Expert: Startup fleet solutions providers are down but not out

The coronavirus pandemic has slammed virtually every sector of the trucking industry. But to paraphrase a famous author, the outbreak slammed each sector in its own way. 

The downsizing that hit newer entrants in the trucking telematics space is a case in point. Over the past two months, Samsara and Keep Truckin, two of the more prominent startups in the ELD and fleet management arena, laid off 18% of their workforce (yes, each company let go exactly the same percentage of employees).

Chalk up the layoffs to the coronavirus but also to the types of customers these providers went after, according to Annette Sandberg, head of TranSafe Consulting, a transportation consulting firm.

Upstarts like Samsara focused on smaller carriers and owner-operators that don’t typically have relationships with large fleets. So when the economy went south, the legacy providers such as Trimble Transportation and Omnitracs — companies that do enjoy relationships with large fleets — weren’t hit as hard.

“As freight got super tight and rates went way down,” Sandberg told FreightWaves, “the big carriers were picking up what was available, and the smaller guys got squeezed out.”

The newer telematics companies likely offered better rates as far as what it costs to have a fleet management system. But when smaller trucking businesses couldn’t pay their providers, “well, it all trickles downhill,” said Sandberg.

A former chief administrator at the FMCSA, Sandberg says neither Keep Truckin nor Samsara is spiraling downward. “They made appropriate cuts, trimmed personnel accordingly to save what they could to do and will build staff back up as the market comes back,” she said.

Still, their fate is likely tied to that of smaller trucking companies. And as evidenced by the high-profile trucking protests around freight rates amid the pandemic, the smaller companies have borne the brunt of the coronavirus shipping downturn.  

Drawing a comparison between the pandemic and the Great Recession, Sandberg said she expects many of the small trucking companies to weather the storm. “Particularly owner-operators — those guys knew how to run trucking companies and once things start picking back up, they have a tendency to come back.”

As for the legacy telematics providers, even though they have more stable funding, the Trimbles and Omnitracs of the world are hurting, too. “If you talk to someone in tmarketing department, I think everyone is losing the little carriers right now,” Sandberg said.

Trimble did not immediately respond to a request for comment.

As the fleet management solutions space gets more crowded and complex, a narrative has emerged positing that new entrants are akin to vandals at the gates, taking market share from the legacies. The latest evidence of that tension: In a suit filed on Tuesday, Omnitracs alleged that Platform Science, another newcomer, had infringed on its technology patents.

Overall, the pandemic is unlikely to upset the balance power between the legacies and the newcomers, according to Sandberg.

“As we get into the summer, we’ll get a better sense as to what recovery looks like,” she said.