Industry experts have long ago decided which side of the "software is killing the dedicated in-car navigation device" debate they are on. However, in a market with traditionally long product life-cycles the rate of change is impressive, as is the swing in revenues.

In 2009, almost 95% of revenues came from established, hardware-based technologies such as factory-fitted navigation and unconnected PNDs. Software-focused markets such as handset-based navigation and connected PNDs were negligible.

By 2014, more than 60% of the installed base will consist of software-based navigation solutions, and the off-deck location-based services (LBS) market will be primarily funded by advertising rather than direct fees.

By 2016, revenues will to all intents and purposes be a 50:50 split.

"For years (world economic crash aside) the in-car navigation market has grown relatively unabated," says ABI Research senior analyst Patrick Connolly.

"It was a niche within an established market that was large enough for everyone to succeed concurrently. However, with penetration rates in some regions approaching 50%, it starts to become more competitive. The result is a clear transition away from pure hardware sales to software based-solutions and revenues."

Reasons for this trend include:

+ In-dash ASPs are falling as companies look to open up the market, driving down hardware revenue.

+ Connected PNDs will become commonplace as the likes of TomTom and Garmin innovate and drive new revenue streams.

+ The arrival of application stores and free navigation will help to drive uptake and revenue in the handset-based market.

+ By 2014, carrier navigation will be evenly split between subscription and free (largely as part of data plans).

+ Location-based advertising will create a viable alternative to subscription services.

Practice director Dominique Bonte concludes, "Finally, this market is evolving to support new revenue sources. Those that fail to move with the market will be left behind."

ABI Research's "Location Systems and Platforms Forecasts" presents forecasts for in-dash, portable and handset-based navigation systems and solutions for each region, including navigation hardware and software shipments and revenue and market penetration levels, as well as vendor market share.

It also contains current data on subscribers, revenue and commercial carrier deployments for the LBS sector.