Ryan : Welcome Hardy! It’s a welcome back, you were here about 50 episodes back, we’re now into the 100’s. Let’s start off with a quick introduction: who are you, what is your background, and how did you end up at Kudelski?
HS : Sure, thanks, it’s a pleasure to be back. I’m Hardy Schmidbauer, Senior Vice President of the Kudelski Group, and specifically of the Kudelski IoT division. My history in IoT, I started designing cordless phones a long time ago and doing a lot of those chipsets designs, moved into the sub-Gigahertz wireless space, targeting a lot of applications which are considered now IoT and smart-metering in consumer products and garage door openers.
I moved over to SenTech and worked on the early strategy and definition of LoRa, built the original LoRa ecosystem which eventually became the LoRA Alliance. I did a startup for two years from 2016-2018, and that was acquired by Semtech. The startup was developing IoT Solutions for Asset Tracking and Lot Management, as well as a consumer solution for tracking and home security. I joined Kudelski last April and am very excited about the tools and the company inside of Kudelski, and the potential that we have within the IoT market as it emerges.
R: Fantastic. A little bit more on the Kudelski side, and the role you play in IoT and how you’re offering, at least on the IoT side, how your approach differs and your offering differs from other security companies in the market ? The general philosophy behind how you handle working with customers ?
HS : I joke that Kudelski is the biggest company that nobody has ever heard of. It’s a super interesting company and history, and it’s important to share a little bit about that history to understand where our expertise comes from in IoT. Within Kudelski there are four main divisions. We have our digital TV business unit, which is a leader in digital access systems for pay TV networks. We secure a lot of the large global TV networks, and the content over those networks. DISH is one of our largest customers today. If you’ve used DISH at all, we have technology in that set-top box, and it’s securing the entire network.
We have a cybersecurity division, which does managed security services, for many large corporations and government and utilities.
And then we have our public access division, which does access control solutions for large venues, stadiums, parking, and for ski resorts. If you’ve skied and went to any Vail Resorts, you’ve typically gone through Kudelski systems and the technology behind how your ticket is generated is also coming from Kudelski.
With that history, we have a long history and expertise in security. We’ve been fighting piracy and hacking in the TV industry for over 30 years. And really, actively having to fight that and have countermeasures and deal with issues I think has given tremendous expertise to the team. A lot of that team, and the R&D focus is now shifted over to IoT, and we’re applying those same concepts that we’ve learned and had to develop over the past 20 years in those other divisions, now applying that to IoT and I think we’re really on the forefront of large volumes in IoT, and I think also in needing and having much tighter security standards within IoT to ensure the IoT solutions can scale and be secure as the volumes ramp up.
R : I appreciate the insights on how you all work and operate. One thing: we’ve had a bunch of security experts, and I’d like to get into a use case conversation. There are interesting applications that you are bringing to the market, but before we do that, I’d like to ask a couple high level questions, to get your take on them: when it comes to security on the IoT front, there seems to be a general lack of concern for security, and I wanted to ask you why that’s an issue, and how do company really stay on top of the latest security threats on the IoT front
HS : Yes, that’s one of the challenges with security is, depending on who you ask you get a different answer. A lot of it really depends, and that’s our philosophy inside Kudelski; it’s not a one size fits all approach right. There are going to be different security requirements for a cat tracker vs a smart meter, or a medical device. So you really need to look at each application individually, define what is needed for a security threat assessment for that solution and then architect and design towards that. I agree there has been a lack of concern for security within IoT, but just since I’ve joined Kudelski, I’ve seen that change rapidly. Security is typically not an issue until it’s a problem, but then it’s too late. We’re seeing a lot of good education across the market, a lot of people having a better understanding and requirements for security, and you’re seeing NIST and other organizations also publishing a lot of new requirements or guidelines for security which I think is doing a lot to educate the market on what is really needed for security within IoT.
ITW: Have you seen Covid play a role in the security landscape as far as, in the last year or so, affecting things through your standpoint?
HS : Covid is accelerating a lot of the IoT solutions or say some IoT solutions, it’s kind of forcing that digital transformation in some industries more rapidly, maybe that they would have organically done, without COVID. I think that transformation is also raising concerns and requirements about security as well. So yes I think inadvertently COVID is also helping to drive forward the security importance within a lot of these IoT solutions that are maybe being accelerated due to COVID.
ITW: It’s been an interesting ride this last year, so getting everyone’s perception has been interesting. I do want to transition here quickly to talking more about use cases. We’ve pivoted the focus from show to focus more on real life examples of how companies are implementing IoT. I’d like for you to talk us through the most recent and exciting use case you’ve got going on, a solution that you have in the market or coming to the market, how that is and how it works ?
HS : Sure. Within Kudelski IoT we have 3 main product lines :
ITW : Take me through that. There sounds like there are two pieces there: the consumer side, and the dealer side. How does that work together and how do they work independently?
HS : Sure. We provide the dealer the lot management solution. While the cars are on lot and in inventory in the dealership we provide them a free lot management solution so they can be able to keep track of their inventory, find cars quickly for interested buyers, be able to get reductions off their insurance, and also really become more efficient and optimize their workflow from when they receive cars to when they’re sold to consumers.
When the dealerships sell the car, they will also sell to the consumer the Theft Recovery Solution. So it changes modes from a lot management solution to a consumer theft recovery solution.
On the consumer side it can also be used to Find My Car if you can’t remember where you parked it at the airport, or if your car is stolen, or if you’d like to lock the location, which is another way of geofencing your vehicle. So if you're on vacation, you want any kind of alert, immediate text or email if your car is moved unexpectedly, you can get that kind of alert directly to your mobile and your email.
ITW : Could you technically set a large geofence set if you give your car to say a child of yours and they drove outside of the geofence you’d be alerted?
HS : We’re not doing that feature. The features we’re focusing on are the “lock the location”. Give an immediate alert if your car moved unexpectedly. If you go away for the weekend and you don’t want your son to drive your sports car, you’d lock the location to ensure the vehicle is not moved.
ITW: Take me through the minds, the thought process that went into the solution : where did it come from, what is the problem that is out in the market that a lot of the people listening are unaware of? You can talk both sides, the dealership as well as the consumer side. Obviously people are familiar with other theft recovery solutions, they’ve heard of LoJack and things like that - but when you started working on that solution, what was the opportunity that you saw, the problem that you saw you could solve, and how does it compare to other available options in the market ?
HS : When we started to look at this market, we identified a few things: a lot of the solutions that are available today are rather old, from a technology standpoint. Also, the business models we didn't really see were efficient for the dealers or for those companies. We really wanted to disrupt on the technology side and also disrupt on the business side to make it much more profitable and efficient for the dealers as well, as well as a solution that can scale much easier across the market.
On the dealer side, LoJack, which has been in the market for a long time and everybody knows, they have announced they are shutting down operations. That solution was developed a long time ago, it uses a proprietary network. There is a big cost to keeping that network up to date - from installing the equipment in the police cars, and having power leases and keeping that up to date, there is a big infrastructure cost.
That made sense back when cellular coverage wasn’t good and reliable, but now with cellular coverage the cost of a proprietary, separate network is really unnecessary overhead. Also, most of the solutions today are wired in, and we felt that we could do a very efficient, cost effective, standalone device which is battery operated, not connected at all to the car system. When you wire the existing trackers into the vehicle, there is a cost associated with that. It takes 30-45 minutes of labor to install those. Our goal was to have something battery operated that could be provisioned and installed in less than a minute. So you avoid that kind of burden and overhead of the wired version.
A lot of the car manufacturers now are also voiding the warranty on anything that is wired in. And they are also super concerned in electric vehicles about anything being wired into the battery and actually most car manufacturers won’t allow a wired-in solution on electric or hybrid vehicles.
ITW: How long does this device last if it’s not wired-in, so it’s not pulling off the battery of the vehicle. What's the life expectancy of these devices? I would assume it’s relatively easy to change the battery if it dies?
HS : Yes, that is critical, and I think that’s where our expertise and history gives us a big advantage as well. Really, both from the dealership and the consumer, the user experience with devices, you know everybody kind of expects instantaneous feedback from apps and devices now. I think thanks to what Apple has done over the years. We’ve designed the device for a five-year battery lifetime. We still check in very frequently with the network so that we can have that proper user experience for the consumer and for the dealers. With the dealers, it’s really from their perspective it’s real-time tracking. We update the position every time the vehicle is moved. So from their perspective, whenever they go to look for a location, it’ll show basically real-time from their perspective where that vehicle is.
On the consumer side, we are very conscious about privacy. In our consumer interviews, privacy and the fear of being tracked is very high on consumers’ concerns. So we only update the position when requested by the consumer. If they request the position of their vehicle, if they forgot where they parked or put them in Theft Recovery, then we start to update the position. Outside of that we check in very frequently with the network so that we can have that proper user experience and set that expectation of the consumer of how long it’s going to take before their position will be updated. That’s critical to not having the wired-in solution, where you have essentially the battery lifetime, a very large battery to draw from, but still being able to deliver the user experience needed to be successful on the market, while having the engineering capability to design something that has a very long battery life time and is extremely low power.
ITW: in your conversations during the research phase with the consumers, what were their thoughts on the current offerings of the market, what were the big takeaways from that that caused decisions made for the RecovR solution ?
HS : From our consumer surveys a lot of consumers are concerned about theft and I think we’ve seen a big increase in theft in the COVID environment, for various reasons. So there is a rising demand from consumers for Theft Recovery Solutions within the market. Most important things for them were the usability of the solution, the theft recovery - being able to work easily and with law enforcement through the RecovR call center. The financial benefits for insurance and for the warranty if your car is stolen also ranked very high. And the other features we have in there to make it very simple and easy to use are also going to be very attractive to the consumer’s compared to what they have today in the market.
ITW: What are the insurance and warranty benefits that you get as a consumer? Aside from the functionality, what are the other reasons people would purchase your solution?
HS: if their car is stolen and not recovered, we provide them $5000 cash towards a new car, and we also pay $1000 towards deductibles on their insurance.
ITW: Basically this way this works is that if you were to purchase this when you buy a car, new or used I assume, it could be either one, you would then disconnect the tracking ability of the dealer, so the dealer has no insight into where this car is, and any kind of data collected after it is sold, and then as a user, when there is no tracking being done until I go in the mobile app and click “Find My Car” or “Car is Stolen” and it goes through that process of reaching out to the authorities to find the actual vehicles, but other than that it’s not tracking where you’re driving. And then if for some reason the car is stolen, there is a $5000 cash warranty applied to this, and also covering the $1000 deductible on the consumer side. Interesting!
Let me ask a question a little before the sale, when you’re talking with dealers, obviously a free lot management solution sounds fantastic, how are they viewing the potential of this being a sell-through item, which happens after the car is sold, when you’re working on the financing and those pieces of the car buying process, how are dealers responding to the solution and seeing this as something they care about making money off, so that it’s something they can offer to their customers ?
HW: Dealerships are making a lot of their profits off of the products that they sell in F&I and through service. They are very interested in products like this. It can have a big impact on their profitability and financial performance within the dealership. Pretty much we see all the dealerships are interested in these types of solutions. They are also very interested in lot management and becoming more efficient, but typically don’t want to pay for it. They are really trying to optimize their financials and having to pay for another management software is hard for many of them to accept. So we think we found a very disruptive business model where we help them provide lot management and make the dealership much more efficient at no cost to them. And they get a revenue source when they sell it through to the consumer. We’re getting great feedback and traction already from the dealership community about our model. And also I think it’s welcoming to have a Kudelski, a billion dollar technology and security leader standing behind the solution and having 24/7 support and call centers, a top quality product that consumers are really going to like. It makes it much easier for them to feel comfortable with us developing this solution and being their partner, and making sure that the consumers are happy with this solution as well.
ITW: What’s your general to-to-market approach, are you going to dealer to dealer, dealer groups, going to organizations representing dealers ?
HS: Correct, we’re in the process of contacting individual dealers and many dealer groups, as well as setting up channels of companies that now offer services and products into dealers, we’re in the process of setting all that up. We’re going to announce this solution at NADA, and then we’ll start to deploy dealerships at the end of march. We already have a high volume of parts with our contract manufacturer through the end of the year secured to help ramp up the solution.
ITW: From a consumer side of things, is there a cost to use this outside of the initial purchase, or is it a flat cost and it’s good forever, how does that work ?
HS : There’s no monthly fees, it’s an all-in cost, and that comes with three years of service for the solution and once that’s over, they can go back to the dealer and repurchase a new device to be placed in their car.
ITW : By time people will listen to this, I assume it will probably be out, but when is the NADA event?
HS : NADA will happen next week, NADA is the North American Dealers Association Show, supposed to happen in person in New Orleans, but this year it’s virtual as most trade shows are.
ITW: I assume it works in any vehicle, any car that needs to be tracked, in your mind, is there a feature roll-out planned down the line that those device could get over the air updates on, or would you need a new device to get a new feature set if you decided to do a version 2.0 ?
HS : No, I think that’s one of the benefits of Kudelski, the engineering talent, especially the software engineering talent that we have is better than I’ve seen anywhere else in the technology industry, and in my career. We are utilizing all of our own products and solutions, so we’re using our keystream solution in the design. So we really have security integrated from the beginning, we have firmware over the air updates, everything is integrated into the design so that we can make adjustments, do remote features authorization or change ownership, zero-touch provisioning and all those features are designed and integrated into the device.
ITW: Last question, if I’m a consumer out there ready to buy a car, and I get presented with this opportunity, why should I consider a RecovR tracker and app in my car and on my phone ? Why should I strongly consider it ?
HS : I think it’s a great solution just to give you peace of mind as a consumer. If your vehicle is stolen or if you occasionally forget where you parked, you can immediately determine the location of your vehicle. And then of course the financial benefit : if your car is stolen, is a good insurance policy that’s well worth the cost to the solution through the dealer.
ITW : How big of a problem is the theft of vehicles ? Could you put it into perspective, what big of a problem that actually is ?
HS : It’s a very big market. If you look at how many cars are sold in the US, how many cars are stolen in the US, it’s a very big problem today, and a very big market. When you look at the volume of the US market alone, not even considering other geographies, it’s a very big market. Just new cars, there are over 17 millions new cars, not including used cars. There is also roughly a car stolen every second. In the time we’ve talked about this, a couple seconds, there’s already been 10 cars stolen. It is a very big problem and becoming a bigger problem I think due to the economic problems that we’re having coming out of COVID.
ITW : That’s very interesting to learn, because I would not have had an idea of how big the problem is. Thank you for explaining this solution coming to market. By the time you’re listening to this, you should be able to learn more about the RecovR solution. What’s the best way for audience to reach you ? Kudelski or RecovR ?
HS : We can reach out RecovR.biz or on kudelski-iot.com you could contact us through there and someone from the organization will give you an immediate response back if you have any interest in the solutions of Kudelski IoT or the RecovR product.
ITW : If I went to a dealer, and they don’t have that option, is that something I can buy after I bought the car, or is that something I would have to lobby my dealer to get ?
HS : No we’re only selling it through the dealers, as we ramp up though we will be able to direct you to dealers that offer it, and if your dealer does not offer it, we can direct you to another dealer that does offer it and you could purchase it through that dealer.
ITW : Fantastic. I appreciate your time, it’s been a fantastic learning experience for me and our audience to understand another great IoT solution out in the market for consumers to get their hands and obviously dealers to get their hands on to benefit their organization. I wish you the best of luck with this launch, it sounds like a fantastic option, and I’m very confident that you’ll be able to put it to market and scale it, like we’re all trying to achieve to benefit the IoT space for all.
HS : Alright, thanks a lot Ryan.