ESAFETY The Business Case

1
E-SAFETY The Business Case

• BUSINESS CASE IN RETROSPECT
• WHAT WERE OUR ASSUMPTIONS SOME YEARS AGO?
• WHAT WAS THE BUSINESS MODEL?
• CURRENT STATUS
• WHERE ARE WE TODAY
• WHAT HAVE WE LEARNED?
• CRITICAL SUCCESS FACTORS
• WHAT CAN WE DO TO BUILD A SOLID BUSINESS AROUND
  E-SAFETY?
• WHO SHOULD PARTICIPATE?
• WHAT COULD BE THE TIMEFRAME?

2
The value chain from another perspective
Content Provider
Service Supply chain
System Integration
Content Packager
End-User
Service Packager
Service Provider
Car Manufacturer
Car Dealer
Equipment supply
Network Operator
Infrastructure
Software Solutions
Software Solutions
Telematics Terminals
Car System Supply chain
Component Supplier
3
The Forecasts Are Optimistic
Excerpt from an internal presentation made in 1999

• In 2001 the safety/security installed base will
  be
• 3.6 Million passenger cars in the EU
• In 2004 safety and security telematics will
  generate revenues of
• EUR 24 Billion in the EU

Source Ger. Transp. Ministery, 1998
4
The Business Case in Retrospect - Assumptions

• Telematics market driven by safety and security
  services based on the GATS/ACP protocols
• End-user who need the services will also be
  willing to pay for them
• E-safety will require dedicated service providers
• Protocols to be open and embraced by all major EU
  countries (and diffuse globally later)
• European mass manufacturers will ensure the
  critical mass
• E-safety requires high technological innovation
  which will be monetary honoured by
  customers/end-users
• Line-fitment is key in developing e-safety
  (implies high degree of car OEM reliance and
  involvement)
• E-safety is a sure road to long-term high
  profitable growth
• All products to be embedded products and end user
  willing to own a handportable and an embedded
  device
• Business to generate annualy 10-20 Billion by
  2002 in EU, all market participants to
  financially gain
• Initial price targets 500-1000 EUR could drive
  mass volumes
• Markets in W. Europe were expected to take off
  first

5
Major Learnings Infirming Initial Assumptions

• Telematics services like safety and security
  didn't materialize on a global scale
• No standard emerged - Western Europe is still
  fragmented in terms of service delivery,
  protocols, systems, etc...
• In spite of efforts to open up, proprietary
  protocols still dominate -gt too complex
  technology led to failure
• Safety and security implied the development of
  complex, crash-proof, redundant and costly HW and
  SW, but end user not was willing to pay for the
  feature, therefore car manufacturers and terminal
  manufacturers had to absorb the additional cost
• Terminal manufacturers had to customize all
  products and to generate a significant number of
  variants, leading to inefficiencies and low
  profitability
• Price target of 500- 1000 Euro (and subsequent
  mark-ups) deterred high volumes
• Most of the players made significant investments
  without recouping them
• End-user rather is inclined to use his/her own
  handportable instead of embedded devices
• Telematics market developed very fast in the USA,
  W. Europe a follower!
• Need to de-risk business and prepare alternative
  business scenarios

6
E-SAFETY Critical Success Factors

• Most of the consumer surveys indicate a high
  interest in e-safety but a lack of willigness to
  pay for it -gt two questions arise
• Question 1 Are safety and security indeed a
  public good ?
• Question 2 If e-safety is a public good, then
  who is going to pay for e-safety?
• Private sector is compelled to generate profits
  and cannot afford to invest without a business
  case -gt lack of consumer willingness to pay
  results in negative business case
• POTENTIAL SOLUTIONS
• Ensure funding and financing for standardized
  service chain infrastructure
• Start public-private joint venture with funding
  from both industry and EU to operate services and
• Sell e-safety rights to private sector
  (long-term license to operate service)-gt Funds
  going otherwise to public sector to be awarded to
  buyer
• Push ONE standard for service and equipment and
  implementation EU-wide via combination of
  voluntary and regulatory efforts (EU directives
  in order to generate mass volumes in a reasonable
  timeframe similar to location-based 911 in US
  whihc has become a fact via regulatory
  directives)
• When service matures, move its operation
  gradually into the private sector