Accenture Study: Construction Equipment Industry Adopts Wireless Technology to Improve Profitability and Service

Industry Receptive to Equipment Telematics as a Competitive Advantage

CHICAGO; Feb. 18, 2003 – More than three out of four construction equipment manufacturers in North America now offer telematics products and services to their customers, according to an Accenture study of executives in the construction industry.

In addition, 80 percent believe that equipment telematics offers an advantage over competitors and they anticipate extra benefits from the wireless technology that include enhanced customer relationships and increased parts and services revenue.

Equipment telematics -- wireless-enabled two-way communication between vehicles or equipment and their external environment for the automatic collection and dissemination of data -- addresses some of the most critical operational and business challenges facing construction and rental equipment companies, including increasing equipment utilization, managing maintenance costs and increasing operational efficiency. Mobile applications of equipment telematics in the construction equipment industry include, among other things, vehicle tracking, positioning and online navigation; data collection regarding vehicle usage and maintenance; and emergency services.

“Historically, the construction equipment industry has taken a conservative approach to using new technologies, but we’re now witnessing a transformation of these companies from product manufacturers to service providers,” said Dean Teglia, the North American managing partner for Accenture’s Industrial Equipment practice. “And equipment telematics will be the key enabling technology that changes their business model and allows them to focus on service and growing revenues.”

According to the study findings:

• Nearly two-thirds (62 percent) of respondents said they foresee improved profitability from providing equipment telematics services, while 60 percent said they believe that equipment telematics will enable them to increase revenue from parts and services and improve target marketing to sell additional products and services.
• More than two-thirds (70 percent) of respondents said that equipment telematics solutions could help them enhance customer relationships through increased knowledge of vehicles’ usage patterns and maintenance servicing.
• Construction equipment users said they expect that 20 to 30 percent of new equipment will incorporate telematics in the next three years, and dealers predict a 15 to 20 percent penetration of telematics in new equipment over the same period.
• Nearly half (45 percent) of survey respondents said they consider predictive maintenance to be the area of greatest interest for adopting equipment telematics, and more than one-third (35 percent) said they consider the integration of telematics services with fleet management systems to be the most critical success factor.

However, the research revealed three key challenges that could impede the construction equipment industry’s adoption of telematics. First, manufacturers and dealers must better educate their sales personnel to package and sell more complex services, based on the full life cycle value to the end user. Second, manufacturers and dealers will need to adapt their product maintenance processes to take full advantage of real-time, detailed information about equipment performance. And third, the industry will have to address the issue of technical standards.

Regarding the issue of technical standards, nearly two thirds (63 percent) of users surveyed said they consider it “very important” for equipment telematics devices to work across all equipment, regardless of manufacturer, make or model, while only 45 percent of equipment manufacturers and dealers held the same view. Today, a lack of technical standards prevents end users from running a platform-independent equipment telematics solution.

“The construction industry must not only transform its culture and processes to prepare for telematics, but also address standards for on-board systems, data and software applications so that end users can reap the benefits across a variety of equipment,” added Teglia. “The central challenge for equipment manufacturers and dealers is to provide a differentiated telematics solution while addressing the end customer’s perceived need for standards.”

Research Methodology
Accenture commissioned a study of the construction equipment segment to determine the extent to which potential providers (original equipment manufacturers and dealers) and users (construction and rental companies) have adopted and delivered equipment telematics products and services. The telephone survey sought the opinions of 54 executives across four industry segments: construction original equipment manufacturers (six respondents), construction companies (17 respondents), construction original equipment dealers (28 respondents) and construction original equipment rental concerns (three respondents). Respondents were screened to ensure that they had some familiarity with telematics and involvement with technology decisions.

About Accenture
Accenture is the world’s leading management consulting and technology services company. Committed to delivering innovation, Accenture collaborates with its clients to help them realize their visions and create tangible value. With deep industry expertise, broad global resources and proven experience in consulting and outsourcing, Accenture can mobilize the right people, skills, alliances and technologies. With more than 75,000 people in 47 countries, the company generated net revenues of $11.6 billion for the fiscal year ended August 31, 2002. Its home page is www.accenture.com.

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