TomTom WORK calls on the telematics industry to clean up its act
‘Being a veteran of 15 years in the commercial telematics space, I am frequently asked why this industry hasn't achieved general acceptance or market penetration greater than 50% of the CV market. Moreover, why hasn't the dramatic decline in the costs of technology in recent years (wireless data, processors, memory, LCDs, maps, etc) fuelled the adoption levels predicted? It is my belief that in general most vendors are failing to capture the real value of their offerings and are not building sustainable business models for the long run.
‘It is well known that both in Europe and North America, penetration rates among the LCV population are on average less than 10% in most market segments. Although growth rates began to improve pre-recession, the current economic climate has created more havoc by stalling growth for most vendors resulting in decreased investment, companies opting to sell their interests and a string of bankruptcies. That's contributed to the state of the industry today being at an all-time low for most vendors and this further deteriorates confidence in buyers seeking ways to remain competitive while they are also subject to the realities of a recovering economy. If we are to gain the confidence of the market place and achieve the predicated growth levels, now is the time that we drop the bad practices of the past and come clean to build confidence and strength for the years ahead.
‘Vendors need to build sustainable business models that continually produce customer value and drive consumer confidence. At the core of this, good companies must innovate, fully sell their innovations to customers, and create strong recurring revenue based on business models that keep this engine going. Most companies have underestimated the cost of developing and supporting a high-quality telematics service platform: a telematics service platform needs highly specialised experts in hardware and firmware, web-based applications, wireless communications, network operations, and vehicle systems. The challenge to providers is to find, train, retain, and continually pay for these specialized resources given downward pricing pressure from the market.
‘Strong businesses are selling the full value of their services and are able to keep their talent. On the other hand, vulnerable companies have sacrificed their revenue potential by lowering their prices too much or have traded up-front hardware sales for 'pay-as-you-go' schemes with a negative effect on the quality of service and innovation. This is a real pity considering high-quality solutions offered by good companies have an excellent return-on-investment ratio of three to eight times costs just in their first year of use.
‘The de facto key performance indicator (KPI) of the industry is "shipped or delivered" units over the life of the company which is a very poor indicator of a vendor's actual performance. A better KPI would be the number of 'active subscriptions' or "connected vehicles" since this more accurately represents the revenue intake or financial health of the vendor. The gap between "shipped units" and "active subscribers" can easily be overstated in cases by 50% or more and hide customer dissatisfaction, unrealised return on investment, or outdated technology. In contrast, TomTom WORK is leading by good example and is clearly stating their numbers as "active subscribers".
‘Nevertheless, I remain very positive about the long-term outlook of this industry because there are few others like commercial telematics which can have such a positive impact to the environmental, sustainability, logistics and at the same time improve short-term business performance of its customers. Like all challenging situations, sooner rather than later, good companies react and markets recover and grow. I'm certain those vendors with sustainable business practices and transparency will prevail, buyers will greatly benefit, and ultimately the industry as a whole will grow.’For more of the latest industry news, click here.