Jack Martin: I'm talking now to Jim Ruthven, program director for IBM Telematic Solutions. Jim, what do you do?
Jim Ruthven: I'm responsible for the sales and development activities for IBM Telematics in the North American region. We have a team of salespeople who work with clients to use telematics to create value for themselves and stakeholders - in particular, automotive OEMs, as well as Tier One suppliers.

JM: In case some of our readers don't know what telematics is, can you explain it?
JR: Sure. The simple explanation is that telematics is the notion of connecting vehicles to back end systems to deliver telemetry and content. That is, information about vehicle performance, location, and time to back end systems where they can be used. It also includes the delivery of content to vehicles for things such as Internet access, e-mail capability, information exchange - those kinds of applications and services.

JM: I understand that you have some very interesting stuff going on right now with General Motors' OnStar Group. Tell me about that.
JR: We're very excited about that relationship. As you may know, OnStar is the world's largest telematics service provider (TSP), with more than 2.5 million subscribers. Hopefully, by the end of 2004, that will have grown to more than 3 million subscribers, which will make OnStar 5 times as large as the second largest TSP. Recently, OnStar and IBM announced that OnStar had chosen the IBM Embedded ViaVoice product as the foundation technology for voice capability in the next generation device - the sixth device iteration that they have installed in General Motors vehicles since their inception in 1996.

 We're excited to be working with OnStar from a couple of perspectives. First, OnStar is working with IBM to help us continue to enhance our voice products so that they can be used with a variety of other customers and in other industries. It really strengthens our product because of the rigorous requirements associated with an automotive environment. As you may know, it's very different from speaking into a microphone in an office because of the noise characteristics and the environmental characteristics associated with the acoustics in an automotive cockpit. Working with OnStar and their Tier One suppliers, in particular Motorola and LG Electronics, we have been able to continue to enhance and improve the voice-recognition capability of our voice products

JM: It sounds like, and correct me if I'm wrong, General Motors is coming out with a new version of OnStar. That's one generation every 12-18 months.
JR: That's correct.

JM: Are the people at OnStar, from your experience, technology people?
JR: They really are. If you look at OnStar's history and how it started, they've done an excellent job of matching and mirroring the electronic industry with the automotive industry. My experience with the folks at OnStar is that they consider themselves to be information technologists - providing the kinds of safety and security applications that their customers want and need by marrying information technology with automotive technology.

JM: That's really aggressive to have your technology switching every 16 months when you consider that we're talking about a car. It's not like a new function being added to, say, a computer operating system.
JR: In many ways, OnStar has set the bar in the industry from a usability perspective. For those who aren't familiar with the OnStar system, it basically consists of three simple buttons, which are typically located somewhere around the rearview mirror, that allow customers to access a variety of applications and services. So, OnStar really has paced the industry in terms of HMI, which is why having them as a voice technology customer is so important.

JM: What is HMI?
JR: Human-machine interface. The way that customers interact with the OnStar system is via voice (no pun intended). It doesn't have a screen or push buttons. General Motors firmly believes that telematics technology should enhance safety and security - keeping your hands on the wheel and your eyes on the road. So, if you had a screen and you forced the customer to interact with the telematic system by pushing buttons or looking at the screen, it takes away from the safety and security aspect. Given that, voice technology is truly a foundation technology for the OnStar system and being able to provide that foundation technology is really a feather in our cap.

JM: How are this voice technology and WebSphere tied together? What would somebody have to do to embed voice technology?
JR: It really depends. One of the hallmarks of IBM's voice strategy or voice technology is that we really have two sides to it. On one hand, we've got the embedded voice side and in this case, Embedded ViaVoice is the technology that OnStar has adopted. It is a stand-alone technology.

JM: Is that the same ViaVoice that you can run on your PC?
JR: It's based on that technology and, in fact, that was its original design point. It obviously has been enhanced to take into consideration computing platforms that are less powerful than a laptop or a desktop type of a system. That's one of the great things about working with companies like General Motors and Honda on their navigation systems. We had to take that base ViaVoice engine and migrate it to a much lower power of form factors.

So we have the embedded voice side, which is pretty much stand alone. It operates inside the cockpit, and if you think about vehicle scenarios or use cases, there are some things that you want to have happen that never leave the car's cockpit. For example, a command along the lines of, "Let's roll the windows up or down" or "Change the radio station."

You don't want that voice command to have to go back to the server to be processed and then send the command back to the vehicle; you want all of that to be self-contained inside the vehicle. Embedded ViaVoice accomplishes that. So the continuous digit dialing function, say "Dial 123-456-7890," never leaves the vehicle.

On the other hand, there are some applications that require significant processing power on the back end. For example, "Find me the best route to the nearest McDonald's." You want the voice command to interact with systems in the back end to take advantage of the power of the back end both from a cost and from an upgrade perspective inside the vehicle. One of the hallmarks of IBM's strategy in the voice arena is that we've got both sides covered and we can help customers make intelligent choices on which technology is appropriate for the application. In OnStar's case, not only do they use our embedded voice engines for embedded applications, but for their virtual advisor application and interactive voice recognition capability, they are using IBM's WebSphere product on the back end.

JM: Where on the back end?
JR: Actually, in the OnStar service center. That virtual advisor capability is based on IBM's IVR [Interactive Voice Recognition].

JM: Is that part of the WebSphere Voice Server?
JR: It is, in fact, WebSphere Voice Server.

JM: Can you expand on that?
JR: A hallmark of IBM's IVR capability is to take voice commands and allow them to interact with contact delivery systems on the back end. That's the function that your voice server is providing for the OnStar team.

JM: What I think is interesting and, it's testimony to what OnStar is and what IBM has done for OnStar, is that you have Acura, Audi, Isuzu, Subaru, and Volkswagen all using the same technology as well as General Motors. Lexus Link is also based on OnStar.

General Motors lent me a 2004 Silverado with OnStar in it. It had a Corvette engine, all-wheel drive, and it was painted Fire Engine Red. But once you got past all the car things, what really struck me about driving that truck was this whole OnStar thing, how it changed the driving experience so I could always know where I was. I could get it to find hotels and places to eat. It could tell me if the truck was running well, which it always did, but I kept asking regularly.

There are about 150 million cars in the United States right now and OnStar has about 2 million customers. Moving forward, this telematics and OnStar thing will become a very mainstream product. I'm curious how you see telematics changing our life experience.
JR: That's an excellent question and fairly wide ranging; it really gets to IBM's point of view as it relates to the telematic industry. For your readers who aren't aware, OnStar has been around since about 1996, which is when IBM actually got into the telematics marketplace by working with Delphi to create a concept car around some telematics use case scenarios. In 1996, the belief was that consumers would pay billions of dollars to have personalized news, weather, stocks, and sports delivered to their vehicle. It was during the Internet bubble. People were experimenting with new business models and believed that others would actually spend money, on a monthly subscription fee for this kind of information. Over time, we learned that it wasn't the case. In fact, IBM came out of the chute saying, "You know, there are other devices out there." Namely, that includes cell phones, PDAs, and other portable handheld devices that customers and clients carry with them that aren't tethered to the automobile and that provide the kinds of functions in which the consumers are interested, in a much more elegant and useful way.

The real value of telematics was in enhancing the vehicle experience with vehicle-centric applications and services. For example, we believe that OEMs can use telematics technology and the capability to deliver diagnostic information to dealers. It allows them to ensure that they have the right technician with the right part on-site, positively impacting customer satisfaction.

In addition, when the yellow "check engine" light comes on, we know that it can mean any one of 3,000 different things. Just looking at the light, you really don't know exactly what's wrong. When that light comes on now, you can call the OnStar service center and the customer support representative can tell you what the problem is. We're envisioning a time when that information can be sent to a dealer, in case a significant problem arises and requires service. So, it's those kinds of applications and services on which IBM has really been focused in terms of the automotive industry.

Then, they can take that very same information and get it back into the hands of automotive company engineering and manufacturing department. That way, they can understand the problems that are happening in the vehicles more quickly and put engineering plans in place to fix them - without running the risk of manufacturing those same issues or problems into subsequent vehicles. So there's a real, tangible impact here - telemetry being used to create value, not only for consumers, but also for the automotive value chain.

JM: Telematics is interesting. It's different than a lot of other technologies when I think about it. It changes the way people live and many times, it's transparent, where the user doesn't even realize that there is some type of technology that's somehow interceding to serve them.
JR: Exactly. If you think about the vehicle experience, the thing that drives people crazy is having to take their vehicles to the dealer for service.

But a societal impact of this kind of technology is that automakers will be able to understand, perhaps even before the customer understands, that there's a problem with the vehicle. By the nature of how vehicles are developed and produced today, mainly with increasing amounts of electronics and software, automakers probably have the ability to fix vehicles without the customer even knowing that there was a problem.

JM: Like predictive maintenance and prognostics. What are prognostics?
JR: Prognostics is the idea of being able to take diagnostic information from the vehicle and predict what's going to happen.

For example, when electronic control units fail in vehicles, they don't fail all at once. They fail over time and they begin to display diagnostic trouble codes well before they fail. So, the ability to understand those codes, together with automotive knowledge and experience, can enable companies to predict whether or not a certain electronic control unit is going to fail and be able to take corrective action before it does.

There are other interesting aspects to this capability. Combining telematics with in-vehicle electronics and software architectures will allow automotive companies to create capabilities around horsepower on demand.

Let's say you've bought a vehicle and you run it in economical mode while driving in the city. And you're getting ready to go to the mountains and tow your boat. In future, you'll actually be able to have the capability to download horsepower. It may not run as efficiently, but you'll have more effective performance.

JM: You're suggesting they pay for the horsepower as they would for their vacation and then when the time period ends, the horsepower goes away?
JR: That's correct. The societal impacts of this are profound. You can even have better gas mileage with more economical driving most of the time, using only the maximum capability of the engine when you need it.

JM: When do you see that actually being a product?
JR: Lots of things have to happen before that actually occurs, but we're thinking 7-10 years from now.

JM: What else do you see on the horizon for telematics over the course of, say, the next 3-5 years?
JR: Well, I think you're going to see some of the things that I described earlier. You'll certainly see enhanced integration between vehicle telemetry delivered by telematic systems, dealer systems, and back-end automotive systems.

The other hallmark that's key to IBM's thoughts is that there is an ecosystem developing around this telemetry and this vehicle data. Other industries are beginning to pick up on the value and the capabilities provided by this data. For example, the insurance industry is keenly interested in information about vehicle performance, vehicle location, and the times it's being driven, vehicle speed, and insurance notification in the event of a crash. All of this data is available today - while not necessarily being delivered wirelessly yet - but as that capability in telematics becomes more prevalent, you'll see insurance companies become interested in creating specific policies for individuals. In fact, IBM is working with Norwich Union Insurance in the UK on just such a pilot project. 5,000 people have volunteered to put devices in their vehicle and exchange some privacy for improved policy rates because the insurance company can reduce their risk by knowing how they're driving.

JM: That would be like on-demand liability insurance?
JR: They call it "pay as you drive." We would call it on-demand insurance capabilities.

JM: Very interesting. So, that will be a much fairer system if it comes to pass for a conservative driver who obviously pays for the non-conservative people that drive on our highways.
JR: I'd like to say that my mom would be an excellent candidate for "pay as you drive" insurance because she has a spotless driving record; she never speeds.

JM: And she probably doesn't drive to high-risk areas.
JR: She doesn't drive to high-risk areas. She drives during normal business hours. She's not out late at night, but she's lumped in from an insurance rating perspective with folks who aren't necessarily as conservative. So, she's a primary candidate for that.

JM: On the flip side, consider young men under 25 who pay the highest insurance. If you get a kid who's primarily driving at the speed limit during daylight hours and who doesn't go to high-risk areas, you could, in theory, charge him less than the young man who's out at 4:00 AM on Saturday night.
JR: In fact, young drivers are one of the targets of the UK pilot.

JM: I hear that telematics with WebSphere is starting to be applied to the company that makes international trucks and international harvesters for people that use fleets.
JR: It's actually International Truck and Engine Corporation. We've been working with them for over two years now to help them develop their telematic strategy, implementation, and execution.

JM: Are they actually doing that now or is that going to happen in the future?
JR: They're in pilot mode now. In fact, they just announced that they're launching their production telematic service in July. So they're in pilot mode now with several customers testing out the telematic system that we've built with them.

It's interesting if you start to think about the commercial vehicle aspect. Many of the issues associated with passenger cars disappear on the commercial fleet side. For example, privacy issues are much less stringent on the commercial fleet side than on the passenger car side.

JM: Because everybody wants to know.
JR: There are a couple of aspects to it. On the passenger car side, there is normal fear of Big Brother watching. IBM's position is that there will be many ways for an opt-in kind of service and capability. On the commercial fleet side, fleet managers and owners actually own the truck. They allow their employees to use them and therefore, the issue of privacy is much less stringent. They have a right to know how their vehicles are being driven, where they are being driven, and how they are being used. So, many of the private citizen issues go away. But the return on investment of the commercial fleet side is also much easier to see because you can begin to get into areas such as driver productivity and asset utilization - real dollar savings and dollar values to the fleet manager's side of the business. In many ways, we see a more rapid acceleration of telematics in the commercial vehicle side than in the passenger car side.

The benefits and the notion of the ecosystem that I talked about earlier are still there. We know, for example, that there are companies, such as Fleet Risk Advisor, taking telematic data and combining it with data about drivers and their performance to help insurance companies work with fleets to improve the accident profile and reduce the amount and the severity of accidents that fleets have.

We know that asset utilization (truck utilization) is an important part of the promotional vehicle side of the business and telematics can certainly help fleet managers in their service organization understand the performance characteristics of vehicles and be able to perform preventative maintenance before they fail. Not only are they improving their asset utilization, but they are increasing customer satisfaction because they work at deliveries and they can make and meet their commitments.

JM: You're talking about some pretty powerful stuff here. Do you see what you're doing as giving the next generation of market leaders the technological advantage that they need to win?
JR: Absolutely. If you look at the International Truck example that I just used, they fundamentally believe that they will be able to use this kind of technology to differentiate their vehicles in the marketplace to help them increase market share in a couple different ways. One way to help them to build better vehicles is by enabling them to know how their vehicles are performing in the field. A second way is by allowing them to consult with their customers to help choose the features and functions that will be most effective.

For example, in one of their pilots, they're working with a company that has a number of tow trucks and they found that, although the tow truck company bought each vehicle with a winch on the front, only 5% of tow truck operators use that winch and obviously, every one of them uses the tow hook on the back. So, the company can counsel its customers to buy only 5% of the vehicles with the winch on the front. That way, they can track the trucks and dispatch them to places where the winch on the front was required. In addition, they found that the boom on the back required additional capability in the electrical system of the vehicle. They were then able to feed that information back to the engineering department to beef up the electrical side of the vehicle architecture. As a result, they could deliver a vehicle that performs better in the field.

To me, this is an excellent example of how International will be able to enhance its position in the marketplace, because it is the only company in the industry today that has the capability. They can consult with their customers and can improve their product at the same time using that technology. It really is transformation from that perspective. It's also transformation from the perspective of helping them to become more efficient and effective as a company. This data forces manufacturing and engineering as well as the retail side of the business to work together. It's through communication and conversation that they are able to improve the effectiveness of the vehicle and their ultimate products.