SaaS-based telematics services are defined as software-based telematics applications residing in the cloud (in either a public or private cloud infrastructure), where the intelligence or data processing essential to the functioning of the application is performed in the cloud rather than by software/hardware residing locally in the vehicle.

"SaaS cloud-based services offer many benefits for telematics services providers compared to the traditional platforms," says Gareth Owen, principal analyst at ABI Research. "For example, the platform is easily scalable and all IT services can be outsourced to the cloud provider which means that the telematics provider can focus on its core competence of developing telematics applications."

However, there are a number of potential issues and challenges, including data privacy and possible legal issues regarding data ownership. There are also security concerns as any "over the air" transmission of firmware updates could provide an opportunity for hackers to modify or disable customers' operating systems or introduce malware.

"Virtually all of the major commercial fleet telematics providers have moved to some form of cloud-based system, and are offering SaaS-based services, although there are wide differences in the types of services offered by these companies," adds Owen. "As a result, a number of these companies are reporting an increase in higher-margin software revenues and a corresponding decrease in hardware revenues. However, most SaaS-based revenue lines include a hardware component in the monthly subscription fee although this is not normally broken down."

As with other cloud applications, fleet telematics systems must be designed from the outset with the cloud in mind and it is often difficult and not cost effective to port legacy systems (typically obtained through acquisition) over to the cloud.

These findings are part of ABI Research's Commercial Vehicle Telematics Research Service, which provides detailed analytical and quantitative information on developments in the commercial telematics industry around the world.

Source: ABI Research