Fleet Telematics Exec Summary


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  • From table found in “Telematics: Technologies, Trends and Markets – Executive Summary“, 9/2001, page 8
  • From table found in America’s Network, 12/1/1999, page 76+
  • Fleet Telematics Exec Summary

    1. 1. Fleet Telematics Executive Summary A review of an emerging technology Authors: Curtis V Palmer Deidre Etheridge John Schlichter
    2. 2. Outline <ul><li>Telematics Introduction </li></ul><ul><li>Fleet Telematics Overview </li></ul><ul><li>Current State of the Industry </li></ul><ul><li>Recent M&A Transactions </li></ul><ul><li>Conclusions </li></ul>
    3. 3. What is Telematics? <ul><li>Telematics is… </li></ul><ul><ul><li>A position-based wireless communication system created from the convergence of wireless technology, information technology and consumer electronics </li></ul></ul><ul><ul><li>An industry that leverages 4 other key industries as shown in the graphic below </li></ul></ul><ul><ul><li>Derived from the French </li></ul></ul><ul><ul><ul><li>word télématiques, </li></ul></ul></ul><ul><ul><ul><li>the convergence of </li></ul></ul></ul><ul><ul><ul><li>Telecommunications </li></ul></ul></ul><ul><ul><ul><li><telecommunique> </li></ul></ul></ul><ul><ul><ul><li>and computers </li></ul></ul></ul><ul><ul><ul><li><informatique> </li></ul></ul></ul>
    4. 4. Typical Applications <ul><li>Safety & Security </li></ul><ul><ul><li>Automatic Vehicle Tracking </li></ul></ul><ul><ul><li>Black Box Technology </li></ul></ul><ul><ul><li>Collision Warning and Notification </li></ul></ul><ul><ul><li>Stolen Vehicle Recovery Systems </li></ul></ul><ul><li>Information/Entertainment </li></ul><ul><ul><li>AutoPC / E-mail / Internet Access </li></ul></ul><ul><ul><li>Onboard Navigation </li></ul></ul><ul><ul><li>Satellite Radio </li></ul></ul><ul><ul><li>Real Time Traffic Advisories </li></ul></ul>Source: Automotive Industries, “Telematics at a glance” (November 1999) The Reduction in EMS Notification Times for Fatal Crashes Source: NHTSA (1998) Example companies:
    5. 5. Additional Applications <ul><li>Turn-by-turn directions </li></ul><ul><li>Traffic and weather reports </li></ul><ul><li>Stock quotes </li></ul><ul><li>Satellite radio and TV </li></ul><ul><li>Internet access </li></ul><ul><li>Hands-free phone </li></ul><ul><li>email services linked to a user’s PDA address book </li></ul>Source: Automotive Industries, “Telematics at a glance” (November 1999)
    6. 6. Future Applications <ul><li>M-commerce </li></ul><ul><ul><li>Location sensitive marketing </li></ul></ul><ul><ul><li>In-transit ordering </li></ul></ul><ul><ul><ul><li>Hotel reservation, Event tickets, etc. </li></ul></ul></ul><ul><li>Electronic/Automatic “Proof Of Delivery” </li></ul><ul><li>Tire Pressure Monitor </li></ul><ul><ul><li>DALLAS-FORT WORTH, October 3, 2001 - ATX Technologies, Inc., the leading independent telematics service provider to the automotive market, and Cycloid Company, the manufacturer of the AutoPump tire inflation and monitoring system, announced today the joint development of a telematics-based system that can provide early notification of a potential tire problem. </li></ul></ul>Sources: NEXIQ - Diversified Software Industries ATX Technologies (October 2001)
    7. 7. Telematics Market Forecasts <ul><li>Worldwide Telematics Market </li></ul><ul><ul><li>Valued at $41B by 2010 </li></ul></ul><ul><li>Automotive Telematics </li></ul><ul><ul><li>Projected $9B sales by 2004 </li></ul></ul><ul><li>OEM Telematics </li></ul><ul><ul><li>Rose from $60MM in 1999 to $380MM in 2000 </li></ul></ul><ul><ul><li>Projected $900MM in 2001 to $7B in 2007 </li></ul></ul>Sources: UBS Warbug – London (August 2001) Booz, Allen & Hamilton (August 2001), Frost & Sullivan (September 2001)
    8. 8. Telematics Market Growth Projections Source: Telematics Research Group (September 2001) Telematics is faster growing than other related industries
    9. 9. Historical Telematics Market Projections <ul><ul><li>Advanced Traveler Information Systems (ATIS) </li></ul></ul><ul><ul><ul><ul><li>Reporting services </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Kiosks </li></ul></ul></ul></ul><ul><ul><ul><ul><li>In-vehicle portable devices </li></ul></ul></ul></ul><ul><ul><li>In-Vehicle Navigation Systems (IVNS) </li></ul></ul><ul><ul><ul><ul><li>Component of IDIS </li></ul></ul></ul></ul><ul><ul><li>Integrated Driver-Information Systems (IDIS) </li></ul></ul><ul><ul><ul><ul><li>Was predicted (circa 1997) not to “take off” until 2001-2006 </li></ul></ul></ul></ul>Source: SRI Consulting (May 1997)
    10. 10. Different Value Chains <ul><li>In-Vehicle Navigation Systems </li></ul><ul><ul><li>Technology Providers </li></ul></ul><ul><ul><li>Automotive OEMs and Aftermarket suppliers </li></ul></ul><ul><ul><li>Content/Service Provider and Transmission Services </li></ul></ul><ul><ul><li>Distributors </li></ul></ul><ul><ul><li>Consumers </li></ul></ul><ul><li>Advanced Traveler Information Services </li></ul><ul><ul><li>Technology Providers </li></ul></ul><ul><ul><li>Content Providers and Systems Integration </li></ul></ul><ul><ul><li>Reporting Services and Transmission Services </li></ul></ul><ul><ul><li>Enabling Devices and Channels </li></ul></ul><ul><ul><li>Consumers </li></ul></ul>Source: SRI Consulting
    11. 11. Different Value Chains <ul><li>Vehicle Safety and Control </li></ul><ul><ul><li>Technology Providers </li></ul></ul><ul><ul><li>Automotive OEMs, Sub-Assembly and Component Suppliers </li></ul></ul><ul><ul><li>Distributors </li></ul></ul><ul><ul><li>Vehicle Insurance Carriers </li></ul></ul><ul><ul><li>Consumers </li></ul></ul><ul><li>Integrated Driver Information Systems </li></ul><ul><ul><li>Technology Providers </li></ul></ul><ul><ul><li>Automotive OEMs and Aftermarket Suppliers </li></ul></ul><ul><ul><li>Content/Service Providers and Transmission Services </li></ul></ul><ul><ul><li>Distributors </li></ul></ul><ul><ul><li>Consumers </li></ul></ul>Source: SRI Consulting
    12. 12. Outline <ul><li>Telematics Introduction </li></ul><ul><li>Fleet Telematics Overview </li></ul><ul><li>Current State of the Industry </li></ul><ul><li>Recent M&A Transactions </li></ul><ul><li>Conclusions </li></ul>
    13. 13. Impact of Fleet Telematics <ul><li>“The impact [that telematics] will have on fleet management is considerable… </li></ul><ul><li>“Asset tracking and evaluation of risk management could lead to lower insurance and enhanced fuel management, remote diagnostics and preventative maintenance will all contribute to the productivity chain.” </li></ul>Source: eyeforauto.com (July 2001)
    14. 14. Fleet Telematics Uses <ul><li>Asset Tracking </li></ul><ul><ul><li>Vehicle location </li></ul></ul><ul><ul><li>Operating history </li></ul></ul><ul><ul><li>Breakdown assistance – exact location known through GPS </li></ul></ul><ul><li>Route Productivity </li></ul><ul><ul><li>Traffic Alerts </li></ul></ul><ul><ul><li>Detailed itineraries </li></ul></ul><ul><ul><li>Scheduling & Sequencing </li></ul></ul><ul><ul><li>New pickups and changes in delivery locations </li></ul></ul><ul><ul><li>Delivery confirmations </li></ul></ul><ul><li>Driver Information </li></ul><ul><ul><li>Load inventory </li></ul></ul><ul><ul><li>Messaging ~ Email, IM, Alerts </li></ul></ul><ul><ul><li>Location-sensitive </li></ul></ul>
    15. 15. Where Does Fleet Telematics Fit? Telematics Safety & Security In-Car Entertainment Satellite Radio Enhanced 911 Asset Tracking GPS Vehicle Tracking Fleet Management Personalized Audio Broadcast Fleet Telematics Street Maps
    16. 16. Fleet Telematics “Five Forces” Analysis <ul><li>Related industries could re-purpose their technologies and infrastructure, e.g. On-Star, AutoPC. </li></ul><ul><li>Wireless service providers (e.g. Sprint, Verizon, Cingular) could begin to offer location-aware services. </li></ul>Current: Moderate Trend: Stable Threat of New Entrants <ul><li>Suppliers include Automotive OEM’s and Aftermarket suppliers, Content Providers, and Distributors. </li></ul><ul><li>The trend of standardizing components will prevail, which means switching costs will decrease. </li></ul><ul><li>Content from established providers becomes a commodity, and it is easy for competing content providers to re-purpose their assets. </li></ul>Current: Low Trend: Decreasing Supplier Power <ul><li>Fleet Mgmt Telematic System Manufacturer Market is still developing. Almost a dozen device manufacturers/software developers. </li></ul><ul><li>Another half dozen service providers. </li></ul>Current: Moderate Trend: Growing Rivalry <ul><li>Buyers include fleet operators, corporate drivers, service providers, and equipment manufacturers. End user is the fleet operator or corporate driver. </li></ul><ul><li>They currently have many choices because market has not shaken out. </li></ul><ul><li>Once shake-out occurs, as systems become embedded within other bundled product offerings, buyer power will decrease. </li></ul>Current: High Trend: Decreasing Buyer Power <ul><li>Many new packages are being introduced. </li></ul><ul><li>This trend will increase until a shake-out occurs among telematics aggregates. </li></ul>Current: Moderate Trend: Growing Threat of Substitutes
    17. 17. Fleet Telematics Forecasts Source: Allied Business Intelligence, Inc. (circa 12/99)
    18. 18. Benefits of Fleet Telematics <ul><li>Pilot projects have indicated that increased productivity (efficiency) can be maintained in the form of: </li></ul><ul><ul><li>Lower empty driven distance </li></ul></ul><ul><ul><li>Lower detour distance </li></ul></ul><ul><ul><li>More cost-effective driving </li></ul></ul><ul><ul><ul><li>“experiences have shown that drivers using on-board computers drive more slowly and use less fuel” </li></ul></ul></ul><ul><ul><li>Lower communication costs </li></ul></ul><ul><ul><li>Less planning time </li></ul></ul><ul><ul><li>Order handling and transport planning can be reduced by up to 50% through automatic order processing </li></ul></ul>Source: International Transport Workers' Federation (July 1997)
    19. 19. More Benefits and ROI of Fleet Telematics <ul><li>Decrease in delivery costs by 10 to 20% </li></ul><ul><ul><li>Diesel Fuel; Vehicle Driver Hours </li></ul></ul><ul><ul><li>Maintenance </li></ul></ul><ul><ul><li>Planning Time </li></ul></ul><ul><ul><li>15 to 20% decrease in Fleet size </li></ul></ul><ul><li>Increase in customer satisfaction, sales and profitability </li></ul><ul><ul><li>Estimated 5% increase in sales </li></ul></ul><ul><ul><li>Capacity to ship more orders </li></ul></ul><ul><ul><li>Predictable on time delivery </li></ul></ul><ul><li>Increase in profitability by understanding “The Cost to Deliver” </li></ul><ul><ul><li>Identify and target sales opportunities in order to increase the volume of profitable deliveries in a given area; Deliver more with less; Return on investment within 6 months. </li></ul></ul>Source: Key measurable customer results, GeoCom TMS website
    20. 20. Potential Pitfall – turns out to be a non-issue <ul><li>Resistance to being “tracked” </li></ul><ul><ul><li>Carburetor Exchange Inc. knows firsthand the anxiety location-based services can cause. Last month, the Indianapolis wholesale distributor of auto parts installed a wireless tracking system […] in eight of its vans to monitor the movements of delivery personnel. When drivers first heard about the system, there was some concern, says driver Larry Tate. But he and others quickly realized the system has its benefits: Carburetor Exchange can map optimal delivery routes on the fly. In a competitive market, Tate says, “this is one of the things that helps us.” </li></ul></ul><ul><ul><li>The distributor can also hold drivers to more precise schedules and let customers know when a delivery will arrive. “It’s helping keep our employees a little more honest,” says Richard Gallagher, VP of Carburetor Exchange. “Sometimes they don’t realize that swinging off to get a pack of cigarettes slows up the whole process.” </li></ul></ul>Source: Information Week (August 2001)
    21. 21. Customer Demand for Fleet Telematics <ul><li>“There are undeniable advantages to dealing with fleets instead of interacting with drivers… </li></ul><ul><li>“One, fleet operators really want the product because it has an immediate impact on their bottom line . </li></ul><ul><li>“Two, for the service provider or equipment manufacturer, fleets represent large volume sales and significant recurring revenue streams . </li></ul><ul><li>“ It’s a win-win market.” </li></ul>Source: “B2B Telematics is Ready Now”, eyeforauto.com (August 2001)
    22. 22. Outline <ul><li>Telematics Introduction </li></ul><ul><li>Fleet Telematics Overview </li></ul><ul><li>Current State of the Industry </li></ul><ul><li>Recent M&A Transactions </li></ul><ul><li>Conclusions </li></ul>
    23. 23. Players in the Industry Value Chain Service Delivery Sales & Marketing Wireless Delivery Software Technology Device Manufacture Customer Support
    24. 24. Potential Corporate Strategies <ul><li>Vertical Integration </li></ul><ul><ul><li>Within other Telematics offerings </li></ul></ul><ul><ul><li>Within other “wireless” solutions </li></ul></ul><ul><li>OEM strategy </li></ul><ul><ul><li>“Secret Sauce” for other Telematics offerings </li></ul></ul><ul><ul><li>Branded offering </li></ul></ul><ul><li>Replacement strategy </li></ul><ul><ul><li>Entrenched wireless solution </li></ul></ul>
    25. 25. Fleet Telematics Industry Sustainability <ul><li>Hypercompetition will remain an issue: </li></ul><ul><li>Wide-scale benchmarking with product proliferation and imitation </li></ul><ul><ul><li>Industry is transparent… lots of imitation </li></ul></ul><ul><li>Rapid new product cycle time </li></ul><ul><ul><li>Some “Fast Followers” for feature/functionality are emerging, offering similar services quickly after innovation is announced by competitors </li></ul></ul><ul><li>Competitors </li></ul><ul><ul><li>Joint Ventures and Alliances are the norm </li></ul></ul><ul><ul><li>Industry Consolidation remains a threat as entrenched vendors vertically integrate </li></ul></ul>Source: R. Kazanjian, Goizueta Business School
    26. 26. Indications of Intended Vertical Integration <ul><li>Wingcast Europe eyes European fleet telematics growth: </li></ul><ul><ul><li>“Fleet drivers and operators are very important to our business” </li></ul></ul><ul><ul><li>“We aim to offer our services to both corporate drivers and fleet operators because they do require very different systems” </li></ul></ul><ul><ul><li>“I believe there will only be one or two telematics aggregates in the future and we will be one of them.” </li></ul></ul>Source: Dr. Lars Kreul, President and CEO, Wingcast, eyeforauto.com (August 2001)
    27. 27. Outline <ul><li>Telematics Introduction </li></ul><ul><li>Fleet Telematics Overview </li></ul><ul><li>Current State of the Industry </li></ul><ul><li>Recent M&A Transactions </li></ul><ul><li>Conclusions </li></ul>
    28. 28. Recent Liquidity Events in Fleet Telematics <ul><li>Global Telematics </li></ul><ul><ul><li>50% stake of JV sold by European Telecom to the other partner, Thales IT&S Holdings </li></ul></ul><ul><ul><li>£6M cash + £1M assumption of debt </li></ul></ul><ul><li>Teletrac </li></ul><ul><ul><li>US company acquired by UK-based Trafficmaster </li></ul></ul><ul><ul><li>$15.5MM cash + $15MM assumption of debt </li></ul></ul><ul><ul><li>Provision for additional $15.5MM cash dependent upon two years performance </li></ul></ul><ul><li>D’Ark Systems </li></ul><ul><ul><li>Acquired by AirQ of Toronto ( fleet management ) </li></ul></ul>Source: Wall Street Journal Europe (July 2001) Trafficmaster.co.uk website (February 2001) Logistics Management & Distribution Report (July 2001)
    29. 29. Recent Liquidity Events in Fleet Telematics <ul><li>CA (NYSE: CA) bought EverTrac </li></ul><ul><ul><li>Terms not disclosed </li></ul></ul><ul><li>NEXIQ Technologies, Inc. (OTCBB: NEXQ) acquires Diversified Software Industries </li></ul><ul><ul><li>NEXIQ will issue 1.7 million common shares in exchange for all outstanding shares of DSI </li></ul></ul><ul><ul><li>The acquisition gives Motorola 7.9 percent of NEXIQ’s total shares outstanding – 1.9 percent on a fully diluted basis </li></ul></ul><ul><li>Odetics and Iteris Close $11.1 Million Transaction </li></ul><ul><ul><li>Includes a significant new equity infusion from strategic and institutional investors, DaimlerChrysler Venture GmbH (DCV) and GIC Special Investments Pte Ltd, the direct equity investment arm of the Government of Singapore Investment Corp. </li></ul></ul><ul><li>Source: Computer Associates and NEXIQ websites </li></ul><ul><ul><ul><li>Transport News (August 2001) </li></ul></ul></ul>
    30. 30. Outline <ul><li>Telematics Introduction </li></ul><ul><li>Fleet Telematics Overview </li></ul><ul><li>Current State of the Industry </li></ul><ul><li>Recent M&A Transactions </li></ul><ul><li>Conclusions </li></ul>
    31. 31. Conclusions <ul><li>Fleet Management is a promising B2B Telematics play </li></ul><ul><li>European market leaders are showing interest in the US market </li></ul><ul><li>There have been some interesting liquidating events, even in the “current market” (circa Summer/Fall 2001) </li></ul>
    32. 32. Conclusions <ul><li>The “center of gravity” in the value chain for Fleet Telematics is in the sales and marketing segment, as rollups of technology is inevitable </li></ul><ul><li>“Barriers to Imitation” are few… therefore, execution and customer acquisition are key </li></ul><ul><li>Companies with entrenched regional presence are strong candidates for a consolidation effort </li></ul>