{"id":16402,"date":"2016-11-17T19:49:21","date_gmt":"2016-11-18T00:49:21","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/does-verizon-have-the-horsepower-to-overhaul-the-trucking-industry\/"},"modified":"2016-11-17T19:49:21","modified_gmt":"2016-11-18T00:49:21","slug":"does-verizon-have-the-horsepower-to-overhaul-the-trucking-industry","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/does-verizon-have-the-horsepower-to-overhaul-the-trucking-industry\/","title":{"rendered":"Does Verizon have the horsepower to overhaul the trucking industry?"},"content":{"rendered":"

Carrier Wars and Trucking<\/em><\/p>\n

Since its formation in 2000, Verizon Communications has been primarily focused on delivering connectivity to consumers and businesses via a global carrier network. The largest business unit is Verizon Wireless, accounting for about 70% of the company\u2019s annual sales. Within the wireless business unit, a majority of this revenue is generated from its consumer retail practice, with only a small percentage as a result of its enterprise initiatives. [i]<\/a> However, as the price war between major carriers has intensified and as consumers are further disassociating wireless service providers with the mobile device experience, Verizon is faced with the daunting challenge of building a long term profitable strategy. One of Verizon\u2019s more recent answers to this has been to invest heavily in its enterprise sector, and specifically in fleet management of the trucking industry.<\/p>\n

In the trucking industry, productivity is gained primarily in two ways: fewer empty miles and less idle time.[ii]<\/a> Fleet management systems (FMS) have been put in place to optimize for this. \u00a0FMS has evolved rapidly since the increased adoption of personal computers and GPS technology in the late 1990\u2019s. Since then, organizations with heavy logistics arms have been able to track, analyze and adjust their trucking fleets in real time. \u00a0And yet, this technology came at the heavy price of installing an expensive GPS device within each vehicle and paying a high fee for GPS satellite usage[iii]<\/a>, until smart phones enabled innovative software providers to build even more sophisticated analytics for fleet operators at a much lower cost.<\/p>\n

Why Verizon?<\/em><\/p>\n

Why should Verizon invest resources here? For perspective, these new FMS software companies service an industry that represents about $650B in annual revenue in the U.S (5% of GDP) and has an expected growth rate of 21% over the next 10 years.[iv]<\/a> \u00a0For Verizon, this represents a massive opportunity to diversify away from the consumer carrier business, with a more stable, recurring revenue stream. The question then becomes, is a network provider like Verizon in a position to take advantage of this massive market? \u00a0The reason they would be is because FMS\/Telematics in its current form is heavily dependent on carrier network connectivity to power the real-time data transfer from truck to hub. With network infrastructure already in place, Verizon can be the foundational layer of the software stack for the entire trucking industry. In addition, to their network infrastructure, their global presence enables Verizon to connect with fleet operators in a way that very few other companies would be able to do given the fragmented the industry is.<\/p>\n

Big Moves<\/em><\/p>\n

Verizon has made two major acquisitions in the FMS space in this year alone: Fleetmatics and Telogis, for a total sum of over $3B.[v]<\/a> Both of these acquisitions represent an opportunity to increase Verizon\u2019s market share in this enormous industry. Fleetmatrics provides a software that allows fleet operators to track vehicle location, fuel usage, speed, and a variety of another metrics for their mobile workforce. Telogis, prior to being acquired, was a leading provider of \u201csmart\u201d fleet connectivity software. Both acquisitions come with well-established customer bases both in the SMB and enterprise space. In fact, with both of these companies\u2019 existing customers combined, Verizon will now own 25% of the telematics market and be connected with about 1.4 million commercial vehicles.[vi]<\/a> Now that they are under Verizon\u2019s control, the company has the capability to build the leading end to end solution for all mobile enabled fleets.<\/p>\n

What\u2019s next?<\/em><\/p>\n

With these acquisitions, Verizon has made a bold statement that they want to be the leader in connected vehicles. While competitor AT&T has focused on partnering with major automotive manufacturers to enable more consumer connectivity[vii]<\/a>, Verizon is making the bet that enterprises\u2019 massive need for optimized fleet management will grant them access to a larger share of vehicles on the road, much faster. Ultimately, however, the reason this strategy has such a high upside is that allows Verizon to stay at the forefront of the next major innovation cycle in this massive market. While smart phones have enabled trucking fleets to become more efficient over the past few years, the next logical step could be using this powerful connectivity to build fully automated trucking systems.<\/p>\n

(793 words)<\/p>\n

 <\/p>\n

[i]<\/a> \u201cHow Verizon Makes Money\u201d Jitender Miklani, 2015, http:\/\/revenuesandprofits.com\/how-verizon-makes-money-understanding-verizon-business-model\/<\/p>\n

[ii]<\/a> \u201cThe Economic Impact of the Internet on the Trucking Industry\u201d Anuradha Nagarajan, University of Michigan, 2000, https:\/\/www.researchgate.net\/publication\/252652552_The_Economic_Impact_Of_Internet_Usage_In_The_Trucking_Industry, page 12<\/p>\n

[iii]<\/a> \u201cA Brief History of GPS Vehicle Tracking\u201d Unknown, 2016, http:\/\/www.trackyourtruck.com\/blog\/brief-history-gps-vehicle-tracking\/<\/p>\n

[iv]<\/a> \u201cThe Staggering Statistics Behind America\u2019s Trucking Industry.\u201d Sam Ro, Business Insider, 2013, http:\/\/www.businessinsider.com\/trucking-industry-infographic-2013-4<\/p>\n

[v]<\/a> \u201cVerizon to buy vehicle management company Fleetmatics for $2.4B\u201d Malathi Nayak, Reuters, 2016, http:\/\/www.reuters.com\/article\/us-fleetmatics-m-a-verizon-idUSKCN10C29J<\/p>\n

[vi]<\/a> \u201cVerizon Fleetmatics Deal makes a Telematics Giant\u201d Paul Clinton, Automotive Fleet, 2016, http:\/\/www.automotive-fleet.com\/news\/story\/2016\/08\/verizon-fleetmatics-deal-makes-telematics-giant.aspx<\/p>\n

[vii]<\/a> \u201cVerizon Acquisition of Telogis Expands Company’s Connected Car Footprint\u201d Doug Newcom, Forbes, 2016. http:\/\/www.forbes.com\/sites\/dougnewcomb\/2016\/06\/30\/verizon-acquisition-of-telogis-expands-companys-connected-car-footprint\/#2c5049cc178f<\/p>\n","protected":false},"excerpt":{"rendered":"

With a slew of major acquisitions, Verizon is positioning itself to change how fleet operators manage their trucks.<\/p>\n","protected":false},"author":2264,"featured_media":16403,"comment_status":"open","ping_status":"closed","template":"","categories":[811,2160,2338,1353],"class_list":["post-16402","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-fleet-management","category-iiot","category-optimusprime","category-trucking"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\nDoes Verizon have the horsepower to overhaul the trucking industry? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/does-verizon-have-the-horsepower-to-overhaul-the-trucking-industry\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Does Verizon have the horsepower to overhaul the trucking industry? 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