I recently had the chance to talk to Graham Wallace, Business Strategist at ESRI

Graham and I sat down to discuss the issues facing the telematics / logistics and IT industries. ESRI (UK) has invested quite a bit of time in order to understand the main trends and identify the main issues that will emerge over the next few years in all three areas.

The key trend in the logistics sector is consolidation. ESRI (UK)’s broad view is that consolidation in the logistics sector will continue to happen at pace – mainly in Europe, but with the focus on creating pan-global links to the Far East – and that, eventually, this activity will drive IT consolidation simply to contain costs.

For instance, in common with all the leading logistics operators, DHL has acquired a number of companies during the past four years, and integrating a huge array of legacy systems has presented a significant challenge. Whilst industry consolidation will continue for the foreseeable future, the pace will eventually slow.

As Wallace puts it, IT consolidation will increasingly overtake acquisition as the main driver of business efficiency and source of cost savings within the logistics sector. During this transition, the scale of the solutions needed by the main logistics carriers will move from relatively small-scale solutions to fleet-wide applications and, finally, to fully integrated capabilities. Wallace believes that it is inevitable that the vehicle manufacturers will play an increasingly important role in this transition process, and that inter-operability will become a necessity.

The combination of these trends will place increasing pressure on the providers of small-scale telematics point solutions. Long running partnerships / ecosystems will be necessary to create the value added inter-operable solutions that customers will increasingly demand. Broadly, ESRI (UK) expects the next tier of lead providers to make an appearance within two years, and the long-term shape of the market to be in the process of settling down within the following three years.

ESRI (UK) has a wide range of clients across various markets, and has identified a number of cross-sector mapping technology trends – all of which have material implications for the telematics industry:

• The growth of enterprise solutions – clients moving away from point solutions to integrated capabilities
• The pace at which integration is happening – even in relatively traditional IT sectors
• Increased focus on cross-functional buying decisions – involving composite requirements and sign-off

At the same time, it’s clear that GIS/ location-based applications offer businesses significant commercial benefits – reflected by the fact that these systems are increasingly becoming an integral part of board-level decision making processes in a number of industries.

More specifically, over the last three years ESRI (UK) has seen a significant shift in the use of mapping technology to improve core business processes, to visualise the benefits of CSR policies and to assist the implementation of environmental controls on the supply chain – all of which are growing in importance within the industry.

So, the stage is set for a significant increase in the use of location based services but, at the same time, it’s very easy to demonstrate just how much focus and investment the logistics sector is putting into achieving global consolidation.

The conclusion is inescapable: ultimately there will be fewer telematics solutions providers because there will be fewer customers.

However, all is not doom and gloom, as customer requirements will evolve, creating demand for telematics providers to develop interoperable solution bundles or specialist solutions to serve the needs of clients.