Wireless appears to be busting at the seams. Carriers have been signing on record numbers of subscribers, handset makers have enjoyed double-digit growth and the industry’s general malaise seems to be lifting. Thus, such successes make the numbers from research and consulting firm ARC Advisory Group all the more surprising.
Although most segments of the wireless industry are enjoying significant growth, ARC Group found that revenues in the mobile resource management market actually declined in 2004. According to the firm’s new Mobile Resource Management Worldwide Outlook report, the market shrunk from $1.16 billion in 2003 to $1.159 billion in 2004.
“It caught me by surprise,” acknowledged Steve Banker, ARC Group’s service director for supply chain management and author of the report.
The mobile resource management industry comprises vendors that sell real-time tracking technology to field workers. The most common scenario in the MRM industry involves trucking companies installing GPS receivers in their vehicle fleets in order to choose efficient routes and monitor drivers’ behavior. For example, a manager would be able to know if a driver ended his or her shift at the 5 p.m. they reported just by checking if they drove home then or not. MRM products can also monitor vehicle engines, alerting companies if the engine is overheating or is in need of a tune-up.
The leader in the MRM space is Qualcomm Inc. with its various fleet-management offerings, including its OmniTracs products. Other players in the space include @Road Inc., Minorplanet Systems plc, PeopleNet Communications Corp., ComTech Mobile Datacom Corp., Teletrac Inc. and others. Such companies typically sell hardware for $1,000 or more that trucking companies install in their vehicles, and then charge around $40 to $50 per month for the service. The service costs are generally divvied up between the vendor and the wireless carrier. Customers generally access location information through an Internet site hosted by the MRM vendor.
Although industry revenues are slowing, ARC Group’s Baker said the actual size of the market is increasing.
“I believe the unit numbers have increased, but that the price points have caused the overall revenues to decrease,” he said, adding that the market is suffering from “brutal cost competition.”
Baker said companies like Xora Inc., Vettro Corp., ActSoft Inc., Aligo Inc., Air-Trak, It2me and a host of others have recently launched a major attack on industry heavyweights. They are selling low-cost products working on standard GPS-capable mobile phones, mainly devices from Nextel Communications Inc. In some cases, the cost of a simple fleet-tracking application is now as low as $50 for a device and $20 per month for the service.
“For many newer customers, there’s a better return on investment for cheaper solutions that are less functional,” Baker said.
Baker said some MRM customers can see a return on their initial investment in as little as six months simply by adding one more stop per week or saving a few extra dollars on payroll. This also means that smaller companies, those with just a few vehicles in their fleet, are now able to purchase mobile resource management products.
“It’s also the unbundling that’s occurring that is driving down the revenues,” Baker said.
Instead of buying both hardware and services from one vendor, smaller customers are buying phones from a carrier and MRM service from one of the industry’s smaller vendors. This serves to further reduce the overall MRM market.
The shrinking MRM industry is not without its casualties. The most notable flameout is Aether Systems Inc.-once heralded as a major player in the market and a favorite of Wall Street. The company in 2000 enjoyed stock prices of $300 per share. Aether last year sold its transportation division for $24 million and what’s left of the company dabbles in mortgage-backed securities. Other casualties include Aligo acquiring H2 Technologies as well as other acquisitions and corporate shutdowns.
Although the MRM industry contracted last year, ARC Group predicts it will see slow growth over the next few years. By 2009, the market could top out at around $1.4 billion. However, the industry may have a much different face.
“In the long run … there’s a good chance this will be a market with many fewer suppliers, and one or more of those suppliers could be a wireless carrier,” Baker said.
Indeed, Nextel and various Nextel resellers are leading the charge into the low-cost MRM market. And Verizon Wireless last week jumped into the fray with its Fleet Administrator offering. Navman Wireless designed the product, but-in an uncharacteristic move for the carrier-Verizon is selling it under its own brand. Verizon’s Fleet Administrator is available for around $550 for the hardware and $50 for the service, and allows customers to monitor vehicle activity including stops, mileage and idleness.
“We are taking a positive stance on Verizon Wireless’ launch of Fleet Administrator, because it is an indicator that the carrier is viewing both LBS in particular and small and medium business applications in general as new sources of revenue,” wrote research and consulting firm Current Analysis.