Does big data from connected cars equal big profits? As Susan Kuchinskas discovered, that's not necessarily the case.
Big data can seem like the answer to a lot of auto-industry problems: Personalized infotainment! Real-time diagnostics! Improved vehicle design! More efficient insurance ratings and claims handling! Closer ties between the OEM and the driver! But what can’t be forgotten are the costs and hurdles to achieving these lofty goals.
IDC recently made some big projections for Big Data in Europe: IDC forecast that the Western European big-data market will grow by a compound annual growth rate of 24.6 percent to $6.8 billion in 2018; but it is vendors who will reap the profits. Companies spent approximately $536 million on storage in 2013; $698 million on software; and $593 million on services in Western Europe, the research firm said.
It's assumed that spending on data collection and analytics will pay off in in actionable insights. But there are several challenges:
· Billing for connectivity, especially while roaming internationally
· Combining different data sets
· Determining the most worthwhile uses of this data
· Lack of standardization in data collection
· Issues of privacy and data ownership
Sometimes, it's not new technology that stands in the way of progress. A case in point is the data charges accrued by connected vehicles, which may be transmitting and receiving data constantly or intermittently. The quandary for the automotive industry is, how does one bill this connection to the consumer – or should the service provider cover the charges?
And those charges can add up as soon as a vehicle roams internationally, something easy to do in Europe. While data roaming costs have decreased substantially in Europe for enterprises, for consumers it's quite expensive, according to Frederic Bruneteau, managing director of Ptolemus Consulting Group.
"There is increasing pressure on mobile network operators in the EU to reduce roaming prices on international calls and data, driven by the European Commission," he notes. However, in order to provide free international roaming, MNOs must have good operating margins – something European carriers don't have. "Carriers in Europe will continue to drag their feet and do what they can to avoid that, because, today, roaming is one of the biggest sources of margins for European carriers," Bruneteau says. He thinks free data roaming in Europe is at least 10 years away.
Combining data for better insights
Another challenge is combining data from multiple sources, including onboard sensors and ECUs, with external data – and then analyzing it as a whole. It's not enough to have big data, according to Bruneteau. "You want smart data. It's good to have a lot of data but if it's not shared and properly used, it's not smart."
Currently, connected vehicles are walled gardens, similar to the limited menu of WAP services available for data-enabled phones at the turn of the century. The first step in creating robust connected-car services, Bruneteau says, is for auto manufacturers to understand that they are part of a greater ecosystem.
Torbjorn Rosenquist, automotive practice leader and senior industry consultant for Teradata International, agrees. "We see the biggest value for car makers as starting to combine onboard and offboard data." He notes that Teradata's solutions for Volvo and Daimler have been live for nearly 10 years. "The have been collecting data as strategy initiatives," he says.
The most valuable uses of automotive data, Teradata has found, include making sure that cars are operating correctly, managing software upgrades and versions, and risk management for insurance. Daily uploads of data from connected cars can be merged with the OEM's database showing a vehicle's configuration, service record and diagnostics.
"The value of crunching the data depends on the use case," Rosenquist says. "If you're going to do quality trends or predictive early warning, it's enough to do that once a week and overnight. Other things need to happen near realtime."
Need for data standardization
The service to be delivered can require complex interactions among several databases, Rosenquist notes. For example, to offer online automotive service bookings, the offer has to be sent to a customer and then a resultant booking must be sent to the dealer. Perhaps there are ancillary services on offer, such as a car wash. Once the customer has confirmed, the appointment should show up in his agenda.
But there is no standard for such telematics services, nor for many others. Bruneteau says, "This is putting the smartphone at an advantage. They're better designed and there's a bigger market." Plus, phones have been designed to be open systems, allowing third-party developers to use their data to create services.
On the other hand, in the telematics arena, stakeholders – OEMs, insurance companies, telematics hardware providers – each have proprietary hardware and ways of collecting data. "Everyone is replicating the same costs, and it slows the market," he says. "It's an antiquated way to do things."
Solving privacy and data ownership
Guido Gehlen, M2M incubation lead for Vodafone, sees laws and regulations as the biggest challenge for making use of telematics data, especially for global companies. Teradata solves this by working with partners in individual markets.
Getting buy-in from consumers is also a challenge, Gehlen says. "It's important to take the consumer with you and explain exactly what the service is." Equally important is explaining how access to data can benefit the consumer. For example, a tiered UBI approach that offers a $20 discount for granting access to driving time and up to $60 off for granting full access to all driving behavior is a clear offer of value. It remains to be seen, however, how much of a discount it will take to get drivers onboard.
Telematics privacy will evolve the same way that it did for Facebook and other consumer services, according to Rosenquist. And he says it doesn't only have to be discounts or free connectivity: "If I could have an app with which I could share data with my city, I would do that for free because I would get better traffic in my city."
Beyond consumer concerns about data ownership, automakers should also be concerned about owning their data, according to Rosenquist. "The biggest opportunity for OEMs is creating uniqueness by reusing data that no one else has, like car configuration data," he says. "OEMs have to differentiate themselves by using data that no one else has."