7/1/2002 | 4 MINUTE READ

Five Myths of Telematics

Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

Telematics has long been touted as the next big blockbuster for the auto industry.


Facebook Share Icon LinkedIn Share Icon Twitter Share Icon Share by EMail icon Print Icon

Telematics has long been touted as the next big blockbuster for the auto industry. For instance, Adventis (Australia) projects telematics to become a $20-billion industry in eight years. But so far, rather than filling the industry's coffers, telematics—collectively a wide array of computer-based services and functions including wireless communications, entertainment, safety/security, and vehicle diagnostics—has been a steady money loser. Still, companies in the telematics arena are spending mightily. For instance, Delphi alone has over 1,000 engineers working on telematics developments. At the same time, its Mobile Multimedia business posted a $33 million operating loss last year. Today's challenge is to "restart the stalled telematics industry," acknowledged Rich Pearlman, Denso's Vice-President of Telematics at the recent Telematics Update Conference. It is time for the industry to step back and reassess its core assumptions.

Why has this industry yet to "gain traction?" Five popular assumptions among telematics aficionados really need to be closely scrutinized.

Myth #1: Telematics is one "industry"

Reality: There isn't one industry here

Very unlike applications, services, hardware, and value chains are collectively lumped under the telematics banner. They share precious little except they directly or indirectly relate to a vehicle. Furthermore, it is extremely unlikely that this grab bag will share the same hardware or infrastructure any time soon. "A consistent industry model has yet to emerge," noted PRTM consultant Thomas Godword.

Instead of an "all-in-one-solution," expect multiple, independent systems to rule. For instance, today one driver could have four completely independent systems all wirelessly connected to the vehicle: a cell phone, an OnStar emergency service, a Blackberry personal digital assistant (PDA), and a tag for automated turnpike, toll collection.

Myth #2: A few, big companies will soon dominate the market

Reality: No firm is close to dominating

Certainly there is no shortage of auto, computer and telecomm giants that would love to dominate telematics. Each, however, has a small share of what is still a highly fragmented, unprofitable business. One belief is that telematics will become a mass market through hardware installed by OEMs. Could an OEM become the 800-pound gorilla? General Motors, among the OEMs, is the most aggressive here.

However, imagine if one automaker could put the same telematics control unit (TCU) on virtually every vehicle manufactured that year. That would still leave 93% of the vehicles on the road without that TCU.

Myth #3: A killer app is not necessary for the success of the industry

Reality: No multi-billion-dollar, product category has ever emerged without a killer app

Telematics providers are grudgingly acknowledging that they don't have the killer application yet. So they are aggregating applications into a hopefully "killer" bundle. Unfortunately, this approach would be like a publisher launching a new magazine. Upon receiving only a tepid reception to the new magazine, the publisher responds by bundling nine other magazines under the new one's cover, expecting the thicker package to do the trick. This same mentality plays out with telematics service providers (TSPs) such as OnStar. In the absence of profitability, they hope that just by adding another service the customer will happily pay $x more per month.

Sun's Telematics Manager, Ken Santoro, points to DoCoMo of Japan's wildly successful I-mode service as such an example. A similar success story, unfortunately, hasn't hit North America yet.

Myth #4: Safety and security are the foundation of telematics

Reality: Sorry, you still need a killer app

GM's OnStar has superlative safety and security offerings, especially its automatic, airbag deployment/notification. Director of Telematics at DaimlerChrysler, Jack Withrow disagrees on the centrality of safety and security. He contends that the market is simply not willing to pony up for the heavy infrastructure and call-center costs necessary to support such mayday services.

In the 1980's the nation's homes were like today's vehicles–unconnected to a larger digital network. A similar search was made then to justify digitally connecting the home to a call center. In the pre-Internet era, about the only perceived need for such connectivity in a home was for medical-emergency notification service. That single service, however, played virtually no role in the explosive growth that culminated in today's Internet. Telematics needs a core application that is used regularly, not just when your airbags deploy.

Myth #5: A common, standard interface to the vehicle will soon solve the industry's profitability problem

Reality: No standardization will occur anytime soon

The wish here is that a mass, telematics market will at last become a reality. Equipment providers will end their Balkanizing ways. However, absolutely none of the key software/hardware players—Sun with its Java Car vision, Microsoft with its Windows CE nor IBM with its Frameworks—is ready to concede the huge vehicle market to its competitors. And OEMs are unlikely to open up their on-board, vehicle busses to outsiders. The last thing OEMs want is to have their already thin market share to shrink even more as aftermarket-equipment makers cut into their business.

In sum most in the telematics "industry" are chasing a pipe dream. No mass market is about to open up. Instead, firms need to create killer apps for niche markets, and especially those not requiring exorbitant infrastructure investments. (The stunning flameout of Metricom should be warning here.) The early users, furthermore, must be passionate and eager to pay for their services, thereby financing the build out of their respective, total delivery systems. Recall that digital networks did not begin with a "big bang;" that is, millions of users did not all jump on at once to a national or global network. Instead, tens of thousands of local-area networks first took hold. The Dedicated Short-Range Communications (DSRC) systems expected to be operational next year could help establish such niche markets. DSRC, with its wireless LANs, could play an instrumental role ushering in a truly digitally connected vehicle and culminating into national networks in the long term. Also, look for commercial vehicles services to take the lead. An example is service-bay-equipment-maker Vetronix expanding into fleet management services (FMS). Certainly, new industry models are necessary to unstick today's moribund telematics "industry." 


  • How General Motors Develops World-Class Propulsion Systems

    Dan Nicholson is vice president of General Motors Global Propulsion Systems, the organization that had been “GM Powertrain” for 24 years.

  • 2018 Kia Stinger GT2 AWD

    The Kia Stinger was a finalist for the 2018 North American International Car of the Year Awards.

  • NISSAN'S Platform Play

    The mid-size 2005 Pathfinder, Nissan's largest design and development program to date, involved three technical centers, and took 36 months and countless trans-Pacific trips to complete. Though it borrows major components from the full-size Titan pickup and Armada SUV, it's not just a downsized clone.