself to encompass something more. Could you tell me what the term actually signifies and what's the driving force behind the telematics industry?

Thilo Koslowski: Nearly twelve years ago when I created our automotive strategic advisory practice at Gartner, the auto industry began to use the term ‘telematics' to describe the combination of telecommunications and informatics technologies and their implications for the vehicle.

Back then, ‘telematics' referred to a new focus that was heavily influenced by the excitement coming from the quickly growing Internet. However – like many of the unfulfilled Internet dreams – the automotive industry had to realise that many of the ideas for delivering in-vehicle services to drivers didn't lead to the expected demand. In many ways, the automotive industry was too early and consumers had yet to understand the value of in-vehicle services at a time when they were beginning to grasp the usefulness of the Internet.

Furthermore many automotive companies – some of them even today – viewed the automobile as the centre of a user's information needs, which limited initial market adoption.

We reflected these unrealistic expectations as well as a projection of when telematics would finally take off in our now famous Telematics Hype Cycle, which we first published in late-1998.

Over the last five to seven years, the telematics industry has changed considerably. In-vehicle technologies, service offerings and business models have evolved and today the industry is much more diverse with representatives from the consumer electronics, Internet and service provider industries.

To reflect this change and broader scope, we introduced a new term in 2006: Vehicle-Centric Information & Communication Technologies (Vehicle ICT). Vehicle ICT represents a broader approach to offering connected services to the vehicle and beyond. We differentiate two sub-segments: Car ICT and Personal ICT.

In this context, the automobile is a connected entity in a user's network of connected environments (home, office and when being mobile). Over the next ten years, the integration of automobiles into users' information networks will continue to drive innovation on the technology and business side. The possibilities and opportunities are significant, and that's what will continue to drive the excitement and investment interest in the connected vehicle.

PS: How will the latest technological innovations – such as the electric car, cloud computing and new wireless networks, impact the telematics industry?

TK: Technology innovations will have a critical impact on the automotive industry, and Vehicle ICT in particular. We work with automotive organisations, CE companies and content/service providers (including TSPs), and technology innovations are helping these companies to develop new customer value propositions, define alternative business models and create a foundation for closer collaboration.

For example, electric vehicles will require data connectivity and services to connect to the charging infrastructure and to address operational needs. Cloud computing promises to reduce content and service delivery costs and can create a flexible way for various companies to gain access to the connected vehicle.

Advancements in wireless networks such as LTE or WiMax – but also expanding existing 3G networks – will lead to higher data bandwidth, reliability and coverage improvements.

Over time. technology innovations will realise the promise of the truly connected vehicle and lead to realising the next frontier: the connected consumer.

To avoid the mistakes of the early days, however, companies must be careful not to integrate technological innovation for the technologies' sake; the idea isn't to turn cars into rolling PCs. Instead, services and applications have to deliver information in an automotive context and address driving-related needs. The success of navigation-focused offerings underlines this important requirement.

PS: Do you think the telematics industry will continue to thrive, despite the changes that have taken place in the automotive industry due to the current economic climate?

TK: Despite the current economic situation, Vehicle ICT and telematics will continue to evolve as they represent one of the very few differentiation opportunities for the automotive industry – today and in the future.

Service offerings aimed at the connected vehicle will allow companies to create new value propositions that are focused on the post-sale phase, which typically lasts multiple years and has been an area of unexploited revenue opportunities especially for the automakers.

We predict that by 2012 to 2014, the majority of automakers will focus their product development efforts in mature markets on alternative powertrain technologies and Vehicle ICT innovations.

Of course, the current economic crisis is having an impact on the automotive industry and on companies' investment priorities. However, I don't expect the economy to cause a significant dent or delay in continuing the industry's ambitions to move forward on Vehicle ICT developments.

A likely consequence of the recession will be an increased focus on Vehicle ICT innovations and offerings specifically designed for the aftermarket. As consumers are holding on longer to their current vehicles, they are looking for ways to upgrade their cars with exciting new features. This will be a significant opportunity for CE companies, service providers and network carriers. Even the automotive companies can benefit from this segment if they create successful partnerships with external partners quickly.

PS: In a previous interview you made references to Navigation 3.0. Could you tell me how this will impact the industry?

TK: Navigation has been a highly successful solution category for the automotive, Vehicle ICT and CE industries over the last ten years. Today, satellite navigation is becoming a readily available tool for consumers to guide them from A to B. This is a great testament to the effectiveness of companies' marketing and product development efforts.

However, this trend also shows a worrisome development: Navigation solutions are becoming commoditised, which results in lower profit margins and growing market saturation.

It was at the end of 2005 when I first pointed out to our clients that the then unstoppable desire for high-end navigation solutions would face a significant revenue and profit change in the next two years. Companies, especially PND manufacturers, were slow to react, and consequently are now beginning to see declining business results and a tougher market environment.

Navigation today has an identify crisis, and companies must expand on the original value proposition to avoid the fate that PDA's faced in the year 2000, when most of the PDA functionally such as Personal Information Management was absorbed by phones.

Navigation 3.0 captures the need to create new value propositions that provide recurring relevance in the form of navigation services that are device-independent, ubiquitous and contextual to the user's location. For example, a successful navigation service in the future will transfer seamlessly between devices, the car and the user's home PC, and will automatically notify others when the user encounters unexpected traffic conditions.

Ultimately, CE companies must transform their businesses from a PND to a Personal Navigation Services (PNS) centric model and put more emphasis on value-added applications that go beyond simple destination routing. I expect a significant increase in solution and business development efforts in this area over the next three to five years.

PS: It has always been a pleasure to have you deliver the opening keynote speech at the annual Telematics Detroit show. Could you give our readers a brief teaser about your keynote speech at this year's show?

TK: My focus has always been on developing strategic thought leadership in the automotive and Vehicle ICT industries and to outline how the markets will evolve. Over the last twelve years, we predicted quite a few business, industry and technology trends, such as our Telematics Hype Cycle, the device-to-vehicle integration concept, the commoditisation of navigation, the need to develop service-centric vehicle ICT and navigation offerings, etc. – virtually all of these predictions became a reality – a fact that we are very proud of.

In this year's keynote, we will continue this tradition and provide new and exclusive insights into how the Vehicle ICT industry will evolve. In particular the audience will learn:

• How the telematics & Vehicle ICT market and expanded value-chain will continue to mature in the short- and long-term
• How consumer preferences are changing and at what point in-vehicle services will become a must-have feature for the masses
• How to maximise existing and new revenue opportunities and what challenges to prepare for
• What technologies and business trends companies must track to stay ahead of the competition
• Which companies are better positioned to deliver successful connected vehicle offerings and who is going to lead, and whom you should partner with

Thilo Koslowski has been hailed as one of the industry visionaries, and his insight and expertise has helped shape the industry. He will deliver the opening keynote at Telematics Update's flagship show Telematics Detroit 2009, and will also lead panel debates on topics such as connectivity, navigation & LBS and telematics services.