The telematics industry has suffered more than most during the recession, with a number of well-known names finding the going too tough to continue.
For some fleets, the benefits of tracking their vehicles are less obvious, so it could be one of the first things to come under the spotlight if a company has been forced to cut costs.
If the difficult economic climate has forced companies to make staff redundant, and those staff use company vehicles, ditching telematics as well as cutting back on the size of the fleet could be seen by some as a way of making further savings.
However, there are long lists of testimonials showing how fleets have saved significant amounts of cash through tracking systems, so it’s safe to say the technology does work.
But telematics companies have had to become more flexible and adapt to market conditions in order to remain competitive and remain an option for fleets keen to monitor their fuel costs and operational efficiency.
Pay-as-you-go systems have become more popular with many fleets, with Quartix recording growth during 2009 thanks to its PAYG offering.
Quartix managing director Andy Walters said: “Some people don’t want to commit themselves for long periods in the current economic climate.
“There are all kinds of options with communication equipment in terms of payment, and people don’t expect to sign up to an agreement tying them in for years any more.”
So the market is changing, and Walters believes Quartix has responded to meet the expectations of many telematics systems customers.
Other providers also accept that there has to be an element of adapting to meet the expectations of a range of customers.
Derek Bryan, chief executive of FleetMatics, said some of the problems faced by the telematics industry had been caused by the recession, but the earlier models for funding were also unsustainable.
“A lot of tracking and telematics companies were set up on a banking and leasing model and some failed after credit began to dry up a couple of years ago,” he said.
“We’ve seen many companies that based their model around finance and leasing go out of business, and we’ve witnessed a change in the whole industry for customers from a relatively high cost solution to one more in line with what some fleets can consider without the very long-term commitments we used to see.
“The addition of pay-as-you-go, and other changes in the market, have been driven by competition, and of course recessionary pressures and the economy.
"In the present climate, fewer companies want to make long-term commitments to anything.”
His views are echoed by Bill Henry, chief executive of Cybit, which was sold to private equity company Francisco Partners in January.
“Customers don’t want to lease telematics products any more because of the long-term commitment to pay. If the supplier goes into administration they still have this commitment but without the ongoing technical upgrades,” he said.
“Cybit is moving away from third-party leasing to a 100% own-book model.
Historically, the telematics market has relied almost exclusively on third-party leasing agreements.
“Third-party leasing creates risks for customers because they must continue to pay the lease agreement payments even if their service provider fails to deliver service or goes into administration.”
Another problem occasionally encountered with long-term payment models and vehicle tracking can occur at vehicle defleeting time, said Walters.
“When you’re running a large fleet, often it’s difficult to keep tabs on tracking systems.
"If they aren’t removed when a vehicle is defleeted they continue to track the vehicle and if the fleet is tied to a long-term agreement, it keeps paying.”
Telematics companies are keen to emphasise the savings that can be made by tracking vehicles, the
fact that they quickly begin to pay for themselves and that the old business models have changed.
Henry said: “As companies get bigger, telematics become more fundamental to running a fleet. And they have greater expectations of their suppliers.
"They want well capitalised companies, often with Europe-wide support if they operate in several different countries. Companies that depend on getting cash up-front will struggle; customers are more sophisticated in asking about this.”
While some oppose the introduction of PAYG telematics, it isn’t just the suppliers that have benefited from offering the short-term funding method.
Quartix has benefited from its system being resold by a distributor network.
These companies have also seen an uplift in interest from being able to offer customers a pay-as-you-go (PAYG) option.
Paul Miller, of Vocal Mobile Solutions, is a Quartix distributor, as well as other tracking systems.
He says: “For a company like ours that acts as a distributor for a number of telematics systems, being able to offer Quartix PAYG alongside other systems means we don’t have to turn customers away who are looking for a PAYG option.
“We only want to deal with companies that are financially stable, particularly where the market has been struggling. As well as Quartix, we also offer Cybit and Box Telematics.”
For fleets, however, the immediate issue is as much about selling the telematics concept to directors and to staff – particularly those who are unionised – as it is agreeing the best funding method.
Stuart Wiseman, fleet manager at Yorkshire Housing, introduced telematics at his previous employer, Kirklees Council.
“We sat with our union reps to explain why we were doing this and the consequences of speeding and misuse of the vans,” he told a Fleet News roundtable sponsored by Trimble.
“But we stressed that we were only interested in the serious issues and saving money for the council, which protects their jobs.
“Then we went to the workforce to get them on board, which took three or four months.”
Once Kirklees had introduced telematics to its vans, the first 10 issues raised all defended the driver in instances where they had been accused of speeding.
But the process does not stop with the roll-out. The next issue is about how management reacts to the exception reports on their staff: do they take action?
“They have to report back to me what action they have taken when we give them the reports,” says Wiseman.
“The main issues are over style of driving, such as hard acceleration.”
He adds: “Telematics has to be managed. You will have an instant result because people think ‘I’m being watched’.”
He advises fleets struggling to get the sign-off for telematics to use an argument based around accident costs related to the company’s products or services. For example, to pay for the accident bill, the company would have to make ‘X’ quantity of chocolate bars or carry out ‘X’ number of housing repairs.
“If you relate it to the bottom line, then they will understand it and will then go along with the plans,” he says. “You have to have a strong business case that they understand.”
Other underplayed benefits of telematics include single-worker safety and recovery of stolen vehicles.
Rick Young, fleet manager at Wakefield & District Housing, says: “We had three vehicles stolen recently and we got them all back within half an hour.”