September 2002

Is the extraordinary range of current vehicle telematics systems helping or hindering market growth? Ken Evans, who founded VeMIS, feels many operators may be intimidated by the choice on offer. Here he traces the emergence of this still-evolving market, and argues that there's no substitute for good advice and sound research

It will be clear from reading the pages of m.logistics magazine that there are more commercial vehicle telematics services out there now than ever before, and more ways of making use of them. It's an exciting market, and one which shows real signs of moving at last from a specialist interest into the operational mainstream.

The benefits are all there to go for, whether you're a supplier offering these systems or a vehicle operator implementing them. Yet in a way, the very proliferation of options is now in danger of actually holding the market back.

A heretical view? Perhaps; but to be frank, I'm quite relieved that I'm not starting up a new commercial vehicle telematics company myself in 2002. I think I'm sufficiently well qualified to make such a comment, having headed a leading UK telematics supplier for 11 years.

 

When I first became involved in on-board data collection systems (the word "telematics") hadn't then been adopted, there were no more than 10 active suppliers offering comparable technologies. Today, more than 50 companies market products that could be described as commercial vehicle telematics systems. Out of interest, the US has seen similar growth, and now has something in the region of 200 suppliers!

I'm not saying it was much easier to launch a telematics company in 1991, when I started to market the newly developed VeMIS product. But today the market is difficult in very different ways.

In 1991 we virtually had to create the market. UK fleet operators didn't know they needed our product, and our greatest enemies were scepticism and procrastination - just what you need when shareholders are demanding immediate results!

Yes, there was some competition too. The US market was, and still is, ahead of the UK in the use of vehicle telematics. Many thousands of vehicle units were sold there during the ten years from 1980. Not surprisingly, several of their established suppliers chose to make forays into the virgin UK market. Companies such as Stemco, Rockwell and Cadec arrived with large sales expectations and these, along with worthy home-grown incumbents like Lucas Kienzle and ICS Black Box, created healthy competition.

But the US suppliers withdrew after a few years. Their products were just too sophisticated for such a young market, and they found potential customers far too hesitant and sceptical of the benefits. Around 1994 I recall cold-calling a fleet engineer of a large national company and describing the principles of capturing data from vehicles electronically, including quantifying good and bad drivers. I recall vividly one of his sales objections: "But it's only information".

Unfortunately, that one didn't appear in my developing mental glossary of how-to-overcome-sales-objections responses, and being fairly green at the time, I let that potential customer slip through my fingers - to both our costs. At that time he couldn't comprehend the value of information about what was happening out there on the road. It didn't make the vehicle more aerodynamic or reduce the rolling resistance of tyres.

I believe there is considerably more comprehension in 2002 of the value of management information regarding vehicle, driver and operational activities - though this lack of comprehension still exists in many quarters.

There was a phase between 1996 and 1999 when telematics became easier to sell because there were more and more existing users, and so more case studies and reference sites were available. Alongside this, increasing fuel prices were focusing attention on costs. Furthermore, one or two new suppliers with larger marketing budgets than mine were beginning to emerge, and these helped to increase general market awareness amongst the larger fleet operators.

In the last two years, however, I believe the pendulum has swung to another extreme, and telematics suppliers are now faced not with scepticism and lack of comprehension, but by confusion and defensiveness.

Why? Well, the wide availability and reducing cost of GPS receivers and communications media, combined with superb mapping software, have made it easier than ever before for small entrepreneurial companies to manufacture and market basic vehicle tracking systems. Meanwhile, the truck manufacturers have opted to develop their own in-house systems rather than adopt proven aftermarket products, and in so doing are adding to the proliferation of offerings. And several big public companies have been set up in this market, each of them inevitably (and confusingly) promoting itself as the leading supplier in the field - an assertion usually backed by a big marketing budget.

All these companies unrelentingly market their own particular brand and, it seems, their own definition of telematics. Many larger vehicle operators, who are the main target of this marketing, have become reluctant to commit themselves to a proposition that seems so diverse and difficult to understand. Net result: their hesitation is costing the logistics industry in excess of £300 million each year in terms of delayed benefits.

One particular market segment is perhaps not suffering these problems to the same extent. Smaller fleet operators on the periphery of the logistics world, such as the small own-account operators and companies running service vans, have proved particularly receptive targets for certain well-known vehicle tracking suppliers. These types of fleet tend to have a low profile; perhaps they don't appear on many marketing databases, and their managers don't go to commercial vehicle exhibitions, returning with carrier-bags full of telematics literature that can end up gathering dust on the shelves.

Such operators have been successfully targeted by well-funded tracking system suppliers with the resource to put in large telesales teams. A benefit to the supplier of selling into this marketplace is that the sales team doesn't need to be particularly technically knowledgeable. And it is easier for the decision-makers to contemplate fitting a whole fleet when it's small; so cost of sales is low.

However, the market as a whole remains slow because of the over-capacity and uncertainty among users. There is a fear among potential buyers that, with so many products available, it will be an arduous time-consuming task to find the right one. At least when we purchase a new television we have the benefit of the Consumers Association to guide us through the wide selection of choices! The financial risk of selecting the wrong telematics product for a large fleet is far more daunting a prospect.

There is a further growth-limiting factor of which both telematics suppliers and users should be conscious. Even if the supplier has the fortune to win and successfully implement a large contract, there's still a serious risk that the product may not be used effectively by operational staff - who may perhaps have had this "solution" thrust upon them from director level.

As a supplier, you might find it difficult to believe that the product into which you have put so much effort and investment may not be used to the full when implemented, and may even fall out of use. Alas, it can happen all too easily. Result: no repeat sales, reduced profit if your income depends upon communications revenue, and ironically enough, an unhappy customer!

To guard against this, suppliers must encourage directors at the user-company to ensure that their operational staff are adequately motivated. Larger fleets should appoint or nominate a product champion. The supplier and customer should continually review the financial benefits, and the buyer should have a firm re-training policy when staff move jobs.

Many fleet operators know they need to implement some sort of telematics system, and many very worthy suppliers are struggling to differentiate themselves from all the other offerings available; but the perfect convergence of fleet operator and telematics supplier at present is rare. Publications like m.logistics will go a long way to dispelling some of the confusion that exists, and consultancies like my own will help commercial vehicle operators select the right product for their needs, but there's still plenty of ground to cover.

Fleet operators must recognise the huge benefits to be gained by commercial vehicle telematics in their various guises; they should research suppliers and undertake a careful selection process. Competitive pressures and customer demands will eventually compel you to do so. Why not enjoy the benefits today?

And anybody planning to start up a new telematics company in the near future must consider their target markets, differentiation strategies and cost-base very seriously; otherwise they should be prepared for a long, uncertain haul.

Following a year of research and consultancy between 1989 and 1990, Ken Evans founded VeMIS, which is now one of the longest-established UK commercial-vehicle telematics companies, and was managing director there for 11 years. He left last year, and now runs a telematics consultancy, GoTelematics. He can be contacted on +44 (0)1743 350610, or at ken.evans@gotelematics.co.uk