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Technology must adopt to deliver new Telematics business models

Guest post by Venkateswaran Vinod, Industry Principal, Engineering Services, Infosys

I just did an 'in-app' purchase that was pretty much impulsive and got me thinking about business models. If you think about it, these impulsive purchases have been borrowed from the retail industry which has had this for a long time now. Consumer buying patterns have been a study of interest for economists, retailers, technologists, and business people. Let's try and extend this model into telematics. One of the first things, which an auto OEM needs to decide while deciding on the telematics services, is the business model - Who is going to pay, what are the payment mechanisms, how frequent should it be?

The services have to be packaged, priced and promoted in such a way so as to appeal and make the consumer buy the service. At the same time, they have to be profitable and sustainable for all parties involved. There are many lessons that can be learnt from the adjacent industries such as consumer electronics, online retailing, and financial services. Having decided on the business model, the right technology has to be enabled to accept, process and realize the payments. 

Traditionally, auto OEMs are used to well-defined payment models and frequencies when selling cars, however connected services are challenging these established mechanisms. Today, there is just one popular business model among most automakers which is an initial trial period followed by a yearly or lifetime subscription for all the services. While this might work in the short term, as the services are expanding newer revenue streams must be considered. These models would provide convenience and choice to the customer while helping the provider to charge for services as well. Here are two models that are quite likely to take off given the buzz that they have created in adjacent industries.

  • Service based subscription: This is very similar to a mobile app purchase where the consumer is given the choice to buy a particular service. What I think will happen is time bound options for a service so for e.g. if you are traveling on vacation to another city, you might want a particular service for your vacation period in the city and not pay for it after that.

  • Monetizing telematics data: Most players in the ecosystem are realizing the value of real time telematics data and there are innovative applications by these industries. Pay As You Drive (PAYD) insurance, Location Based Advertising are examples of leveraging the telematics data. The monetization of telematics data can subsidize the service package itself

  • Bundling with other services: The wireless service provider or the automotive OEM can offset the telematics pricing by bundling it with the other packages offered by them to the customer. An example could be that if the customer opts in for real time driving patterns/ maintenance reminders then the telematics service package itself could be discounted.

The business model decision will drive the technology that needs to be enabled to implement them. Here are some areas that I think will have a significant impact as the business models continue to evolve -

  • Instantaneous service provisioning and delivery: Customers would expect that they can subscribe to services for which they be provisioned and service delivered instantly. Technology needs to make this entire process easy to use and accessible through multiple channels. A robust service delivery framework that can scale and be flexible is critical.

  • Ability to accept micropayments: The payment mechanisms have to be geared to accept micropayments and enable incremental/time bound service enablement. The revenue assurance systems have to be enabled to work with very frequent payments through multiple channels.

  • Addressing security and privacy issues: Data and communication security algorithms will play a critical role in sharing data across ecosystem partners. Technology needs to support privacy regulations and ensuring that what's shared is what's acceptable

  • Support infrastructure: Customer care technology, marketing and other customer touch points have to be enhanced to support this dynamic evolution of new services. Analytics of customer behavioral data combined with context and location information will be extremely powerful.
While business models will continue to evolve, automotive OEMs need to have a robust architecture that can support this evolution. Postponing the decision to invest in technology upgrades will only complicate and make it difficult to innovate in this dynamic space. In many ways, they feed into each other and successful OEMs leverage this synergy well

Comments

Nice article Vinod. Service based subscription can also have different flavors like Pay-per-use, Pay-as-you-drive. Perhaps the Airtel Money concept may also be useful as the telematics services expand.

Thanks for sharing your thoughts Jagadish. You have brought out interesting flavors of the service based subscription and if I were to expand, the technology impact is incredible -

- There is a need for real time big data analytics (there are estimates out there which predict that the size of data generated from a vehicle would be upwards of 1TB),

- The level of sophistication that is required within the service delivery framework to process this data and immense business rules that have to be designed is significant

- Another side note is how would governments and other regulatory bodies react to such models in terms of toll, road tax etc would also be interesting to observe

Interesting insights....perhaps the scenario resembles to an extent the early days of Healthcare industry and TPA's importance into the ecosystem.....Going forward, predictive modeling driven analytics will have a big role to play.

Thanks Saptarshi for your comments. You are spot on, predictive analytics has a huge role to play in the evolution of this field

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