IBM Corp, the biggest computer maker, will gain sales as more cars and trucks connect to wireless data networks and act like rolling Web appliances, analysts said.
Researchers initially predicted a rapid boom in the use of location devices, chips and software to route data to and from vehicles -- a field called telematics that lets cars and drivers interact with the Internet and the outside world. The outlook now is less buoyant. Still, telematics is growing, and the business strategy has shifted in IBM's favor, the analysts said.
Telematics proponents first envisioned cars as rolling multimedia computers, processing data on board. Now, analysts say, the more likely business model -- called thin client, or off-board -- will see basic communications processors and software inside the car linking to richer databases, Internet services and networks outside the vehicle.
"Their solution is the right way to go: thin client," said Jonathan Lawrence, a former financial analyst who is president of the consulting firm Crystal Mountain Group Inc, of IBM's approach.
Michael Heidingsfelder, head of US operations for the German consultancy Roland Berger & Partners GmbH, calls IBM "well-positioned" in telematics because it is focusing on "providing technology for the voice and data flow into and out of the vehicle" instead of loading up the car itself.
"They're not an auto company, but they've become very knowledgeable," Heidingsfelder said.
For navigation and emergencies
Telematics can be used to determine a vehicle's location using global-positioning-system satellites, automatically call for help after a collision, provide traffic alerts and connect to the Internet for services and entertainment or to hear or dictate e-mail.
It also will let automakers and dealers forge closer relationships with customers. Data on a car's service and maintenance needs can be communicated automatically from car sensors to a local dealer. Information on the use of individual cars can be fed back to designers so systems and warranties can be improved. Using monitoring devices, fleet owners can charge according to the precise usage of a car or truck.
A year ago, the global telematics market was expected to grow from US$7 billion in sales this year to US$49 billion by 2010, according to a study by UBS Warburg LLC. In a report last month, Roland Berger estimated this year's sales at US$1.3 billion and put the 2010 market total at US$24 billion.
Carmakers and wireless-phone companies are vying for the fees drivers pay for some telematics services, Lawrence said. Drivers now pay an average of US$17 a month in the US, and charges are expected to decline, a Roland Berger study said.
With General Motors Corp's OnStar service, a Cadillac or Saab owner whose "check engine" light comes on will have a remote computer diagnose the problem and report back on what to do.
"My personal view is that the wireless service providers will win," Lawrence said. "That plays into IBM's hands."
The Armonk, New York-based company wants to keep on-board computing to a minimum, preferring that data is transferred wirelessly for processing at remote data centers. This avoids driving up the price of cars, repairs and stocking parts.
Linked to a wireless network, cars can update on-board software automatically. Internet access can deliver automated services via the Web.
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