The world is getting more and more connected. I’m connected to my car, my kid’s watch, and my doorbell. If I was to buy a new piece of heavy equipment, I’d expect to be connected to that too. For equipment manufacturers considering their connected strategy, there are two approaches. In this post, we will go over both of them, but I am personally an advocate of the Open approach.
Open and Closed Approaches
At a really high level, there are two approaches to making equipment connectivity happen: Closed and Open.
The Closed approach is a full connectivity system delivered by one supplier. This includes onboard telematic unit, a backend/cloud service, and a mobile/web experience. The Closed approach is attractive because it is an “easy button” one-stop-shop for connecting a machine. The downside is that you are no longer in control of your data, your customers’ data, and you’re going to rely on the permissions granted by a supplier for information that is increasingly critical to your business. Also, with a Closed approach you are not able to modify or add functionality to the system. As the saying goes, “data is the new oil,” and with this approach, you have given your supplier your mineral rights.
The Open approach is where a supplier brings an open platform connectivity system for a telematic controller or asset tracker. This means that you can change the software on the system (either internally or with contract resources). This typically means that you need to develop your own backend/cloud service and mobile/web experience. Undoubtedly, this is harder and requires more effort than a supplier-delivered, turn-key, approach. As they say, nothing worthwhile is ever easy. We will discuss the upside below. With an Open approach, you control your data, how it is used, and how it can direct the path of value-added services that are built off this data. This data is “digital oil” and is incredibly valuable to you in so many ways.
Control of Data
Before discussing data and value propositions, it is important to understand that to achieve these, you must control the data. There are different perspectives on data ownership. Some people believe that the operator should control the data. Others contend that the ownership of the data should reside with the equipment manufacturers. In any event, your supplier should not own or control your data. It is simply too valuable to have to ask for permission to access, modify, and mine.
Access to this data provides opportunities for cost reductions or avoidance of expenses. These cost reductions come in a number of different packages. Having data about the fleet and its operation can lead to value-added services that improve fleet safety, which limits litigation and settlement expenses with a reduction in accidents. This data can also be used to provide the evidence necessary to negotiate with insurance carriers and provide critical information to manage this growing industry expense. Lastly, the data can be used to understand the circumstances related to warranty claims. This can lead to the avoidance of payment on unjust claims and the improvement of design to eliminate future claims in related areas.
Control over the data creates potential for delivery of value-added services to customers, which creates potential for new streams of revenue. Such services can include things like:
1. Web-based analytics that allow for more productive utilization of fleet assets.
2. Utilization of data to deliver timely parts.
3. Maintenance services to efficiently minimize machine downtime.
Interesting opportunities can also emerge in the monetization of third-party, value-added, services through APIs that allow selective access to your data. In these cases, a programmatic interface is created to allow additional companies to access data, at the customer’s request, to provide more niche services at high value. Access to that data can be monetized, with a fee charged to the third party, giving you a portion of their revenue stream without any of the development or maintenance burden of the niche application.
Whenever one of our customers really starts to dig into their data, two things emerge. The first is value. The second is more questions that, if answered, are expected to uncover additional exciting business value.
This is where an open platform is also critical. Answering those questions can involve changes to the software on the telematic unit, changes to the backend architecture to mine/compare/contrast data in different ways, or changes to the mobile experience to better present customer features or track customer behaviors. With an open platform, the cycle of data acquisition, analysis, and value creation becomes an evergreen — but only if you have the control necessary to drive the evolution of your connected ecosystem.
At Appareo we believe you should have the freedom to choose. You should be free to choose which telematic supplier you select for different equipment platforms. You should be free to choose which mobile devices are compatible with your solution. With an open system, you are free to specify, implement, and manage these choices. With a closed system, you are locked into the offerings and mobile device support from a single supplier. That supplier may be great, but you are also locked into the supplier’s timelines for supporting new generations of connectivity technology (4G, 5G, etc.), as well as the timeliness with which that supplier can offer you access to connectivity services in new countries.
Control of Security
An Open platform doesn’t mean unsecure. Open means having the freedom to impose your cyber rules and requirements on the system, ensuring that your security preferences are embodied in your connected solution. When you own your security you have the comfort of certainty. When you’re working in a closed party system, there are always questions about the security and control of access to your equipment, your data, and your customer’s data. This should be an area you want to control.
President & CBO