In the second of a two-part series, Tom Wellings reports on why foreign providers of fleet management solutions find it so hard to penetrate Russia and the wider CIS region.
Foreign truck manufacturers are keen to bring their telematics solutions into Russia, but one mistake they are making is trying to push fleet management features that are not particularly attractive to Russian customers.
“This is particularly true of driver monitoring systems,” says Ivan Nechaev, vice president at Access Industries.“Their clients are just not very interested in these solutions.”
"In Europe, there is much more interest in driver behavior monitoring systems than in Russia,” agrees Boris Pankov, owner of Omnicomm. “I don't think this will change within the next two, three years because there is a different culture among local Russian fleet managers and drivers. These systems are expensive, and they cannot see a clear benefit."
In other words, local companies have more fundamental issues to solve, and they would rather focus on systems that can demonstrate how costs will be saved.
“Logistics companies, for example, are taking into consideration huge distances and overall delivery time,” says Anna Badovskaya, former brand manager for Pankov’s Omnicomm.
“Monitoring driving style and safety doesn’t have a significant effect on efficiency, whereas sticking to the planned route along with relevant fuel consumption does," she continues. "Road surfaces don’t allow speeding, and drivers are paid for the number of kilometers they drive, so they spend long hours at the wheel to ensure relevant payment for a ride. At the same time, additional features cost extra money. Why would a client pay for functionality that is almost impossible to capitalize on?”
Any system sold in Russia and the CIS, therefore, needs to clearly show how it will save money in the specific local conditions where it will be used.
Still, promoting and explaining driving monitoring should not be seen as an entirely lost cause, according to Nechaev. “We have foreign clients in Russia that recognize the benefits of using such systems,” he says, adding that the technology will probably come of age once market penetration of fleet management systems increases, and additional cost saving become harder to achieve.
(For part one of the series, see Commercial telematics in Russia, part I.)
Saving fuel, saving money
What isn’t up for debate is that saving fuel is a big deal in Russia and the CIS. When the distances travelled are so large, it’s no surprise that fuel sensors and related technology are hugely popular.
“Although fuel costs are comparable to Western Europe, labor costs are lower, so fuel costs are relatively a higher proportion of costs,” says Rickard Andersson, senior analyst, Berg Insight.
In fact, any measures that can minimize fuel use are welcomed and that includes monitoring unauthorized personal use of vehicles through tracking.
“The main focus of Russian companies is on increasing efficiency by eliminating discreditable practices from drivers,” Pankov says. “This is why fuel consumption control and route execution monitoring systems are in demand. Such applications provide quite quick results in the local environment.”
Another area where foreign suppliers could improve is in making their products more flexible, both in how different modules fit together and in how much customization they allow.
This is important because of the wide variety of vehicles typically employed by large Russian organizations.
“Some may be 20 years old with almost no electronics, and some are the latest generation with associated CAN interfaces,” Nechaev says. “You need to have a unified solution that will fit all these vehicles.”
More often than not, this also means fully integrated systems that are tailor-made to fit each client's needs.
“Most of the foreign companies are not ready to supply such flexible products,” Nechaev says. “Generally, it is not possible to change or integrate their off-the-shelf products. The market is changing [in this respect]. But most clients still need a custom solution."
The same is true for different types of fleets, according to Katarina Malitskaya, a marketing specialist at Gurtam. “There are many specific uses concerning – for example – public transport in cities or agricultural applications,” she says. “Systems must be very flexible and able to be customized to these specific needs. It is very difficult to find one solution for everything."
To sum up, in order to succeed in Russia and the wider CIS region, foreign telematics suppliers need to act more like their Russian counterparts.
Among others, they need to:
Understand the typical usage scenarios in the region and tailor their product to them. It is a mistake to assume that a product that works in Western Europe will suit elsewhere.
Focus first on what matters most in the region: fuel efficiency and fraud prevention. Only then bring in more sophisticated products, such as driver behavior monitoring.
Make sure that all solutions are extra robust and tamper-proof.
Design systems that are flexible, modular and customizable, with emphasis on fleets with very wide age profiles.
Tom Wellings is a regular contributor to TU.
For all the latest telematics trends, check out Consumer Telematics Show 2014 on Jan. 6 in Las Vegas, Telematics for Fleet Management Europe 2014 on March 12-13 in Amsterdam, The Netherlands, Content and Apps for Automotive Europe 2014 on April 8-9 in Munich, Germany, Telematics Detroit 2014 on June 4-5 in Novi, Michigan, and V2X and Auto Safety USA 2014 on July 8-9 in Novi, Michigan.
For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.