Fleet management systems opportunities for the IT channel

Fleet management systems are being ported to the cloud and finding acceptance among a wider customer set, creating opportunities for broad-based VARs.

Anyone who owns a vehicle can attest to the expense of keeping a car or truck on the road.

That burden becomes all the greater for an organization running a fleet of vehicles. Fleet management systems aim to help companies and government entities keep tabs on maintenance, track fuel economy, and record mileage and trip times. Solution providers specializing in this field say the market is set for expansion. Vehicle fleet management technology is transitioning out of its early adopter phase and finding acceptance among a broader customer set, they contend.

Chris Ransom, director of sales engineering for Verizon Networkfleet, a fleet management and telematics solutions provider based in San Diego, aptly described the market as "accelerating." He said fleet management is following a trajectory similar to cell phones and other technologies: a slow buildup leading to an expansion stage in which declining prices and increasing capabilities encourage adoption.

"I believe we are at that inflection point right now," Ransom said of fleet management.

Indeed, fleet management's footprint appears poised for significant growth. Rickard Andersson, senior analyst with Berg Insight AB, a market research firm based in Göteborg, Sweden, said fleet management's market penetration varies according to geographic region. The forecast for the technology's penetration rate in the North American market in the total population of nonprivately owned commercial vehicles is to increase from 11.7% in 2012 to 21.9% in 2017, Andersson noted. Market penetration in Latin America, he said, is expected to grow from 7% in 2012 to 14.2% in 2017, he added.

Fleet management systems differ from one solution provider to another, but generally consist of hardware for collecting vehicle data and a wireless service for transmitting data to a central computer. The fleet management software component analyzes the data and creates reports. Many systems employ global positioning systems (GPS) for vehicle location tracking and an additional device that plugs into a vehicle's onboard computer and collects vehicle usage information.

Fleet management is following a trajectory similar to cell phones and other technologies: a slow buildup leading to an expansion stage in which declining prices and increasing capabilities encourage adoption.

Traditionally, fleet management systems relied on on-premises computers, but cloud-based systems now populate the market. The cloud shift has contributed to the increasing pace of adoption.

Prova Systems and Technologies Inc., a fleet management solutions provider based in Carbondale, Pa., has made the transition from PC-based systems to Software as a Service (SaaS). The company debuted its Fleet Genius cloud system last fall. The system includes Prova's onboard diagnostic device, which plugs into a vehicle's data link connector port and reports data to the fleet management platform in the cloud. The system can track mileage, speed history and engine diagnostic codes among other metrics.

John Collins, vice president of business development at Prova, said the SaaS system currently links to nearly 500 onboard devices and has logged more than 1 million miles of vehicle usage. He said the cloud approach has made life easier for the company's small- and medium-sized business (SMB) customers, who no longer have to worry about details such as memory requirements or what version of Windows they operate.

SaaS also simplifies his company's business model, Collins added. "It has freed us up to focus much more on features ... rather than on supporting any number of antiquated computers our customers might be running," he explained.

With SaaS, the key for customers is "not having to do anything from an IT perspective," Ransom added.

The Verizon Networkfleet telematics solution uses in-vehicle hardware and a Web-based application for analyzing data on particular vehicles and tracking overall fleet performance, according to the company. The solution employs GPS, which transfers information to the company's data center via a wireless network.

The ease-of-use factor makes SaaS-based fleet management an attractive option for fleet operators.

"SaaS-based offerings have, in general, become increasingly popular on the fleet management market, both among SMBs and enterprise customers," Andersson said. "The importance is greater for the smaller companies, which in many cases may be unable to host a system on in-house servers, thereby finding cloud-based systems the only viable alternative for fleet management adoption."

Market niches

The fleet management field actually covers a number of vertical niches and vehicle types. Fleet verticals include transportation, government, retail and utilities. Vehicles range from large-goods vehicles such as tractor-trailers to lighter transports such as vans and service trucks.

Andersson said the fleet management penetration rate is highest for heavy transport fleets, while service fleets remain less penetrated in many verticals.

A solutions provider's offering may not change much from vertical to vertical. The size of a customer's fleet, however, may prompt a different market response. Some companies have created products geared toward customers who need to manage small fleets.

Collins said Prova has developed a pricing strategy that begins with a "freemium" offer for customers with five or fewer vehicles who don't want to use the company's on-board device. Those customers sign up to use the SaaS system to monitor fuel receipts and track preventive maintenance.

"They are happy to get off spreadsheets," Collins said.

Fleet owners with more than five vehicles who are not interested in purchasing the on-board monitors pay 95 cents per vehicle per month. And customers pay $5.95 per month for each vehicle equipped with Prova's on-board device. Collins said hybrid deployments are possible: A company with 50 vehicles, for example, can purchase on-board monitors to cover just 20. He said a customer can move the hardware from vehicle to vehicle over time to get a sense of each vehicle's performance.

Ransom said most of his company's business is with smaller fleets, but noted across-the-board demand from SMBs to enterprise customers. He said no particular vertical segment is moving faster than others.

That said, a few common themes are drawing customers of all kinds to fleet management systems.

"The growing competitiveness among the transportation service providers, CO2 emission control norms and rising fuel prices are making the fleet management system ... an essential component for the business operation of the fleet vehicle operators," noted a MarketsandMarkets research report published in August.

Channel role

Solution providers focused on vehicle fleet management, as opposed to more broadly based channel companies, appear to be the primary players in the market. But the shift to SaaS and the expansion of the market to a wider range of customers could change the sales and delivery landscape. Fleet management specialists have begun to cultivate more broadly based resellers as well as transportation-oriented VARs for assistance in expanding market reach.

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TomTom International BV, for instance, has established a network of partners to back its fleet management SaaS tool. The partners provide pre-sales consulting, installation, integration and technical support at the local level, according to the company.

"Resellers are typically able to earn revenue from hardware sales, installation, training and support, as well as ongoing SaaS commissions," said Matt Gunzenhaeuser,sales director US for TomTom Business Solutions.

Local Motion, a Burlingame, Calif.-based startup offering cloud-based fleet management, is moving toward the channel. Neil Zeller, business development and commercialization lead for Local Motion, said the company looks forward to working with VARs and integrators in the future. Local Motion's system includes real-time fleet monitoring and remote diagnostics. The company has received a $6 million investment from venture capital firm Andreessen Horowitz.

The channel can put more feet on the street for fleet management companies looking to scale up. And linking fleet management data into other IT systems represents another potential channel role. Solution providers have created application program interfaces (APIs), exposing fleet management data. APIs may provide an opening for integrators.

Ransom said Verizon Networkfleet has an API but doesn't build the interfaces to other systems. He said a customer's IT staff or third-party companies perform that task.

Overall, channel companies entering the fleet management arena will find a young market with ample opportunity for innovation.

"Most companies in our space are smaller companies," Ransom said. "There's still plenty of room to improve the technology on the hardware and software side to do the job better."

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