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Fleet Telematics SystemsMarch 2014 1

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Strong connection: Higher fuel prices and an


expanding trucking sector will lead to growth

IBISWorld Industry Report OD4546

Fleet Telematics Systems


March 2014

Maksim Soshkin

2 About this Industry

17 International Trade

31 Regulation & Policy

Industry Definition

19 Business Locations

31 Industry Assistance

Main Activities

Similar Industries

21 Competitive Landscape

32 Key Statistics

Additional Resources

21 Market Share Concentration

32 Industry Data

21 Key Success Factors

32 Annual Change

21 Cost Structure Benchmarks

32 Key Ratios

3 Industry at a Glance

23 Basis of Competition

4 Industry Performance

23 Barriers to Entry

Executive Summary

24 Industry Globalization

Key External Drivers

Current Performance

25 Major Companies

Industry Outlook

25 Trimble Navigation Limited

11 Industry Life Cycle

33 Jargon & Glossary

26 Omnitracs LLC
27 Fleetmatics IRL Ltd.

13 Products & Markets


13 Supply Chain

29 Operating Conditions

13 Products & Services

29 Capital Intensity

15 Demand Determinants

30 Technology & Systems

15 Major Markets

30 Revenue Volatility

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About this Industry


Industry Definition

This industry manufactures hardware


and software for fleet telematics
systems. Fleet telematics systems use
electronics and GPSs to track the

Main Activities

The primary activities of this industry are

location and other characteristics (e.g.


mileage or speed) of vehicles in a fleet.
This industry includes fleet telematics
systems for mobile devices.

Manufacturing vehicle data collection and transmitting devices


Manufacturing fleet communication hub devices
Designing and publishing data processing software
Designing and publishing mobile phone applications

The major products and services in this industry are


Local fleet systems
Long haul fleet systems
Mobile devices
Trailer tacking and monitoring systems
Other devices

Similar Industries

33422 Communication Equipment Manufacturing in the US


This industry manufactures communications equipment used by telematics manufacturers.
33451a Navigational Instrument Manufacturing in the US
This industry manufacturers navigational instruments used as components in telematics systems.
33531 Electrical Equipment Manufacturing in the US
This industry manufactures electrical components of telematics systems.
33632 Automobile Electronics Manufacturing in the US
This industry manufactures the electronics equipment in vehicles that communicate with telematics
systems.
48412 Long-Distance Freight Trucking in the US
Long-distance freight-trucking operators handle various commodities, generally palletized and transported
in containers or van trailers.

Additional Resources

For additional information on this industry


www.isuppli.com
Automotive Infotainment and Telematics
www.fleet-central.com
Fleet-Central
www.government-fleet.com
Government Fleet Magazine

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Fleet Telematics Systems March 2014

Industry at a Glance
Fleet Telematics Systems in 2014

Key Statistics
Snapshot

Revenue

Annual Growth 09-14

Annual Growth 14-19

Profit

Exports

Businesses

$2.0bn

8.6%

7.0%
$219.1m $220.0m 126

Demand from truck transportation

Revenue vs. employment growth

% change

Trimble
Navigation
Limited
16.7%

Omnitracs LLC
12.8%

16

10

12

% change

Market Share

4
0
4

Fleetmatics IRL
Ltd. 
8.6%

5
10
15

Year 06

08

10

Revenue

12

14

16

18

20

Year

20

08

10

12

14

16

18

20

Employment
SOURCE: WWW.IBISWORLD.COM

p. 25

Products and services segmentation (2014)

11.4%

Key External Drivers

Trailer tacking and


monitoring systems

Demand from truck


transportation

3.0%

Other devices

Number of mobile
internet connections

38.1%

Local fleet systems

World price of crude oil

19.0%

Trade-weighted index

Long haul fleet systems

28.5%

p. 4

Mobile devices

Industry Structure

Life Cycle Stage


Revenue Volatility
Capital Intensity

SOURCE:
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SOURCE:
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Growth
Medium
Low

Industry Assistance

None

Concentration Level

Medium

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32

Regulation Level

Light

Technology Change

High

Barriers to Entry

Medium

Industry Globalization

Medium

Competition Level

High

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Industry Performance

Executive Summary | Key External Drivers | Current Performance


Industry Outlook | Life Cycle Stage
Executive
Summary

The Fleet Telematics Systems industry


proved virtually impervious to the
recession, outpacing most other
industries over the past five years.
Operators in this industry manufacture
devices, and develop and service software
used to track the location and other
characteristics (e.g. mileage or speed) of
vehicles in a fleet. Industry growth
slowed during the recession, in line with
the decline of trucking sector, the
industrys main downstream market.
However, increasing fuel costs, in
addition to new markets and products

have begun to drive industry growth. As a


result, industry revenue is expected to
climb an annualized 8.6% in the five
years to 2014 to $2.0 billion, with a 5.8%
jump in 2014.
Industry operators have expanded
their emphasis on software development
and servicing during the past five years,
while increasingly outsourcing hardware
manufacturing to low-wage economies.
Models such as software-as-a-service
(SaaS), which are constantly updated and
expanded upon, enable consumers to
access fleet data and analysis for a
subscription fee. Success of this software

has been further buoyed by a boom in


mobile-device use. Because smartphones
and tablets already feature necessary
hardware such as global positioning
systems (GPSs), they can easily be turned
into telematics devices through
appropriate application downloads.
Consequently, demand for industry
software has increased in line with the
growing use of mobile devices.
Additionally, as the prices of industry
products have declined (due to cheaper
hardware, subscription models and
mobile device platforms) the number of
markets using telematics has expanded.
These include small, local-trucking
companies, commercial vehicle fleet
owners and heavy equipment owners.
Most importantly, oil prices are expected
to increase at an annualized 10.1% to
$100.2 per barrel in the five years to
2014. Consequently, vehicle fleet owners
have tried to cut back on fuel costs by
purchasing fleet telematics systems and
software to analyze fuel usage.
Industry revenue is forecast to grow at
an annualized 7.0% to $2.7 billion in the
five years to 2019. Demand will be driven
by an expanding trucking sector, higher
fuel prices and increased use of mobile
devices. Furthermore, emissions and
worker safety regulations, and new
products and markets will provide an
additional boost in demand for fleet
telematics systems.

Demand from truck transportation


Transportation companies generally own
large fleets of vehicles. These companies
look to save money and increase the
productivity of their drivers and vehicles by
using telematics systems. As a result, when
the trucking sectors revenue increases, it
typically means that more carriers can
afford to install telematics systems.
Demand from trucking transportation is
expected to increase in 2014.

Number of mobile internet


connections
Drivers can increasingly access fleet
telematics systems on mobile devices,
such as smartphones and tablets.
Therefore, as the number of mobile
internet connections increases, it will
become easier for companies with
vehicle fleets to use these systems, and
the demand for fleet telematics systems
on mobile devices will grow. The

Increasing

use of mobile devices with GPS


capabilities will propel industry demand

Key External Drivers

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Industry Performance

number of mobile internet connections


is expected to increase in 2014,
representing a potential opportunity.
World price of crude oil
As the world price of crude oil increases,
transportation companies that own fleets
of vehicles will look to cut fuel costs by
using telematics. As a result, as the price
of oil increases demand for industry
products climbs. The world price of
crude oil is expected to decrease in
2014, representing a potential threat to
the industry.

Trade-weighted index
The trade-weighted index compares the
value of the US dollar to the currencies of
the countrys trading partners. When the
value of the dollar increases it makes
industry exports more expensive for
foreign consumers and imports less
expensive, thereby reducing exports while
increasing competition from imports. In
addition, a stronger dollar makes
offshoring hardware manufacturing more
practical, further reducing industry
revenue. The trade-weighted index is
expected to increase in 2014.
Number of mobile internet connections

Demand from truck transportation


10

400

300

Millions

% change

Key External Drivers


continued

5
10

100

15
20

Year

200

08

10

12

14

16

18

20

Year 05

07

09

11

13

15

17

19

SOURCE: WWW.IBISWORLD.COM

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Industry Performance

Current
Performance

The Fleet Telematics Systems industry


has performed exceptionally well over the
past five years as the proliferation of
industry products increased. Industry
players manufacture devices and develop,
maintain, and service software used in
fleet telematics systems. Fleet telematics
systems combine the functions of
electronic devices, GPSs and specialized
software that tracks the location and
other characteristics, such as mileage or
speed, of vehicles in a fleet. While the

The recession

Throughout the recession the industry


continued to grow, albeit at a more
sluggish rate. Because the trucking
industry accounts for over half of the
industrys revenue, demand was
negatively affected by a contracting
trucking sector. In 2009, revenue for the
trucking industry plunged 16.3%, leaving
carriers with fewer financial resources to
invest into technology such as telematics.
Moreover, a primary benefit of fleet
telematics systems is improved fuel
efficiency, as they flag up inefficient
routes, unproductive behavior and idle
time. In addition, a sharp decline in the
world price of crude oil (which led to
lower fuel prices) in 2009 put off the
need to invest in telematics systems.
However, industry revenue continued to

grow by 5.9% that year as penetration


into new markets and product
development drove demand.
Furthermore, once the economy began to
recover, fuel prices trended upward
again, and the world price of crude oil is
expected to climb at an annualized 10.1%
to $100.2 per barrel in the five years to
2014. Consequently, more companies
have begun to demand fleet telematics
systems to cut fuel costs.

The Fleet Telematics Systems industry


was formerly a hardware-focused
industry whereby most industry players
offered devices that needed to be
installed in vehicles. Widespread
installations required substantial
investment on the part of the consumer,
particularly those with extensive vehicle
fleets. As a result, most customers were
large, long-haul trucking companies with
sufficient resources to purchase such
systems. Additionally, the industrys

focus has shifted from hardware


manufacturing to software development
and service over the period. Because
most hardware components of telematics
systems are fairly similar, industry
players have had to differentiate
themselves by developing software that is
easy to use, flexible and able to provide
users with analyses of their assets. Many
of the industrys largest players have also
begun to use the software-as-a-service
model, whereby consumers pay a

Changing products
and markets

recession put pressure on industry


growth, operators began to recover as
increasing fuel prices, untapped markets
and the development of new products
boosted demand for fleet telematics.
Nevertheless, continued outsourcing of
hardware production and saturation in
certain markets slightly hindered growth.
However, in the five years to 2014,
industry revenue is expected to climb at
an annualized 8.6% to $2.0 billion, with a
5.8% jump in 2014.

Fuel prices fell during the

recession, causing operators


to delay the purchase of
industry products

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Industry Performance

subscription fee in exchange for access to


a telematics system and software. The
software is constantly upgraded and is
offered to consumers as service by which
they can access their data and analyses via
internet connection.
The increased emphasis on software has
also led to greater telematics system use on
mobile devices, rather than installed vehicle
hardware. Because most mobile devices,
such as smartphones and tablets, are
equipped with GPSs and other
communication features, they can function
as telematics devices if appropriate software
is installed. As the number of mobile
internet connections is expected to
skyrocket at an annualized 36.8% to 234.2
million connections in the five years to 2014,
mobile telematics software use has become
one of the dominant product platforms in
this industry. However, because mobile
devices are not directly installed into
vehicles, the type of data they can transmit
and analyze is limited, thus constraining this
platforms growth.
Changing product offerings and
platforms have also coincided with the

International trade

In the five years to 2014, imports have


grown at an annualized 6.1% to $898.0
million. The primary driver of this growth
has been increased outsourcing of
hardware manufacturing to low-wage
countries, such as Mexico and China. For
instance, Mexicos lower wage
requirements, coupled with its proximity
to the United States and membership to
the North American Free Trade
Agreement, has rendered it a prime
location to produce the industrys more
commoditized hardware. However,
despite hardware manufacturing moving
abroad, imports share of domestic
demand has declined as domestic software
development outpaced the import growth
of hardware. At the same time, increased
use of fleet telematics systems abroad has

industrys penetration into new markets.


Because many drivers already use
smartphones, and subscription-based
products require less initial investment,
smaller transportation companies have
begun to be able to afford industry products.
This has led to increasing demand from
local trucking companies and owneroperators, which account for the majority of
trucking enterprises. At the same time, the
traditional long-haul trucking market has
become saturated as most operators in this
sector already use some kind of industry
product. Moreover, the use of telematics has
moved beyond increasing fuel efficiency and
route productivity. Telematics capacity to
allow users to monitor and analyze driver
behavior, improve asset utilization, track
and monitor cargo and equipment
conditions, reduce accidents and improve
sustainability has enabled the industry to
enter new markets such as logistics, utility
vehicle fleets and construction equipment
fleets. For example, industry products
enable construction equipment owners to
track the location of their equipment and
monitor its condition.

Revenue vs. exports


24
16

% change

Changing products
and markets
continued

8
0
8

Year 06
Revenue

08

10

12

14

16

18

20

Exports
SOURCE: WWW.IBISWORLD.COM

boosted industry exports, which are


expected to grow at an annualized 9.1% to
$220.0 million in the five years to 2014.

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Industry Performance

Profitability,
consolidation and
other trends

Rising demand for fleet telematics is


anticipated to drive up industry profit
from 8.9% in 2009 to 11.2% in 2014.
However, profitability is expected to
remain below prerecession levels as
constantly dropping barriers to entry and
a saturated long-haul trucking market
cause price competition to increase. As
hardware prices drop and software
development becomes a central function
of the industry, it has become easier for
new players to enter the market and
harder for existing ones to differentiate
themselves. The resulting price
competition has encouraged a surge in
mergers and acquisitions. This activity
has been characterized by companies, in

Industry
Outlook

The Fleet Telematics Systems industry is


expected to continue its rapid growth
over the next five years. Growth in the
trucking sector and increasing fuel prices
are anticipated to drive demand for
industry products. Moreover, greater use
of mobile devices with internet
connections, increasing regulations and
new markets are also expected to spur
demand. However, imports and strong
competition resulting from relatively low
barriers to entry will slightly taper

industry growth. Consequently, in the


five years to 2019, industry revenue is
expected to climb at an annualized 7.0%
to $2.7 billion.

As US economic activity picks up,


demand for trucking services is
anticipated to increase. Trucking sector
revenue forecast to grow at an
annualized 3.5% to $365.1 billion in the
five years to 2019; consequently,
carriers will have more money to spend
on industry products. In addition, the

world price of crude oil is expected to


climb an annualized 3.6% to $119.5 per
barrel, thereby increasing the
transportation sectors costs. As a
result, trucking companies and other
vehicle owners will be incentivized to
invest into industry products in order
to cut fuel costs.

Trucking sector and


fuel prices

addition to large corporations outside the


industry, acquiring rivals in order to
expand product offerings, enter new
markets, gain market share and expand
economies of scale. Nonetheless, despite
consolidation, declining barriers to entry
and strong demand for industry products
will attract more players to the industry.
Consequently, the number of industry
enterprises is expected to increase at an
annualized 1.3% to 126 companies in the
five years to 2014. Moreover, strong
product demand and new software
engineering jobs are expected to cause
industry employment to rise at an
annualized 1.0% to 6,693 employees
during the same period.

Increased

environmental
regulation will lead to
greater use of industry
products

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Industry Performance

Regulations drive
demand

As public awareness of environmental


issues increases, both federal and state
governments are anticipated to continue
phasing in more stringent emission
standards for vehicles, ranging from
commercial vans to heavy trucks.
Consequently, demand for fleet
telematics systems will rise as these
products can help reduce emissions by
improving fuel and route efficiency.
Furthermore, the Department of
Transportations Federal Motor Carrier

Safety Administration is expected to


introduce rules that would require
interstate commercial truck and bus
companies to use electronic on-board
recorders (EOBRs). These recorders
monitor the amount of time a vehicle is
being used, thereby enabling regulators
to track compliance with laws covering
driving hours. As a result, fleet vehicle
owners will be further encouraged to buy
industry products in order to comply
with new regulations.

Continued market
and product change

The industrys expansion into new


markets is expected to continue driving
demand. As the price of fleet telematics
systems continues to drop, owners of
small vehicle fleets will more easily be
able to afford them. As a result, the local
trucking, taxi and limousine market is
expected to account for a larger share of
industry revenue, at the expense of the
long-haul trucking market. Moreover, as
supply chains become more complex and
integrated, the need to monitor all
vehicle assets (including trailers and

containers) will rise in importance,


further boosting demand. Rental
companies, especially those specializing
in heavy equipment, are also expected to
continue to expand their use of industry
products to monitor their equipment and
improve asset utilization. Lastly, with the
number of mobile internet connections
forecast to climb at an annualized 6.0%
to about 313.0 million in the five years to
2019, demand for already popular mobile
telematics devices and applications will
continue to rise.

International trade

Industry imports are expected to rise


at an annualized 5.0% to $1.1 billion in
the five years to 2019. However,
similar to the previous five years, the
rapid pace of domestic telematics
software development will temper
import growth, which accounts only
for hardware, thereby reducing its
share of domestic demand.
Furthermore, the trade-weighted index
(TWI), which measures the strength of
the US dollar relative to its trading
partners currencies, is forecast to
increase over the next five years, which
will make imports less expensive for

Use

of telematics systems
abroad will increase,
resulting in export growth
domestic customers. Simultaneously, a
stronger dollar will make industry
exports more expensive for foreign
buyers, thereby tapering export
growth. Nonetheless, increased use of
telematics abroad is expected to help
exports increase at an annualized 7.4%
to about $315.0 million in the five
years to 2019.

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Industry Performance

Profit and other


trends

As demand for industry products


continues to increase, profit margins are
anticipated to climb from an expected
11.2% in 2014 to 13.6% in 2019. The pace
of industry consolidation is also forecast
to quicken as companies merge to gain
market share, enter new markets and
improve their economies of scale.
Nonetheless, as hardware becomes
increasingly less important and
expensive, the industrys barriers to
entry will decline further, enabling
new companies to enter. These two
trends, namely consolidation coupled
with a rising number of new entrants,
are expected to cancel each other out
and will lead to growth in the number
of businesses. Consequently, the

A

combination of
increasing merger activity
and more new entrants will
lead to profit growth
number of industry enterprises is
forecast to increase at an annualized
0.6% to 130 companies in the five
years to 2019. In addition, a rise in
demand will lead to the hiring of more
workers to offset continued losses of
manufacturing jobs to outsourcing,
causing industry employment to climb
at an annualized 0.9% to 6,998 people
over the five-year period.

Fleet Telematics SystemsMarch 2014 11

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Industry Performance
The industry is growing faster
than the overall economy

Life Cycle Stage

The number of enterprises in the


industry has increased

% Growth in share of economy

The number of industry products


and markets have increased

20

Maturity

Quality Growth

Company
consolidation;
level of economic
importance stable

High growth in economic


importance; weaker companies
close down; developed
technology and markets

15

Key Features of a Growth Industry


Revenue grows faster than the economy
Many new companies enter the market
Rapid technology & process change
Growing customer acceptance of product
Rapid introduction of products & brands

10

Quantity Growth
5

Fleet Telematics Systems

Many new companies;


minor growth in economic
importance; substantial
technology change

Local Freight Trucking


Local Specialized Freight Trucking
0

-5

Navigational Instrument Manufacturing


Telecommunication
Networking Equipment
Manufacturing

Communication Equipment Manufacturing

Decline

Shrinking economic
importance

-10
-10

-5

10

15

20

% Growth in number of establishments


SOURCE: WWW.IBISWORLD.COM

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Industry Performance

Industry Life Cycle


This

industry
is G
 rowing

The Fleet Telematics industry is in the


growth stage of its life cycle. In the ten
years to 2019, industry value added
(IVA), which measures the industrys
contribution to GDP, is forecast to climb
at an annualized 6.4%, while GDP will
increase at an annualized 2.7%. While
telematics has been around for decades,
its use on a large scale is only now
becoming a reality. Increasing fuel prices
and increasingly complicated supply
chains have increased demand for
industry products. Moreover, thanks to
increased focus on software development,
outsourced manufacturing and dropping
prices of hardware inputs, the cost to
install fleet telematics has significantly
declined. Consequently, smaller
companies beyond the traditional
long-haul trucking market have begun to
use this technology.
Over the past five years industry
players have shifted their focus away
from hardware, which has become more
commoditized, to software and services.
Most companies now offer subscription
based services, where users have access
to data via internet connection and
mobile devices. Companies wishing to
differentiate themselves from
competitors have to provide software that
provides the best analytics and is easy to
use. Moreover, the markets the industry

serves have also begun to change.


Originally, the industry primarily served
the long-haul trucking industry, but now
industries from construction to utilities
use industry products. Furthermore, as a
result of entering new markets the type of
product offering industry players provide
is also beginning to change. Clients now
want more than just data that helps them
cut fuel costs and monitor their vehicles
locations. They want to receive analyzed
data that can help them monitor the
condition of their assets, increase their
workers productivity and even
recommend the best possible action in
order to increase asset utilization.
The industry has also begun to rapidly
consolidate. The struggle to differentiate
product offerings, enter new,
unsaturated, markets and gain the
economies of scale required to bring in
and retain clients has incentivized player
to merge. Moreover, as the potential for
rapid industry growth has become
clearer, a number of companies outside
the industry have entered the market. For
instance, Danaher Corporation and
Verizon both entered the market in 2012
through acquisitions. Nonetheless,
declining barriers to entry has made it
easier for new players to emerge, causing
the number of enterprise to increase over
the past five years, despite consolidation.

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Products & Markets

Supply Chain | Products & Services | Demand Determinants


Major Markets | International Trade | Business Locations

Supply Chain

KEY BUYING INDUSTRIES


48411

Local Freight Trucking in the US


This industry purchases fleet telematics software to track and monitor its vehicle fleets.

48412

Long-Distance Freight Trucking in the US


This industry purchases fleet telematics software to track and monitor its vehicle fleets.

48422

Local Specialized Freight Trucking in the US


This industry purchases fleet telematics software to track and monitor its vehicle fleets.

48423

Tank & Refrigeration Trucking in the US


This industry purchases fleet telematics software to track and monitor its vehicle fleets.

KEY SELLING INDUSTRIES

Products & Services

33421

Telecommunication Networking Equipment Manufacturing in the US


This industry sells wireless telecommunications equipment to fleet telematics system
manufacturers.

33451a

Navigational Instrument Manufacturing in the US


Fleet telematics systems usually use navigational instruments such as GPS products to perform
their basic functions.

The industrys products and services


consist of devices installed directly into
vehicles and equipment, as well as mobile
devices and applications. Software
development has increasingly taken up a
larger share of product offering as mobile
applications and complex data analysis
becomes more popular. In particular,
companies have to offer constant
software updates and information
services in order for client to retain their
devices and get up to date information.
High quality software also allows clients
to better analyze and visualize data,
thereby, making system adoption easier.
A large portion of telematics information
is processed via fleet communications
hubs that receive and store the data
transmitted by the vehicle systems.
However, the use of cloud computing and
internet connectivity is rapidly replacing
this model.
Local fleet systems
Local fleet systems account for an
estimated 38.1% of industry revenue.
These devices are installed directly into
vehicles, allowing users to monitor things

such as driver behavior, route


productivity, fuel efficiency and vehicle
location. Most of these systems are used
by local trucking companies as means to
improve efficiency in a competitive
market. However, taxi and limousine
services, and local government agencies
are also increasingly using these devices
in order to keep tack off and monitor
their vehicle fleets and workers. Over the
five years to 2014, this segments share of
revenue has increased as the technology
has become less expensive and
applications of such systems broadened.
Mobile devices
Mobile devices make up an estimated
28.5% of industry revenue. This product
segment represents applications for
smartphones which perform the
function of vehicle systems devices as
part of a fleet telematics system. Because
smartphones already house both a GPS
and cellular antenna, they have been
utilized to collect and transmit vehicle
location data in lieu of a vehicle systems
device. This software is installed on the
vehicle drivers phone. As smartphones

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Products & Markets

Products & Services


continued

Products and services segmentation (2014)

11.4%

Trailer tacking and


monitoring systems

3.0%

Other devices

38.1%

Local fleet systems

19.0%

Long haul fleet systems

Total $2.0bn

28.5%

Mobile devices

have risen in popularity and dropped


in price over the past five years, mobile
vehicle systems software has increased
in revenue share, mainly at the
expense of vehicle systems devices.
However, they lack some of the
functionality of the latter because they
typically do not connect to the
vehicles computer system.
Long haul fleet systems
An estimated 19.0% of industry
revenue is derived from long haul fleet
systems. These systems consists of
telematics devices installed directly
into long hail vehicles. Nearly all of
such systems are installed on longdistance trucks. Like local fleet system,
these systems allow users to monitor
and analyze data about driver behavior,
route productivity and fuel efficiency.
While this segments revenue has
increased over the past five years, its
share of overall industry revenue has
shrunk due to the more rapid growth of
local fleet and mobile segments.

SOURCE: WWW.IBISWORLD.COM

Trailer tracking and monitoring systems


Devices installed onto freight trailers
account for an estimated 11.4% of
industry revenue. By installing telematics
systems onto trailers, users can monitor
the location of their trailers and create
trucking routes that increase trailer
utilization. Furthermore, telematics
devices can now transmit data on the
condition of trailers, including
temperature and humidity, which is
useful to companies transporting freight
such as frozen food and grains.
Other devices
All other devices only make up an
estimated 3.0% of revenue. Most of these
are heavy equipment monitoring devices,
which allow owners of equipment such as
earthmovers to know the location and
condition of their assets. In particular,
equipment leasing and rental companies
have increased their use of such devices
as this allows them to improve asset
utilization and estimate when equipment
repairs and maintenance are due.

Fleet Telematics SystemsMarch 2014 15

WWW.IBISWORLD.COM

Products & Markets

Demand
Determinants

Demand for fleet telematics systems


depends on a number of variables
including the performance of
downstream markets, fuel prices,
proliferation of mobile devices and the
price of industry products.
The Fleet Telematics Systems
industry is mostly sold to the trucking
and logistics industries. As a result,
industry performance is somewhat
dependent on how well these
downstream markets do. These
industries invests in fleet telematics
systems to a greater degree when profit
is high and cash is available to invest in
technology improvements, explaining
why industry growth slowed down, when
the transportation sector was hit by the
recession. However, because the
proliferation of fleet telematics is still
low, industry revenue still showed
strong growth during the recession.
Moreover, because industry products
have been proven to improve route
productivity and reduce fuel costs any
increase in fuel prices makes investment
into industry products more attractive.
Consequently, even during periods of
weak demand for trucking, trucking
companies acquired industry products
in order to reduce costs and gain a
competitive edge. In addition, other
types of logistics companies have been
buying telematics systems as a way to
monitor increasingly complex and data
driven supply chains.

Over the long term, demand for


telematics has steadily increased because
the price of semiconductors, which
comprise the computational systems
necessary to this industry, has steadily
fallen. The price drop in these inputs has
caused the prices of industry products to
drop as a result. Smaller-scale companies
with vehicle fleets can now afford fleet
telematics systems, which used to be
available only to large-scale companies.
Another key industry demand
determinant is the proliferation of mobile
devices with internet connections. Most
mobile devices such as smartphone and
tablets already have both a GPS and
cellular antenna. Consequently, they are
increasingly being utilized to collect and
transmit vehicle location data in instead of
a vehicle systems devices, with many
industry players developing software for
such devices. Moreover, because it costs
less and easier to integrate a mobile based
system than a one based on direct vehicle
installation, mobile devices have become
popular among smaller customers. Lastly,
potentially reduced insurance premiums
have also begun to drive demand for
industry products. Insurance companies
are increasingly offering lower premiums
to customers who install telematics on
their vehicles. This allows insurance
companies to analyze driving behavior
and habits, which then lets the charge
higher premiums to more risky drivers
and lower premiums to safer ones.

Major Markets

Trucking
Trucking dominates the market for
telematics systems, accounting for an
estimated 63.0% of industry revenue. Most
customers in this market are for-hire
carriers, but private fleets have become a
major users over the past five years.
Long-distance freight trucking companies
were the first to invest in fleet telematics
systems and remain a large market for the

systems. These companies have the most to


gain by investing in telematics systems
because they have large fleets, and these
systems generate savings on a per-vehicle
basis. In addition, because long-distance
freight trucks stay on the road for long
stretches of time, the marginal
improvements in fuel usage quickly pay for
the initial investment in a fleet telematics
system. This markets share of revenue is

Fleet Telematics SystemsMarch 2014 16

WWW.IBISWORLD.COM

Products & Markets

Major Markets
continued

Major market segmentation (2014)

12%

Express and logistics


services

25%
Other

63%
Trucking

Total $2.0bn
set to increase as regulations concerning
hours of service (the amount of time
truckers are allowed to work within a
certain time frame) intensify.
As the price of telematics systems has
steadily decreased over the past five years,
local freight trucking companies have
increased their investment in them. These
companies have smaller fleets than their
long-distance counterparts and, as a result,
cut fewer costs through investing in a
telematics system. However, these
companies are more likely to invest in a
mobile-phone-based telematics system due
to its lower cost. As a result, local freight
truckings share of industry revenue has
increased over the past five years and is
expected to continue growing.
Express and logistics services
Companies such as express carriers and
third-party logistics providers account

SOURCE: WWW.IBISWORLD.COM

for an estimated 12.0% of industry


revenue. Parcel and courier
companies are installing telematics
systems on their vast fleets of trucks in
order to improve their efficiency of
routes. Shipping and logistics
companies are also using industry
products and services to monitor
increasingly complex and integrated
supply chains.
Other
All other markets make up an
estimated 25.0% of industry revenue.
These include, taxi and limo services,
government and commercial vehicle
fleets, and owners of heavy equipment.
While the applications of telematics
differs with each segments, most use
industry products to monitor driver
behavior, vehicle and equipment
conditions and improve utilization.

Fleet Telematics SystemsMarch 2014 17

WWW.IBISWORLD.COM

Products & Markets

Level & Trend


 xports in the
E

industry are
Mediumand
Increasing
Imports

in the
industry are
Mediumand
Increasing

Industry trade balance


800
400

$ million

Imports
In 2014, IBISWorld estimates that
imports will account for 34.1% of
domestic demand, which is down from
36.7% in 2009. However, while imports
share of domestic demand has declined
in the five years to 2014, their value is
actually expected to increase at an
annualized 8.0% to $898.0 million. The
primary reason for this disparity is that
industry revenue growth (a lot of which is
driven by non-traded software
development and service) has outpaced
imports of hardware. Nonetheless, the
industry imports more than it exports
because most industry hardware is
relatively easy to produce, with many
companies moving manufacturing to
countries with low labor costs in order to
reduce prices. That is one of the reasons
Mexico accounts for an estimated 20.8%
of imports. Its relatively low labor costs,
proximity to the United States and
membership to the North American Free
Trade Agreement (NAFTA) makes it an

International Trade

400
800
1200
1600

Year 06
Exports

08

10

12

Imports

14

16

18

20

Balance
SOURCE: WWW.IBISWORLD.COM

ideal location in which to produce


industry products for the United States
market. Similarly, China makes up an
estimated 14.7% of imports because of its
relatively low wages. Taiwan, which
accounts for an estimated 14.2% of
imports has a strong tech sector which
imports many industry products into the
United States, while Canada makes up

Imports From...

Exports To...

9%

Canada

6%

10%

Mexico

4%

France

14%

Taiwan

Canada

42%
Other

12%
Japan

69%
Other

15%
China

21%

Mexico

Year: 2014

Total $220.0m

SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA

Total $898.0m

SOURCE: USITC

Fleet Telematics SystemsMarch 2014 18

WWW.IBISWORLD.COM

Products & Markets

International Trade
continued

8.8% of imports primarily because of its


tech sector, proximity to the United States
and membership to NAFTA. Lastly,
imports have been boosted in recent years
by a strengthening dollar, which has
lowered the price of imports compared to
domestically produced goods.
Exports
Industry exports are expected to increase
at an annualized 11.1% to $220.0 million
in the five years to 2014. Such rapid
growth has increased exports share of
industry revenue from 11.0% in 2009 to
an expected 11.2% in 2014. In general
exports have been driven by wider
acceptance of industry products outside
the United States. Nonetheless, exports

are far lower than imports because US


based manufacturers have to compete
with lower priced products from China
and Mexico, while also dealing with a
recently strengthening dollar that has
made exports more expensive for
foreign buyers.
Canada and Mexico account for 9.5%
and 6.1% of exports, respectively, because
they both border the United States and
are members of NAFTA. Moreover, both
countries have relatively large trucking
industries which transports the majority
their freight both domestically and to the
United States. Japan and France make up
11.6% and 3.7% of exports as both
countries have large logistics industries
which use industry products.

Fleet Telematics SystemsMarch 2014 19

WWW.IBISWORLD.COM

Products & Markets


Business Locations 2014

West
New
England

AK
0.0

Great
Lakes
WA

ND

MT

4.6

Rocky
Mountains
ID

OR
2.1

West NV
0.5

1.9

SD
0.2

WY

0.6

MN

0.0

0.3

Plains

CO

1.6

KY

1.6

OK
0.8

NC
1.1

TN

AZ

NM

3.7

1.1

Southwest
TX
8.3

HI
0.3

Additional States (as marked on map)


1 VT

2 NH

3 MA

4 RI

5 CT

6 NJ

7 DE

8 MD

0.3
2.1

1.1

4.0

5.3

0.3

SC

Southeast

0.5

MS

AL
1.0

0.0

GA
0.8

0.3

LA
1.0

FL
8.3

Establishments (%)

0.3

1.9

AR

0.2

0.5

19.7

WV VA
2.4

0.3

0.6

CA

West

3.2

MO

KS

1.0

OH

1.3

3.0

3.8

IN

IL

0.0

UT

PA

1.4

1.0

0.0

1 2
3
NY
5.0
5 4

MI

0.6

IA

NE

0.0

WI

ME

MidAtlantic

9 DC
0.0

Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
SOURCE: WWW.IBISWORLD.COM

Fleet Telematics SystemsMarch 2014 20

WWW.IBISWORLD.COM

Products & Markets

Other regions
About 13.9% of industry establishments
are located in the Southwest, with Texas
alone accounting for 8.3% of them. The

30

20

10

Southwest

Southeast

Rocky Mountains

Plains

New England

Mid-Atlantic

0
Great Lakes

The West, Southeast and Mid-Atlantic


The West dominates the industry, with
27.2% of establishments located there.
California alone is home to 19.7% of
establishments because it is a hub for
technology and software developments.
As a result, it is easier for companies to
not only find the best engineers, but
also establish links with other
industries and investors that can help
operators grow. The Southeast and
Mid-Atlantic account for 16.3% and
15.0% of industry establishments. The
states of Florida, Massachusetts and
New York are particularly popular for
operators as they all have high research
and development spending.

Distribution of establishments vs. population

West

Several factors affect industry locations,


including proximity to complementary
industries, customers and suppliers.
Firms also consider the location and
accessibility of highly skilled labor.

Business Locations

Establishments
Population
SOURCE: WWW.IBISWORLD.COM

state not only home to major technology


hubs like Austin, but has a large trucking
industry which uses industry products.
All the other regions account for less
than 10.0% of establishments as they are
less focused on technology and have
smaller populations.

WWW.IBISWORLD.COM

Fleet Telematics Systems March 2014

21

Competitive Landscape

Market Share Concentration | Key Success Factors | Cost Structure Benchmarks


Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration in this

industry is M
 edium

Key Success Factors


IBISWorld

identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:

Cost Structure
Benchmarks

The Fleet Telematics Systems industry has


a moderate level of market concentration,
with the four largest players accounting
for an estimated 43.0% of industry
revenue. Despite the presence of
nationwide major players, most of the
industry comprises small-scale firms that
only serve a small market, based on the
functionality of the telematics systems
they provide. These smaller companies
typically have only a few contracts and
operate web-based applications rather
than through hardware installed at the
clients base of operations. The largerscale firms use their abundant resources
to offer premium products that allow
more functionality.

However, over the past five


years market concentration has
significantly increased. Constantly
falling barriers to entry, the potential
for future growth and the advantages
obtained from scale have encouraged
a major wave of merger and
acquisition activity. In fact, most of
the industrys major players have
either been acquired or themselves
acquired a competitor. Nevertheless,
despite rapid consolidation, the
industrys falling barriers to entry
have made it easy for new players to
enter the industry, with the number
of enterprises rising over the past
five years.

Companys product is user/


consumer friendly
The industrys products are highly
technical. However, successful firms
create products that can be easily used by
users with little technical knowledge.
Customers will switch to a more userfriendly system if available.

Ability to quickly adopt new technology


Companies in this industry must be on
the cutting edge of wireless
communication and navigational
instrument technology.

Proximity to key markets


Most fleet telematics systems
companies are small, local operations.
Successful telematics companies must
locate themselves close to their
potential customers.

Profit
Profit, defined as earnings before interest
and tax expenses, is estimated to
comprise 11.2% of industry revenue in
2014. Profit margins have slightly
increased over the past five years as the
trucking sector began to recover and
increasing fuel costs incentivized more
transportation companies to use
telematics. However, increasing internal

Level of competition
existing in the market
The fleet telematics system software
industry has a low level of
concentration, with most players
operating in a small geographic region.
Therefore, a firms revenue is heavily
dependent on how many other firms
are operating in that region.

competition caused by declining barriers


to entry and increased use of software
service has kept margins from reaching
their prerecession levels.
Purchases
Purchases are the largest expense for the
Fleet Telematics Systems industry.
Purchase will account for an estimated
32.6% of revenue in 2014. Purchases

WWW.IBISWORLD.COM

Fleet Telematics Systems March 2014

22

Competitive Landscape

include metal products, printed circuit


boards, semiconductors, wireless
communications devices and many other
materials, components and supplies.
However, purchases share of revenue has
steadily declined over the past five years
as companies have outsourced their
manufacturing operations to lower costs
countries such as Mexico and China.
Moreover, as more companies focus on
software development as opposed to
hardware manufacturing, purchases will
continue to decline year by year.
Wages
At an estimated 18.6% of revenue, wages
are the second-largest single expense for
this industry. The two dominant types of
industry workers are factory employees
and software engineers. As the industry
has focused more and more on software
development and services, software
engineers share of wages has increased,

while increased outsourcing of


manufacturing has lowered factory
workers share of wages. Moreover,
because the number of software
engineers is lower than that of industrial
workers, wages share of revenue has
declined over the past five years.
Other
Rent and utilities, marketing and
depreciation only account for an
estimated 3.0%, 2.0%, and 1.6% of
industry revenue. Other costs, such
as research and development (R&D),
insurance, administrative costs and
legal fees account for an estimated
31.0% of industry revenue. In
particular, R&D accounts for a large
portion of revenue because companies
have to constantly develop and
update their software and hardware
offerings in order to stay ahead
of the competition.

Sector vs. Industry Costs


Average Costs of
all Industries in
sector (2014)

Industry Costs
(2014)

14.7

11.2

100

80

Percentage of revenue

Cost Structure
Benchmarks
continued

18.6

21.9

60

32.6

24.6
40

20

7.6
7.2
4.8
19.2

Profit
Wages
Purchases
Depreciation
Marketing
Rent & Utilities
Other

1.6

3.0

2.0

31.0

0
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM

Fleet Telematics Systems March 2014

23

Competitive Landscape

Basis of Competition
Level & Trend
 ompetition
C

in
this industry is
Highand the trend
is I ncreasing

Barriers to Entry
Level & Trend
 arriers to Entry
B

in this industry
are M
 ediumand
Decreasing

The major points of competition in this


industry include brand strength, price,
niche markets and value-added services.
Brand strength allows existing and
established companies to gain greater
market presence and product acceptance.
In order to gain market share, emerging
firms must convince potential customers
that their telematics system has a large
enough coverage area and is easy to use.
In addition, switching to a new brand
forces the customer to invest in a new set
of hardware and learn how to use a new
interface. Companies also compete
strongly on price because most industry
products offer similar functions. As a
result, price-competition is often
intense, with many operators
outsourcing hardware manufacturing to

The industry exhibits moderate, but


constantly declining, barriers to entry. In
general, hardware manufacturers have to
invest into machinery and facilities
required to produce telematics
equipment. However, as the use of
mobile phone applications and webbased interfaces instead of hardware
and central communications hubs has
made it easier for new players to enter
the market, especially if they offer easy
to use and high quality software and
services. These new product lines have
not completely eclipsed the old model,
though, because a physical piece of
hardware installed on a vehicle can
deliver more functionality than just a
mobile phone due to its link with the
vehicles computational system.
Moreover, the price of semiconductors
has fallen, lowering the cost of hardware
manufacturing. On the other hand, new

low cost countries such as China in


order to better compete.
Companies can compete by supplying
products to niche markets. Most smallscale operators only provide industry
goods to one market (i.e. long-distance
freight trucking and local refrigeration
trucking) by building hardware, software
and services that are tailored towards
that markets end users. This allows
them to build a specialization that
makes competition from non-niche
players less likely. Finally, a company
can gain an edge over competitors by
offering value-added services. These
services include providing design
solutions, application engineering and
software development and updates,
repairs, and general post-sales services.

Barriers to Entry checklist


Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance

Level
High
Medium
Growth
Low
High
Light
None
SOURCE: WWW.IBISWORLD.COM

entrants have to face strong competition


from large incumbent players. These
companies have better brand
recognition, with many downstream
markets already using their products.
Consequently, it is more expensive for
customers to switch to a new telematics
provider as it would require investment
into buying and learning new hardware
and software.

WWW.IBISWORLD.COM

Fleet Telematics Systems March 2014

24

Competitive Landscape

in
this industry is
Mediumand the
trend is I ncreasing
International trade is a
major determinant of
an industrys level of
globalization.
Exports offer growth
opportunities for firms.
However there are legal,
economic and political risks
associated with dealing in
foreign countries.
Import competition can
bring a greater risk for
companies as foreign
producers satisfy domestic
demand that local firms
would otherwise supply.

Trade Globalization
200

Going Global: Fleet Telematics Systems 20042014


Global

Export

150
100
50
0 Local
0

United States, however, hardware


manufacturing is often outsourced to
countries with low labor costs. Moreover,
an increasing number of foreign-based
players are entering the industry. For
instance, Fleetmatics is one of the largest
telematics companies in the United
States, but it is based in Ireland.

Fleet Telematics
Systems
Import
40

80

120

Imports/Domestic Demand

200 Export

Exports/Revenue

Level & Trend


 lobalization
G

The Fleet Telematics Systems industry


has a moderate, but increasing level of
globalization. The Unites States market
for telematics is the largest in the world,
with most players based in the States in
order to serve their local or niche
markets. Moreover, most industry
software development takes place in the

Exports/Revenue

Industry
Globalization

160

Global

150
100
50
0 Local
0

2004
2014

40

Import
80

120

160

Imports/Domestic Demand
SOURCE: WWW.IBISWORLD.COM

Fleet Telematics SystemsMarch 2014 25

WWW.IBISWORLD.COM

Major Companies
Trimble Navigation Limited | Omnitracs LLC
Fleetmatics IRL Ltd. | Other Companies

Major players

Omnitracs LLC 12.8%

(Market share)

61.9%
Other

Fleetmatics IRL Ltd. 8.6%


Trimble Navigation Limited 16.7%

Player Performance
Trimble Navigation
Limited
Market share: 16.7%

SOURCE: WWW.IBISWORLD.COM

Trimble Navigation Limited is a


Sunnyvale, CA-based company that
builds technology to increase work
process productivity across numerous
industries, including agriculture,
architecture, civil engineering,
construction, environmental
management, government, natural
resources, transportation and utilities.
The company, which has 6,561
employees, was established in 1978 and
generated about $2.0 billion in 2012.
Trimble has four divisions: engineering
and construction, field solutions, mobile
solutions and advanced devices.
The mobile solutions division, which is
the only segment relevant to this
industry, provides hardware and software
designed to manage mobile workers and
assets. Products in this segment include
embedded telematics, scheduling and
dispatching software, enterprise

software, and fleet management


hardware and software. During much of
the past five years, Trimble has been a
minor player in the Fleet Telematics
Systems industry; however, beginning in
2011, the operator has acquired several
key players, including PeopleNet,
GEOTrac Systems and TMW Systems,
making Trimble the industrys largest
company. While the company does
produce telematics hardware, most
revenue is collected through its
subscription-based software-as-a-service
(SaaS) model. Under this model, the
company installs proprietary hardware
devices (most of which are produced in
Mexico) consisting of a GPS receiver,
business logic, sensor interface and
wireless modem onto vehicles. Data is
then processed through Trimbles data
center, to which clients gain access via
internet-connected application software.

Trimble Navigation Ltd. (US industry-specific segment) financial


performance*
Year

Revenue
($ million)

(% change)

Operating Income
($ million)

2008
2009

103.6

NC

7.0

-8.6

96.0

-7.3

8.9

27.1

(% change)

2010

95.7

-0.3

1.2

-86.5

2011

135.5

41.6

2.8

133.3

2012

215.8

59.3

20.2

621.4

2013

300.5

39.2

40.2

99

*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD

Fleet Telematics SystemsMarch 2014 26

WWW.IBISWORLD.COM

Major Companies

Player Performance
continued

Financial Performance
Trimbles industry-specific revenue is
expected to increase at an average annual
rate of 23.7% to $300.5 million in the five
years to 2013. Similar to many other
industry players, the company lost
revenue and operating income during the
recession, with revenue declines
continuing through 2010. However, the

company has since acquired various


competitors, causing its market share to
skyrocket. In 2011, the company acquired
PeopleNet, and in 2012, it purchased
GEOTrac Systems and TMW Systems.
However, TMW Systems revenue was
not recorded until 2013, leading revenue
and operating income to increase by
39.2% and 99.0%, respectively, that year.

Player Performance

San Diego-headquartered Omnitracs LLC


is one of the industrys leading telematics
providers for the trucking sector,
particularly for long-haul carriers.
Omnitracs, established in 1988 as a part
of telecommunications manufacturer
Qualcomm, pioneered machine-tomachine communication with the
introduction of OmniTRACS, a satellitebased communication system for the
transportation industry. The system
allowed companies to track and monitor
their trucking assets. Until recently,
Omnitracs was part of the Qualcomm
enterprise services (QES) division, which
is grouped under the Qualcomm Wireless
& Internet (QWI) segment. QES provides
equipment, software and services that
enable companies to wirelessly connect
with their assets and workforce.
Specifically, it offers satellite- and
terrestrial-based, two-way wireless

connectivity and GPS location services to


transportation and logistics fleets and
other enterprise companies. The service
permits customers to track the location
and monitor the performance of their
assets, communicate with personnel and
collect data. However, in 2013,
Qualcomm finalized the sale of
Omnitracs to Vista Equity Partners for
about $800.0 million.

Omnitracs LLC
Market share: 12.8%

Financial performance
In the five years to 2013, Omnitracs US
industry-specific revenue is expected to
decline at an annualized 2.5% to $230.6
million. At the height of the recession,
the companys revenue plummeted by
18.7% and has since struggled to recover.
In general, the company has had
difficulty moving away from the saturated
long-haul trucking market toward the
local trucking market. As a result,

Omnitracs LLC (industry-specific) financial performance*


Year

Revenue

(% change)

Operating Income

(% change)

2008

262.3

N/C

-0.3

N/C

2009

213.3

-18.7

6.7

N/C

2010

233.1

9.3

4.5

-32.8

2011

244.9

5.1

-56.7

N/C

2012

230.0

-6.1

-5.5

-90.3

2013

230.6

0.3

-3.0

-45.5

*Estimates

SOURCE: ANNUAL REPORT AND IBISWORLD

Fleet Telematics SystemsMarch 2014 27

WWW.IBISWORLD.COM

Major Companies

Player Performance
continued

operating margins have been negative for


the past three years, with revenue
expected to slightly grow 0.3% in 2013.

Player Performance

Fleetmatics IRL Ltd. is a Dublin, Irelandbased operator that provides fleet


management solutions to commercial
fleets of small- to medium-sized
businesses. The companys revenue is
primarily derived through an SaaS
model, in which clients subscribe to its
software services. These services allow
users to monitor vehicle locations, fuel
usage, speed, mileage and other
information through mobile devices
installed with Fleetmatics software. The
company mainly operates in the United
Kingdom, Ireland and the United
States. However, only its Boston-based
US operations, which account for more
than 87.0% of its revenue, are relevant
to this industry. In 2010, the company
acquired SageQuest Inc., leading to a
boost in the number of vehicle

Fleetmatics IRL Ltd.


Market share: 8.6%

subscriptions from nearly 150,000 in


2009 to over 200,000 in 2010.
Financial Performance
In the five years to 2013, Fleetmatics US
revenue is expected to grow at a
staggering average rate of 43.9% per
year to $155.1 million. While the
companys overall revenue grew during
the recession, it suffered a loss of $4.1
million in 2008. However, similar to
other major players in this industry,
Fleetmatics has rapidly expanded its
revenue stream through its acquisition
strategy. The acquisition of SageQuest
Inc. in 2010 caused company revenue to
climb by 54.8% in 2011. Subsequently,
combined company revenue grew at a
double-digit pace and is expected to
increase by 39.2% in 2013 alone.

Fleetmatics IRL Ltd. (US industry-specific) financial performance*


Year

Revenue

(% change)

Operating Income

(% change)

2008

25.2

N/C

-4.1

N/C

2009

36.3

44.0

3.2

N/C

2010

50.9

40.2

2.0

-37.5

2011

78.8

54.8

5.1

155.0

2012

111.4

41.4

10.8

111.8

2013

155.1

39.2

25.8

138.9

*Estimates

Other Companies

Danaher Corporation

Estimated market share: 4.9%


Danaher Corporation offers professional,
medical, industrial and commercial
products and services. The company is

SOURCE: ANNUAL REPORT AND IBISWORLD

headquartered in Washington, DC and,


in 2013, about 42.0% of its $19.2 billion
in revenue was earned in the United
States. The company entered the Fleet
Telematics Systems industry in 2012,

Fleet Telematics SystemsMarch 2014 28

WWW.IBISWORLD.COM

Major Companies

Other Companies
continued

with the acquisition of Navman Wireless,


a major provider of vehicle-tracking and
fleet management hardware and
software. In 2013, it further boosted its
market share in the industry through the
acquisition of United Kingdom-based
Teletrac from private equity firm Vector
Capital. As a result of these acquisitions,
IBISWorld expects Danaher to generate
$88.2 million in industry-specific
revenue in 2013.

Verizon Telematics

Estimated market share: 2.7%


Verizon Telematics, which is
headquartered in Atlanta, entered the
Fleet Telematics industry in 2012 with
the acquisition of Hughes Telematics,
Inc. Hughes, which was formed through a
merger of Polaris Acquisition Corp. and

Hughes Telematics, is a telematics


services company that provides
numerous real-time voice and data
communication services and applications
for use in the automotive industry. Since
2009, Hughes has been the exclusive
telematics service provider in the United
States for all new vehicles sold by
Mercedes-Benz, and has entered into
services agreements with Volkswagen to
become their exclusive provider in 2013.
Through its acquisition of former
industry leader Networkfleet, Hughes
provides a fleet management solution
that includes an easy-to-use, automaticvehicle location and remote-vehicle
diagnostics system. Through
Networkfleet, Verizon Telematics is
expected to generate $49.4 million in
industry-specific revenue in 2013.

Fleet Telematics SystemsMarch 2014 29

WWW.IBISWORLD.COM

Operating Conditions

Capital Intensity | Technology & Systems | Revenue Volatility


Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level

of capital
intensity is L ow

The Fleet Telematics Systems industry


has a low level of capital intensity. In
2014, for every dollar industry players
spend of labor, an estimated $0.09 will
be spent on capital. Manufacturers of
telematics hardware have to invest into
relevant machinery, equipment and
facilities make products such as
vehicle systems devices and fleet
communication hubs. On the other
hand, firms must invest in highly
skilled labor, such as software
engineers and technicians. These
professionals are highly sought after in
a variety of industries, and their wage
cost is high. Moreover, as electronics
hardware manufacturing has become
less expensive (due to outsourcing and
commoditization) and the software

Capital intensity

Capital units per labor unit


0.5
0.4
0.3
0.2
0.1
0.0

Economy

Information Fleet Telematics


Systems

Dotted line shows a high level of capital intensity


SOURCE: WWW.IBISWORLD.COM

aspect of telematics more important,


the industry has become less focused
on hardware manufacturing.

Tools of the Trade: Growth Strategies for Success


Investment Economy

Recreation, Personal Services,


Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.

Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.

Communication
Equipment
Manufacturing

Traditional Service Economy


Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.

Capital Intensive

Labor Intensive

New Age Economy

Fleet Telematics Systems


Local Freight Trucking

Navigational Instrument Manufacturing


Telecommunication Networking
Equipment Manufacturing

Change in Share of the Economy

Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
SOURCE: WWW.IBISWORLD.COM

Fleet Telematics SystemsMarch 2014 30

WWW.IBISWORLD.COM

Operating Conditions

Capital Intensity
continued

Nonetheless, capital intensity has


climbed over the past five years as
manufacturers invested into

automated production equipment in


order to improve productivity and
lower wage costs.

Technology
& Systems

The rate of technology change is high in


the Fleet Telematics Systems industry.
Companies generally adopt new
technology to offer either new features
or better usability to customers.
Currently, telematics systems can use
satellite networks, terrestrial networks,
such as broadband cellular networks, or
some combination of the two. Some
systems also use a wireless local area
network (WLAN, also known by the
common standard Wi-Fi) to transmit
data back to the central server without
incurring any network usage charges.
In addition, the industry has moved
away from only using hardware installed
on fleet vehicles and in the customers
office. Hardware in vehicles is being
replaced by mobile phone applications that
perform similar functions. Mobile-phone-

based systems are especially popular


among customers who only use a fleet
telematics system to track vehicle positions.
A device installed on the vehicles computer
system can also provide info such as
diagnostics and cargo monitoring. Also, a
telematics system can be used to
implement an auto insurance policy based
directly on a drivers driving habits. Back at
home base, specialized computers used to
collect and process the data from the
vehicles is being replaced by web
applications that serve similar functions. As
the hardware needed to operate a
telematics system is reduced, the cost of
implementing a telematics system goes
down. Combined with the steady decline of
the price of computer components,
technology change is causing industry
products to steadily decline in price.

This industry has a moderate level of


revenue volatility, with year-on-year
revenue changes averaging 6.9% since

2009. Volatility has been primarily


driven by rapid revenue growth caused
by strong demand for telematics.

of
Technology
Change is H
 igh

Revenue Volatility
Level
The level

of
Volatility is M
 edium

A higher level of revenue


volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.

Volatility vs Growth
1000

Revenue volatility* (%)

Level
The level

Hazardous

Rollercoaster

100
10

Fleet Telematics
Systems

1
0.1

Stagnant
30

10

Blue Chip
10

30

50

70

Five year annualized revenue growth (%)


* Axis is in logarithmic scale
SOURCE: WWW.IBISWORLD.COM

Fleet Telematics SystemsMarch 2014 31

WWW.IBISWORLD.COM

Operating Conditions

Revenue Volatility
continued

Industries such as trucking have


increased the use of telematics as means
to improve efficiencies in the face of
string competition and increasing fuel
prices. In particular volatility increased
after 2011 as demand for industry
products increased on the back of an

improved economy, with revenue growth


climbed from 6.1% in 2010 to 12.8% in
2011 and from 4.2% in 2012 to 14.6% in
2013. Over the next five years, volatility is
expected to remain moderate as
advancements in relevant technology and
new markets drives rapid growth.

Regulation & Policy

The Fleet Telematics Systems industry is


not directly regulated by the government.
However, regulations on related
industries do impact this industry. The
Federal Communications Commission
heavily regulates the manufacturing of
communication devices, such as GPS
navigation devices, cellular networks and
wireless networks, which telematics
systems employ. On the other hand, the
industry benefits from the actions of the
Environment Protection Agency (EPA).
As the EPA continues to pressure
transportation companies to reduce their
carbon footprint, they will increasingly

turn to fleet telematics systems to help


reduce fuel usage.
Moreover, like in all manufacturing
industries, industry facilities are subject
to federal, state and local environmental
and health and safety regulations that
impose workplace standards, as well as
limitations on the discharge of pollutants
into the environment. Such laws include
the US Clean Air Act and the Clean Water
Act. These acts require compliance with
air and water quality standards and
empower the Environmental Protection
Agency to establish and enforce limits on
the emission of pollutants.

While the industry receives no direct


assistance from the government,
certain environmental regulations can
potentially boost demand for
telematics. For instance, the
Department of Transpirations Federal
Motor Carrier Safety Administration
has proposed rules requiring interstate
commercial truck and bus companies to

use electronic on-board recorders


(EOBRs). EOBRs allow the monitoring
of the amount of time a vehicle is being
used, which enable regulators to track
compliance with regulations covering
driving hours. If this regulation is to
take full effect it would lead to
increased demand for telematics
products that can be used as EOBRs.

Level & Trend


 he level of
T

Regulation is
Lightand the
trend is S
 teady

Industry Assistance
Level & Trend
 he level of
T

Industry Assistance
is N
 oneand the
trend is S
 teady

Fleet Telematics SystemsMarch 2014 32

WWW.IBISWORLD.COM

Key Statistics
Industry Data
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sector Rank
Economy Rank

Industry
Revenue Value Added
($m)
($m)
984.6
439.3
1,041.5
437.7
1,147.1
450.1
1,221.6
478.7
1,293.6
445.9
1,373.1
471.5
1,548.4
513.1
1,613.2
544.7
1,849.0
573.2
1,956.1
614.1
2,249.5
682.8
2,384.5
720.0
2,514.5
757.6
2,652.8
797.7
2,737.9
827.7
62/94
68/94
1014/1313 1017/1313

Annual Change
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sector Rank
Economy Rank

Revenue
(%)
5.8
10.1
6.5
5.9
6.1
12.8
4.2
14.6
5.8
15.0
6.0
5.5
5.5
3.2
28/94
237/1313

Key Ratios
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Sector Rank
Economy Rank

IVA/Revenue
(%)
44.62
42.03
39.24
39.19
34.47
34.34
33.14
33.77
31.00
31.39
30.35
30.20
30.13
30.07
30.23
70/94
672/1313

Establishments
131
132
136
139
144
141
144
148
152
153
156
158
158
159
160
71/94
1083/1312

Establishments
(%)
0.8
3.0
2.2
3.6
-2.1
2.1
2.8
2.7
0.7
2.0
1.3
0.0
0.6
0.6
54/94
780/1312

Industry
Value Added
(%)
-0.4
2.8
6.4
-6.9
5.7
8.8
6.2
5.2
7.1
11.2
5.4
5.2
5.3
3.8
22/94
172/1313

Imports/
Demand
(%)
36.31
39.68
39.27
38.27
36.69
36.70
34.70
34.40
33.56
34.09
31.66
31.71
31.81
31.73
32.16
1/9
139/420

Figures are inflation-adjusted 2014 dollars. Rank refers to 2014 data.

Enterprises Employment
116
6,297
117
6,761
120
6,423
122
6,389
118
6,354
117
6,474
117
6,482
122
6,565
125
6,629
126
6,693
126
6,767
129
6,821
130
6,885
131
6,949
130
6,998
69/94
59/94
1064/1312 1020/1313

Exports
($m)
117.8
141.0
156.8
148.3
142.2
155.7
158.0
180.2
197.0
220.0
250.0
270.0
290.0
301.0
315.0
5/9
291/420

Imports
($m)
494.2
592.3
640.3
665.4
667.3
705.9
738.7
751.3
834.4
898.0
926.4
982.0
1,037.5
1,093.1
1,148.6
2/9
204/421

Wages
($m)
289.5
307.3
295.6
300.6
308.7
316.6
329.1
336.6
354.0
362.9
382.4
391.7
401.1
410.7
417.0
69/94
992/1313

Domestic
Demand
1,361.0
1,492.8
1,630.6
1,738.7
1,818.7
1,923.3
2,129.1
2,184.3
2,486.4
2,634.1
2,925.9
3,096.5
3,262.0
3,444.9
3,571.5
5/9
277/420

World price
of crude oil
($ per barrel)
53.4
64.3
71.1
97.0
61.8
79.6
104.0
105.0
104.1
100.2
101.0
105.0
110.5
114.9
119.5
N/A
N/A

Enterprises Employment
(%)
(%)
0.9
7.4
2.6
-5.0
1.7
-0.5
-3.3
-0.5
-0.8
1.9
0.0
0.1
4.3
1.3
2.5
1.0
0.8
1.0
0.0
1.1
2.4
0.8
0.8
0.9
0.8
0.9
-0.8
0.7
47/94
61/94
676/1312
784/1313

Exports
(%)
19.7
11.2
-5.4
-4.1
9.5
1.5
14.1
9.3
11.7
13.6
8.0
7.4
3.8
4.7
2/9
49/420

Imports
(%)
19.9
8.1
3.9
0.3
5.8
4.6
1.7
11.1
7.6
3.2
6.0
5.7
5.4
5.1
3/9
91/421

Wages
(%)
6.1
-3.8
1.7
2.7
2.6
3.9
2.3
5.2
2.5
5.4
2.4
2.4
2.4
1.5
50/94
611/1313

Domestic
Demand
(%)
9.7
9.2
6.6
4.6
5.8
10.7
2.6
13.8
5.9
11.1
5.8
5.3
5.6
3.7
2/9
76/420

World price
of crude oil
(%)
20.5
10.7
36.4
-36.3
28.9
30.6
1.0
-0.9
-3.8
0.9
3.9
5.2
4.0
4.0
N/A
N/A

Exports/
Revenue
(%)
11.96
13.54
13.67
12.14
10.99
11.34
10.20
11.17
10.65
11.25
11.11
11.32
11.53
11.35
11.51
4/9
257/420

Revenue per
Employee
($000)
156.36
154.05
178.59
191.20
203.59
212.09
238.88
245.73
278.93
292.26
332.42
349.58
365.21
381.75
391.24
56/94
601/1313

Wages/Revenue
(%)
29.40
29.51
25.77
24.61
23.86
23.06
21.25
20.87
19.15
18.55
17.00
16.43
15.95
15.48
15.23
56/94
627/1313

Employees
per Est.
48.07
51.22
47.23
45.96
44.13
45.91
45.01
44.36
43.61
43.75
43.38
43.17
43.58
43.70
43.74
19/94
286/1312

Average Wage
($)
45,974.27
45,451.86
46,022.11
47,049.62
48,583.57
48,903.31
50,771.37
51,271.90
53,401.72
54,220.83
56,509.53
57,425.60
58,257.08
59,102.03
59,588.45
74/94
510/1313

Share of the
Economy
(%)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
68/94
1017/1313

SOURCE: WWW.IBISWORLD.COM

Fleet Telematics SystemsMarch 2014 33

WWW.IBISWORLD.COM

Jargon & Glossary

Industry Jargon

CLOUD COMPUTINGA model that uses a network of


remote servers hosted on the internet to store, manage,
and process data, rather than a local server.
GPS NAVIGATIONA device that receives global
positioning system signals to determine the devices
current location.

IBISWorld Glossary

BARRIERS TO ENTRYHigh barriers to entry mean that


new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITYCompares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity. High
capital intensity is more than $0.333 of capital to $1 of
labor; medium is $0.125 to $0.333 of capital to $1 of labor;
low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICESThe dollar figures in the Key Statistics
table, including forecasts, are adjusted for inflation using
the current year (i.e. year published) as the base year. This
removes the impact of changes in the purchasing power of
the dollar, leaving only the real growth or decline in
industry metrics. The inflation adjustments in IBISWorlds
reports are made using the US Bureau of Economic
Analysis implicit GDP price deflator.
DOMESTIC DEMANDSpending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to industry
revenue, and then subtracting exports.
EMPLOYMENTThe number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISEA division that is separately managed and
keeps management accounts. Each enterprise consists of
one or more establishments that are under common
ownership or control.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single physical
location where business is conducted or where services or
industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in the United
States.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players account
for more than 70% of industry revenue. Medium is 40% to
70% of industry revenue. Low is less than 40%.

HOT SPOTA site that offers internet access over a local


wireless area network.
WI-FITechnology that allows an electronic device to
wirelessly exchange data over a computer network.

INDUSTRY REVENUEThe total sales of industry goods


and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.
LIFE CYCLEAll industries go through periods of growth,
maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENTBusinesses with
no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
PROFITIBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
VOLATILITYThe level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.
WAGESThe gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.

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