We are all witnessing the transformation of the modern telematics and IoT market globally — new devices, new companies, new standards, new regulations, new uses, new applications. But sometimes it’s hard to match all this change happening on the newspaper headlines with reality. What do these novelties mean for the established companies with a solid reputation, extensive customer base, and high-quality products? Which of them pose threats and which open opportunities?
To clarify the picture we want to present a vision of an expert with 15+ years of experience in telematics, Chief Gurtam Architect, Aliaksei Shchurko that he shared during the annual Telematics conference in Minsk.
Let’s first look at how the telematics market started and evolved over the years and where we are now.
Telematics market retrospective
It all started in 1994 when GPS technology was first opened to the public.
Introduction phase (around the year 2000)
Around 2000 companies like Teltonika, Ruptela, Gurtam, and others pioneered the market by offering hardware or software products for GPS tracking. This was the “Golden age” of the telematics industry as the competition was low, customers were happy with whatever you offered (since there were few alternatives), the standards were non-existent, and the barriers to entry were pretty high because of the significant upfront investment required.
Unification phase (from around 2010 until now)
The industry kept growing and maturing — more and more companies (hardware manufacturers, software developers, telematics service providers) have been flooding the telematics market with goods and services. GPS tracking becomes a commodity.
“I do not believe that companies like Google, Yandex, Amazon or Microsoft will create some kind of global fleet management system.”
Due to the rapid growth of the market, software companies start creating flexible and scalable universal solutions (e.g. Wialon) that can deal with multiple types of devices and serve most imaginable GPS tracking projects (fleet management, logistics, asset tracking, sharing economy, agriculture, and more).
Such an approach is convenient for telematics service providers as they can resell virtually the same product a thousand times and tap into versatile markets with minimum customization efforts. But sometimes it looks like dropping a nuclear bomb on a sparrow.
Specialization phase (from around now and into the future)
Recent years are showing a clear trend for customization. This is when a pizza delivery business wants a simplistic “two-button” mobile app for the courier and an informative dashboard for the management with specific KPIs for their business area rather than a bulky one-size-fits-all product. The same is true for taxi companies, banking industry, pet tracking, whatnot.
Specialization is very much appreciated by the customers (they get exactly what they need) but poses certain complications to the service providers — they cannot replicate their solutions to the same scale as the generic ones, and on the other hand, they need to make a significant upfront investment into the development of each vertical solution.
The development of a custom software solution would likely cost somewhere between $100,000 and $1mln. Logically, you have to charge your customers to make up for your investments (and hopefully become profitable, right?). However, the market for such a niche solution might be as small as 10,000 or 100,000 vehicles.
This disproportion between the funds required to offer a solution and the projected size of the market harnesses the development of specialized telematics software. What can be done about? It’s unlikely we can increase the size of the market. So, we have to cut the development cost. And this is what platforms like flespi and Space are destined to do — take the burden of hardware integration, connectivity, solution architecture and design off the shoulders of the service providers and let them focus on delivering the unique value to their customers as fast as possible.
Trends & expectations
What else is going to happen to the telematics market?
Everything is going to be cheaper — hardware, software, connectivity. Therefore, with all other things constant, each individual customer will pay less.
On the other hand, labor costs will go up. Why? Because of IT companies. If you look at it conceptually, what the IT industry does is it automates different processes. Automation, in turn, means replacing people. This helps businesses save money on human resources and bring more money to the IT companies. With the growing funds on their bank accounts, IT companies are happy to pay their employees more to keep us creating advanced automation technologies. And now other companies have to raise salaries as well to try to prevent IT companies from stealing their top talent.
But.
The good news is that the value (and cost) of data from telematics devices is going to grow as more and more interested parties will be hunting it — ERPs, marketplaces, insurance companies, governments, etc. But all these guys do not want to deal with devices — they just want the data. And this is where the TSPs step in (see the tips below).
Survival tips for telematics businesses
Sell telematics experience. It can take hours if not days for a newbie in the industry to connect and configure a new device. If you are dealing with this for years, you know all the intricacies, caveats, and stumbling blocks, and have already come up with the ways to overcome those. Share this knowledge, consult those who don’t want to dive deep but want the result quick, and get paid for that.
Gain new expertise in specialized areas. Search for industries, niches, and business cases that go in line with your core competencies and that you can become proficient at and add to your portfolio. When you are a pioneer, you don’t have to worry much about competition, do not have to adjust to market prices, etc.
Invest in automation. Don’t waste your human resources on routine tasks that an algorithm can handle; use them for creativity and decision-making.
Prepare for constant market expansion. Envision your customer base grow 10 or 100 times. Are you ready for that? What can be the bottlenecks and what can you do to eliminate them or alleviate the impact? Keep this in mind and get prepared in advance.
***
The telematics market is undergoing a constant transformation — new players, new technologies, new business models, etc. The competition will get fierce but the possible uses of telematics will grow manifold. You decide whether to stagnate and complain or grow and advance. Stay hungry for opportunities to challenge yourself and use the right tools to materialize them.