ARC Advisory Group Releases New Mobile Resource Management Market Study: The Mobile Resource Management Industry Suffers a Market Contraction!

DEDHAM, Mass. -- 2004 marked an important inflection point for the Mobile Resource Management (MRM) market. A market that had once been growing very fast shrank by about 1 percent last year! In calendar year 2003, the industry had revenues of $1,160 million; those revenues contracted to $1,159 Million in 2004 according to a new ARC Advisory Group market study, Mobile Resource Management Worldwide Outlook Through 2009.

Mobile Resource Management solutions provide near real-time location status of mobile assets (like trucks or trailers) and field workers to other managers and workers. MRM, as defined by ARC, is a Business-to-Business (B2B) solution. The revenue segments included in this study are hosting, software, and services. Hardware revenues were not included.

Brutal Cost Competition Drives Consolidation

According to Steve Banker, Service Director for Supply Chain Management at ARC Advisory Group and the study's author, "This market's contraction has been driven by dramatically falling prices. MRM suppliers with solutions that require expensive in-cab equipment and provide high-end functionality (such as vehicle diagnostics) at a high price, have seen their revenues fall and many have been operating in the red. The result has been widespread consolidation in the industry."

Over 20 consolidation events have occurred in the last two years. These events include suppliers going out of business, the assets of bankrupt companies being acquired by other suppliers, and companies discontinuing their MRM product lines. Acquisitions are not always indicative of consolidation; a company can be acquired, for example, because it has strong growth potential. However, in this market the large number of acquisitions is more indicative of a market where many companies were struggling to make money and sold out at a low price in order to survive.

Among the most significant events of the last two years was the collapse of the North American company Aether Systems, formerly one of the leaders in MRM. This year the same thing could occur in Europe. Europe's leading MRM supplier had its auditors state in their annual report that there were doubts about the company's ongoing viability.

But Cost Competition Is Good for Users!

The most common deployment method for MRM involves On Demand solutions. The On Demand business model, as ARC defines it, involves selling a solution based on monthly service charges where one instance of software is hosted centrally by the software vendor and most customers use Internet browsers to access the application. The part of the market that has grown quickly, and put severe pressure on many existing MRM suppliers, has been suppliers of very low priced On Demand solutions that require inexpensive hardware. The Nextel network in North America, in particular, is surging. The Nextel network involves MRM suppliers who use inexpensive, Nextel GPS-enabled phones as the hardware device, and provide a very low priced hosted service. GPS phones can be bought for about $50; older solutions requiring in-cab equipment typically sold for many hundreds of dollars.

Three years ago, many customers paid about $50 per month per vehicle. Last year a number of suppliers were charging about $30 per month per vehicle (or user). And this year some suppliers are selling stripped-down tracking solutions for as little as $20 per month per vehicle or mobile user. In the newer "unbundled" arrangements, the MRM supplier garners about $10 per month per mobile asset, and so does Nextel. Clearly, the brutal cost competition that has been the bane of the MRM industry has been a boon for customers.

This boon has been particularly welcomed by small businesses. Historically the largest buyers of MRM were Truckload and Less-than-Truckload companies with fleets of hundreds or even thousands of vehicles. Today the hottest segment of the market is small service firms (such Heating, Ventilation, and Air Conditioning or plumbing firms) with very small fleets.

For more information on this study, go to: www.arcweb.com/res/mrm.

Note to Editors: This document can be used with attribution to ARC Advisory Group.

About ARC: Founded in 1986, ARC Advisory Group has grown to become the Thought Leader in Supply Chain solutions. No matter how complex your business issues, our analysts have the expert industry knowledge and first-hand experience to help you find the best answer. We focus on simple yet critical goals: improving your return on assets, operational performance, total cost of ownership, project time-to-benefit, and shareholder value. Further information can be obtained from ARC, Three Allied Drive, Dedham, MA 02026, 781-471-1000, Fax [phone], E-mail [e-mail], Web www.arcweb.com.