How to achieve optimised iot deployments for transport and telematics

HOW TO ACHIEVE OPTIMISED IoT DEPLOYMENTS FOR TRANSPORT & TELEMATICS SPONSORED BY AERIS

INTRODUCTION Transportation and telematics have been among the longestestablished areas of the machine-to-machine (M2M) and Internet of Things (IoT) markets. That maturity is attributable to the clear business case and strong return on investment offered to companies that invest in transportation and telematics systems. The business case is enhanced because investment in an IoT platform opens up the potential to address several applications with one system.

This is one of the core drivers behind the expected continued growth in the market.

Research firm Machina Research has predicted that global M2M connections in fleet management applications will rise to almost 60 million in 2023 from a base of about 12 million in 2013.

Other research firms see similar growth. MarketsandMarkets forecasts the global commercial telematics market is set to grow from US$20.02bn in 2015 to US$47.58bn. In terms of regions, the firm expects Europe to be the largest market in terms of market size, while Middle East & Africa and Asia-Pacific (APAC) are expected to experience an increase in market traction, during the forecast period.

Latin America is expected to experience a high growth rate and adoption trend in this market.

Routine applications extend from basic vehicle tracking to encompass driver monitoring, routing and tracking and monitoring vehicle cargo. Each of these applications has the potential to enable vehicle operators to run their fleets more efficiently, thereby saving money, or to generate money by offering additional services.

It’s obvious that the initial application of tracking a vehicle has huge benefits for an organisation in terms of knowing where its vehicles are and whether they are available to collect cargo or perform a service. That enables the productive time of a

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vehicle to be maximised and substantial savings in operational cost to be made. In addition, knowing the location of a vehicle enables the most efficient route to be chosen so fuel consumption and driver hours are minimised.

This efficiency helps meet regulatory requirements for environmental protection, which are increasingly demanded by customers who want to work with companies that demonstrate good environmental credentials. This is increasingly important for their marketing, branding and corporate social responsibility.

So far, so simple but these are applications that have been available for many years and are utilised and well understood by almost all fleet operators. Where transportation and telematics becomes more interesting is in the widening of the capabilities of systems to monitor the vehicle, the driver and its cargo rather than only its location.

Monitoring the vehicle Monitoring of the vehicle is a logical extension from monitoring its location and there are compelling benefits to be accrued. For example, fleet operators can use vehicle monitoring systems to determine when a vehicle is likely to need servicing by using sensors to identify emerging problems with a vehicle and then plan for it to be taken out of service for repair with minimal downtime. This data can also be provided to the vehicle makers to help with their research and development.

Monitoring the driver Driver monitoring is increasingly being taken up by fleet operators as they seek to demonstrate regulatory compliance and improve the quality of their workforce. Local legislation such as limits on driving hours per day is closely regulated with penalties for both the driver and the fleet operator for non-compliance. This area is becoming of greater importance as organisations look to driver monitoring to ensure that vehicles are driven safely and fuel-efficiencies are maintained. In addition, usagebased insurance (UBI) is starting to gain a foothold. Organisations can radically reduce their insurance costs if they can prove their drivers are careful and comply with speed limits.

Monitoring the cargo Cargo monitoring isn’t just a passive means of making sure a truck door is closed or sending and alarm if a truck is broken into. More attention is being devoted to telematics in truck trailers. Increasingly companies want to ensure that perishable goods are delivered in perfect condition so cargo monitoring now encompasses cold chain monitoring that can be used to prove a cargo was maintained at a precise temperature for the entire journey. Fleet operators can provide this type of service as a value-add at extra cost to customers.

BARRIERS TO UPTAKE Cost Although the benefits of IoT for transportation and telematics are numerous, have clear business cases and are easy to understand, there are a number of challenges for organisations to address if they are to achieve optimised IoT transportation and telematics deployments.

Cost is always a barrier even in a situation where the business benefits are well defined and transportation and telematics IoT is no exception. There is an inescapable cost involved in installing hardware into vehicles, putting wireless connectivity in place and acquiring software to manage and operate the services. In

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addition, it may at first be difficult to identify a clear return based on making these investments to support a single service. The return often comes when a second or third service is added and the full benefits of a system becomes more apparent when all these capabilities come together.

For instance, the business case is much better when multiple applications are deployed. These enable an organisation to achieve a series of benefits including fuel savings, making driver hours more productive, reducing insurance costs and achieving higher revenues from providing value-added services such as cold chain monitoring.

Even in scenarios where the intent at the start is to address multiple applications, there is some resistance to making the necessary investment because of the cheap availability of labour in the European market. If you can hire truck drivers costeffectively, the value created by maximising their driving hours diminishes. This is opposite to the problem in the UK where there is a massive driver shortage at present.

Fragmentation The full value described above seems easy to achieve in a new situation but is far more complex in an existing fleet. This will be composed of vehicles of varying ages from different manufacturers so having hardware fitted on the vehicle assembly line would only create integration issues as a Mercedes-installed system would not necessarily interact with a system pre-installed at the factory by Volvo, Renault or Scania. In addition, older vehicles – many fleets have lifecycles of more than three years – will not have access to the same features as newer vehicles.

Retrofitting of equipment is therefore standard practice but it comes at a greater cost as vehicles are taken out of service for the installation and a more bespoke approach is required.

The service life of vehicles also creates fragmentation because those initially kitted out for a simple M2M tracking service will require substantial upgrading to be able to support newer applications such as those detailed above.

Employee reluctance In addition to the challenges of deploying technology across a diverse fleet, organisations need to overcome reluctance among their employees. There’s an understandable perception among drivers that monitoring of their habits is intrusive and unwelcome. However, fleet operators can make the case that monitoring can assist drivers. For example, a forward-facing camera monitoring a vehicle can be used to prove the innocence of a driver in an accident. Alternatively, monitoring can be used as an incentive so, if a driver meets an efficiency target or a good driving standard they can be paid a bonus.

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Network availability Although most European markets have high levels of cellular network coverage, there will inevitably be areas in which coverage is patchy or non-existent. These are effectively blindspots for all IoT applications and, while many are likely to be addressed within a few years, some are likely to remain.

A greater problem is the transition to LTE and the likely, eventual retirement of 2G cellular networks in Europe. Transportation and telematics applications are dependent on cellular networks and 2G solutions will become obsolete as 2G networks are retired, as is happening in the US now. Most IoT providers offer 3G or 4G/LTE upgrades so the issue will be addressed but it is another headache for fleet operators to consider and prepare for.

Market dynamics Although one of the most mature sectors of IoT, transportation and telematics faces further growing pains. There is turbulence in the mainstream of the sector as new entrants – especially generalist companies buying specialists to complement their offerings – come into the market. In addition, there is increased M&A activity between companies.

Vendor consolidation is not the only dynamic affecting the supply side. Mobile network operators are seeking to offer telematics and transportation-related services, often through their own IoT operations. In addition, vehicle makers are providing fleet management systems as a free service.

Both network operators and vehicle manufacturers have some limitations. For network operators there is still a need to ensure coverage across geographies and network technologies and few have all the requirements addressed in-house. In particular, in a fragmented market such as Europe, mobile operators don’t have a complete, continent-wide footprint and suffer from fragmented approaches to network technologies and coverage.

Vehicle makers face limitations as well. Enterprises typically do not by the entirety of their fleets from one vendor. They do see the value in standardising on a specific vehicle where possible but will often run fleets of vehicles from different vendors in each size segment of their fleet. In addition, they have some concerns about vendor lock-in to a specific vehicle maker. Relying on a vehicle maker for IoT systems will heighten this concern. Even so, for some companies the idea of IoT services being bundled in with the vehicles on an apparently free basis will be attractive.

The clear benefits of IoT services in transportation and telematics have meant that the market is approaching saturation at the large fleet end of the market. Equally, at the low-end, smartphone and tablet apps are fulfilling the needs of small and independent fleets. This leaves the mid-market of price-sensitive fleet operators for suppliers to address.

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Suppliers therefore are faced with increased competition, commoditisation of services and technologies and increased pressure on prices and revenues.

Nevertheless the sector remains buoyant and much of the full potential is yet to be realised. Demand will come from new regulations and liability facing fleet operators.

Applications such as forward-facing and inward-facing cameras, data logging for driver hours and cargo tracking, especially for cold chain cargos, are becoming compliance obligations for operators. These tougher demands are helping to make the case for IoT investment by fleet operators.

In addition, fleet operators face pressure from the introduction of data hungry devices such as smartphones and tablets added to the increased bandwidth requirements posed by cargo sensors and even cameras. This adds operational cost for the fleet operator, generating greater interest in cost saving or revenue generating IoT applications to offset the additional regulatory compliance and network connectivity costs they are facing.

CASE STUDY: USING REAL-TIME INTELLIGENCE TO SOLVE TRANSPORTATION ISSUES Isotrak is a provider of fleet management software solutions and systems integration to some of the largest Fortune 500 companies and to six of the top 25 largest food retailers worldwide. With its ATMSi transport management system, customers gain real-time visibility, control and measurement of their fleet’s performance through: vehicle and trailer tracking, job and resource management, electronic proof-ofdelivery (ePOD), driver communications, driving style management and business intelligence reporting.

Isotrak knows that the demands placed on delivery fleets are constantly evolving and customers require greater insight into fleet operations so it uses business intelligence data to provide retailers and manufacturers with a total vision of their transportation ecosystem. Expanding the capabilities of its real-time ATMSi fleet management system, Isotrak provides integrated supply chain solutions that access real-time data with robust alerting and reporting capabilities.

With 25% of the world’s top food retailers using Isotrak products, Isotrak required quicker access to analytics for its IoT/M2M deployments – delivered with reliable reporting methods and at a low total cost of ownership.

Isotrak turned to Aeris, an operator of end-to-end IoT and M2M services and a technology provider enabling other operators to build profitable IoT businesses, to provide a reliable mobile network optimised to meet the demands of worldwide fleet management systems, while providing actionable visibility into the IoT/M2M solution.

“Our fleet management system provides advanced data and reporting scenarios for complete visibility into the transportation ecosystem,” explains Jason Price, the sales and marketing director at Isotrak. “We wanted to ensure reliable connectivity services and data insights no matter where our customers are located. By

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complimenting our solution with Aeris’ IoT network solutions, we are able to provide a robust, global solution that goes well beyond improved connectivity and competitive rate plans. Our customers gain access to real-time, useful information at their fingertips that helps improve their cost structure.”

Aeris offers global support for the major cellular technology standards, such as GSM, CDMA and LTE, and this enables Isotrak to offer its customers flexibility and the potential for growth across the globe. In addition, Aeris’ flexible pricing models meant that Isotrak could partner with Aeris without having the burden of an initial large financial outlay.

Powered by Aeris’ network, Isotrak delivers solutions for telematics and fleet management customers who want to lower their data costs and improve operational efficiencies with data analytics. The security built-in to the Aeris system with a private virtual network gives Isotrak – and its customers – the peace of mind to enable them to focus on maintaining a competitive advantage.

CONCLUSION Transportation and telematics providers find themselves in a commoditising market where differentiation is hard to create and margin is challenging to defend. However, a strong and attractive opportunity continues in addressing the small fleets market.

Providers that can reduce costs in the face of increased bandwidth consumption and offer service level agreements and quality of service guarantees on networks they don’t own or control will set themselves apart from their competitors.

There is still substantial growth expected across the transportation and telematics sector and which types of organisation, whether network operators, vehicle makers or specialist providers, will win the largest share of the market remains an open question.

Regardless of which type of provider wins out, the key ingredients for a successful deployment remain: Low upfront cost, comprehensive network coverage and quality, a platform that can support multiple applications and position you for future upgrades, and a clear return on investment.

MARKET DATA ABI Research has confirmed the growing role of big data in IoT/M2M, estimating that the market for integrating, storing, analysing, and presenting IoT data had reached $5.7 billion in 2015.

Berg Insight estimated that the number of insurance telematics policies in force on the European market reached 4.8 million in Q4 of 2014. Growing at a compound annual growth rate (CAGR) of 42.4%, this number is expected to reach 28.1 million by 2019.

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Transparency Market Research expects the global telematics market, which was worth US$14.67bn in 2013, is expected to reach US$46.18bn by the end of 2020, growing at a healthy 18.0% CAGR between 2014 and 2020.

Telematics is set to power more than 73 million commercial vehicles by 2020 amidst cutthroat competition, reports ABI Research.

The number of active fleet management systems deployed in commercial vehicle fleets in Russia/CIS and Eastern Europe was 4.2 million in Q4 of 2015 reports Berg Insight. Growing at a compound annual growth rate (CAGR) of 13.5%, this number is expected to reach 7.9 million by 2020.

The installed base of fleet management systems in Europe is set to reach 8.9 million by 2019, says Berg Insight. The firm estimates the number of active fleet management systems deployed in commercial vehicle fleets in Europe was 4.40 million in Q4 of 2014. Growing at a compound annual growth rate (CAGR) of 15.1%, this number is expected to reach 8.9 million by 2019.

Frost & Sullivan reports that overall, the commercial vehicle telematics space will be dominated by the aftermarket segment, in which vehicle original equipment manufacturers are expected to contribute approximately 23% of total telematics penetration. As the European and North American markets become less fragmented due to continued consolidation among vendors, competition in the telematics aftermarket will decrease in these regions.

ABI Research estimates that the market for goods tracking technologies, which was worth $3.6 billion in 2016, will swell to $5.6 billion by 2021.

The installed base of active cargo tracking units will reach 5.8 million by 2019, reports Berg Insight.

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