Machine 2 Machine Vision

Today’s New York Times has an Op-ed piece by Robin Chase, the founder and former chief executive of Zipcar. Mr. Chase puts forth the proposition that a simple solution to getting out ahead of potential safety issues such as the current Toyota accelerator problem is real-time access to vehicles’ “black boxes” via wireless applications. In the Op-ed piece, he states: “Aberrant engine and driving behavior would leap out of the carmakers’ now-large data set, allowing them, if necessary, to conduct recalls much earlier. And, in exchange for your contribution of anonymous data, carmakers could send you driving benchmarks aggregated from your peers…”. As I and others have presented multiple times at various Telematics Update conferences over the past ten years or so, there are various incentives that could be offered to the vehicles’ owners in exchange for anonymous access to this data. The cost to the automotive OEM for the telematics device and service that would be used to gather this data would be justified by cost savings related to reduced warranty and potential recall costs. Additionally, the telematics solution would then be resident in the vehicle, ready for use as a platform to up-sell consumers services like crash notification and remote door unlocking, as well as creating partnering opportunities for potential new revenue streams such as Pay-as-you-drive (PAYD) insurance. Car guys need to start thinking about telematics as more than safety, security, and navigation, but as being a tool for transformative business model improvement.

Today’s Wall Street Journal has an article entitled “Heists Targeting Truckers On Rise”. The story outlines the increase in trucking freight theft since the current recession started. Being that most decisions to implement telematics systems are driven by ROI models I have been pondering the concept of reduced insurance rates for transporting freight if security and tracking technology is implemented on the trailer. At the Telematics Update Fleet & Asset Management conference this past November in Atlanta I asked some of the insurance industry participants if they had been looking into this sort of offering. All of them responded that they were currently focused on insurance offerings related to driver behavior and had not looked into the technology for purposes of reducing freight loss while in transit. Being that this story was reported in a mainstream media publication (WSJ), it would seem that this is a growing problem in search of a solution – and as such an opportunity for the telematics industry.

A long time, respected colleague of mine, Stefan Gudmundsson of Telit, has a published a feature article in the current addition of M2M Magazine. This article provides an excellent roadmap for any company that is considering developing its first M2M application. Stefan has done an excellent job of integrating both the design and business requirements of an application in to a simple to understand primer on the topic. Anyone who is just starting out in M2M would do well in taking this primer to heart as it will help in cutting through the current buzz or hype and potentially save you much expense and heartache downstream.

Despite the ecological value of incentivizing the swapping of low mileage cars for higher mileage cars, there has been some questions over the economic value of the Cash for Clunkers program. Many are wondering if the program only served to pull forward manufacturing demand that would have soon developed anyway. I have been kicking around the following questions: would there have been more value in the program if there were additional incentives for purchasing cars that had telematics systems? Besides the obvious personal and societal advantages regarding safety and security, could cars equipped with telematics potentially be more efficient because of better routing afforded by these devices and their value added services? Could the telematics systems be used to gather real life data regarding emissions? From an economic standpoint, incentivizing the purchase of telematics systems would have extended the value of the program beyond the automotive industry and benefited the wireless device, cellular service, software, and GPS industries as well as others. These industries represent innovation – the future of the nation as well as the automotive industry. Vehicles will have to have connectivity capability resident in order to derive the maximum value out of the Smart infrastructure that is called for in the Stimulus Plan of earlier this year. Incentivizing the purchasing of telematics systems as part of the program would have helped to accelerate this up-take and adoption. The Cash for Clunkers program was based purely on mileage – meaning that many small, low end cars – those most probably lacking in innovative cutting edge technology, including telematics, were left out of the mix, ultimately resulting in missed opportunities on both the economic and ecological fronts.

Having just gotten settled from my return from the 2009 Telematics Detroit event, I have some observations:

1. This year’s event appeared to be the biggest yet. I don’t have the official statistics, but the room where the main event was held appeared to be at least twice as large as in previous years and it was pretty much filled for the keynote sessions.
2. Due to the well known challenges going on in the automotive industry I didn’t really know what to expect attitude or “buzz” wise. I was pleasantly surprised to find that the vast majority of attendees were very positive. It seems that the broad area of telematics – in this case encompassing safety and security, infotainment, and navigation systems – is providing some positive momentum in the industry.
3. The audience continues to broaden for the event. For example, there were quite a few new attendees from several major insurance companies. This is a positive sign that the scope of telematics applications – and thus the addressable market for equipment and services – will continue to grow. The continuing growth of sub-segments such as Pay-as-you-Drive Insurance and Auto Financing Payment Assurance Technology will help to smooth out the effects of business cycle dips in the more established segments such as OEM Automotive and Fleet Tracking.

All in all, it was a very strong event and I left with a positive impression of the continued growth potential for the telematics industry.

Yesterday’s NY Times’ Green Inc. blog had a posting by Laura Shin recounting the deployment of “Big Bellied, Text Messaging Trash Cans” in Somerville, MA. It’s heartening to see a mainstream media story that in a straight forward manner provides an overview of the many benefits of an M2M application (the texting trash cans) integrated with a telematics application (the management and routing of garbage trucks). What I think is really important about this posting is that it provides the perspective of politicians and government employees involved as to what they are trying to achieve and how they believe it is working out. I am also pleasantly surprised by the readers’ comments appearing below the posting. The comments show that the general public has the proper perspective to evaluate the value of implementing such solutions with regards to return on investment, energy efficiency, and the reduction of harmful emissions. This bit of real-world feedback is very valuable to us insiders of the telematics and M2M industries.

GPS and mobile communications are essential capabilities of any telematics solution. For a couple of years now, the manufacturers of wireless modules have been offering converged GSM/GPS modules. They have had trouble maintaining margins on the price of the converged package because everyone in the industry has knowledge of the market prices for the individual components and the wireless module companies have done a poor job of communicating any increased value that is provided by the converged offering. Last week, u-blox, the GPS solutions provider announced that it was acquiring Neonseven, an Italian based company that provides design and development services in the wireless communications space. This announcement was released on the same day that u-blox announced the launch of a new GSM/GPRS/GPS surface mount module. It’s not too much of a stretch to imagine that the previous week’s announcement of the SiRF /CRS merger is intended to deliver similar solutions and value to the market. Because of the commercial challenges experienced by the wireless module companies in maintaining margins, it will be interesting to see if a converged offering brought forward by a GPS focused company will fare any better. These acquisitions /mergers also expands the number of companies providing such offerings, theoretically causing further commoditization and price erosion for all players, regardless of the industry in which their legacy resides.

Plainly speaking, GPS solutions have been perceived as commodities by OEMs and Tier 1s for a while now and wireless communications modules are rapidly achieving the same perception. I guess that we are about to find out what happens when two distinct industries try to increase the value of their offerings by assembling two commodities into a single offering.

As I have been saying for some time now, the global economic crisis could very well be a good, albeit tumultuous, period for the telematics and broader M2M space. Telematics and M2M are all about efficiency and productivity. Efficiency and productivity increases are exactly what are needed by industry and enterprises to help them maintain profitability and survive during these times of shrinking economic activity and potential deflation.

The February 17th edition of The Wall Street Journal had an article by Michael Totty with the title: “Smart Roads. Smart Bridges. Smart Grids.” The article makes the case that since the government is making huge infrastructure investments as part of the stimulus plan, it should do so with an eye toward the future and that this technology will provide for an easier monitoring and maintenance of that infrastructure. There are additional cases made for the societal benefit of the Smart Infrastructure in areas such as traffic management and accident avoidance, as well as adding efficiency to the power and water grids.

Government and industry need to realize that they have a common goal in bridging the good provided to society through infrastructure spending with that of private industry’s deployment of applications intended to increase productivity and efficiency. This is because the technologies behind telematics and M2M have evolved to the point where there will be much more utility and value for the industries and enterprises that deploy the technology if the resident infrastructure is enabled to facilitate their deployment – thus providing a value multiplier effect to both parties. I am making the case that this economic crisis is a catalyst for industries’ investments in these applications, while in a parallel track; the stimulus plan will be a catalyst for government spending in “Smart Infrastructure”, which is basically the same as telematics and the broader M2M areas. Those of us in the telematics and M2M industries need to recognize this opportunity and attack it aggressively, despite the generally accepted management instinct to retrench and cut costs during a recession.

Last week I attended the latest meeting of the Payment Assurance Technology Association’s board of directors that was held in conjunction with the National Automotive Dealers Association (NADA) show in New Orleans. This sub-segment of telematics is currently in a phase of rapid growth due to demand created by the global credit crisis. I love being associated with this group because to me it’s a concrete example of the ways in which telematics and M2M technology can be deployed to solve broader business and social issues. I provide a description of the association and industry below.

The Payment Assurance Technology Association’s (PATA) serves the starter interrupt/GPS tracking industry. The PATA seeks to unify, standardize and validate the activities of the industry and markets engaged in the manufacture, sale and use of technology for monitoring or disabling vehicles and for other applications.

There are different methods applied in implementing payment assurance technology.

• In some systems, the vehicle is fitted with a small box containing a cellular radio, a GPS, and a micro-processor. This box is wired into the ignition system of the vehicle with associated warning indicators installed on the vehicles dashboard. If the customer falls behind in making their scheduled payments, a signal is sent to the box over the cellular network and a color coded indicator light is displayed on the dashboard, warning the customer that they are late in making a payment and that if they do not make a payment in a number of days they are liable to have their ignition disabled. If the payment is still not made after the prescribed number of days, the service company may send a signal to the system, disabling the vehicles ignition. The vehicles location may also be retrieved using GPS in order for the vehicle to be repossessed.

• Other systems are simple keypads that are installed on a vehicle’s dashboard and wired to the ignition system. Warning lights warn the customer that within a predetermined number of days, a code will have to be entered via the key pad in order to keep the vehicles ignition enabled. Customers are provided with the code at the time that they submit their payment.

The PATA and its members are very conscious regarding the safety of the operators and passengers of vehicles fitted with our technology. Systems provided by PATA members will only disable the ignition of a vehicle that is already stopped and turned off. This greatly reduces any potential danger that would be related to disabling a moving vehicle.

The PATA was formed in order to establish best practices and to formulate a set of guidelines under which its members should operate. It’s the PATA’s desire to ensure that the value of this very important technology is understood by all constituents including; the vehicle buying public, government and regulatory bodies, automobile dealerships, and finance companies. It is the PATA’s intention to proactively work with all parties to resolve any industry or social issues related to this technology as soon as they are identified.

The technology provided and deployed by PATA members makes qualification possible for people who would not otherwise qualify to obtain financing for vehicles and equipment. The world wide credit crisis has cut off credit to all but those who have excellent credit. The lack of available credit limits individuals’ ability to purchase vehicles that they may need to get to a job, to college, or to start a small business. The implementation of starter interrupt technology reduces the risk profile for providing financing to these individuals, thus making the financing possible. The technology can be viewed as a behavioral aid for those with poor credit or little credit experience. The payment assurance technology always provides warning lights days in advance, providing customers the tools to aid them in keeping in good financial standing with their finance company and in building a strong credit history. Disabling a vehicle’s ignition is always a last resort as it means that the remainder of the loan will probably not be settled, reducing profitability for the financing company.

The January 3rd edition of The New York Times had an opinion piece written by a Computer Science professor and a Product Manager from Google.

They suggest four ways that technology can help Detroit to save itself. At least three of these ideas could be considered telematics or an extension of telematics related technology and are not new ideas to those of us in the telematics industry. I have two reactions to stories such as these:

1. Joy; in that people from disciplines outside of telematics are now realizing the potential benefits that we have been speaking about for roughly a decade now.

2. Concern; because we now have the government and mainstream media heavily involved in determining the future direction of the automobile industry. Their statements (informed or otherwise) will definitely have an impact on the public’s expectations. There is no way that those who develop and put into practice public policy have any idea about the unique challenges of implementing wireless technology into an automobile.

With regards to item number two above, I speak from some experience. I come from the cellular industry and started selling wireless radios to Tier 1s for implementation in OEM telematics projects around 2001. At that time, I viewed everything through the lens of what is technologically possible. The wireless industry was growing in leaps and bounds, and I strongly believed that when combined with the power of the internet and location based applications then we could help to transform the automotive industry business and revenue models. The car guys were not moving at a speed that suited my vision, so I ended up labeling them as being dinosaurs who “didn’t get it”. Of course, at the time I had no idea about anything related to an automotive project. Over the years, I learned a lot. A lot about how cars are developed, a lot about the business models, and a lot about the safety and resulting liability risks that the car guys have to take into consideration for everything that they do.

What I learned from a career in the wireless industry:

A. Wireless networks are systems that continually evolve while in operation with the ability to overlay upgrades onto existing technology. The technology develops at a faster pace than it can actually be deployed. This will even happen with little understanding of the business dynamics which will ultimately impact that deployment. For example, in the late ‘90s I was involved in a thing called WAP. This was wireless internet technology that while it worked, didn’t have ready all of the business or market support process that it required. In that case, the failure wasn’t fatal, it was seen as more or less a learning experience in an iterative process that very soon led to the launch of GPRS, which led to an overlay of EDGE, etc.

B. Devices are even less problematic in the industry. The expected life span of a mobile device is somewhere around two years with no requirement to maintain form, fit, function over any period. If the device breaks, throw it out and we will give you another new one with an extension of your service plan!

C. Just keep technology moving forward, because if you don’t you run out of things to sell.

What I learned as an automotive outsider who tried to sell technology to the automotive industry:

A. A car is a static, closed system and is assembled from various sub-systems. Once all parts, sub-systems, etc. are tested and approved, there shall be no changes until it goes through production. Even after production, there is really nothing in it for an automotive company to make a car “upgradeable”. You already own it. Allowing for changes introduces risk to the overall performance of the vehicle, thus creating a liability risk for something that was already shipped and paid for.

B. It takes over three years to define, develop, test, correct, retest, and approve all of the parts so that the final vehicle can be locked down and go to production. Most of the parts and sub-systems in a car are specifically designed and develop to be part of the car. This allows for incremental improvement of features and cost, without radically changing the sub-system that would require major new design, testing, and approval. These incremental improvements can take place over five to ten years, minimizing continued large investments.

C. In the car world, change equals cost related to redesign, retest, etc. As such, all of this additional cost needs to be justified in an ROI.

If you match up the items above to their corresponding letter, you start to see that this is not a matter of what is technologically possible. It’s a matter of completely incompatible business models and development cycles. The folks inside of the auto companies understand this, but they do not currently have the highest level of credibility. So you get outsiders from “successful” industries suggesting what Detroit needs to do to save itself.

Being that I come from the wireless side of things, there is no benefit to me in making the implementation of wireless technology into an OEM vehicle sound any harder that it is. As a matter of fact, it would have been a great couple of years for me and the companies that I worked for if it was easy. I also sincerely hope that this crisis can be a catalyst for changes in the automotive development and business model that will allow the industry to overcome these challenges. However, I am not sure how you maintain the quality and risk mitigation that is required to avoid product recall / litigation while keeping up with the technology cycles of consumer grade offerings that have little, if any, impact on public or individual safety. These are very big issues for very smart guys. I hope that the expectations of government and the public can be properly managed as the issues are worked through.