frost & sullivan market insight: taking m2m to the next level in 2013
TRANSCRIPT
March 2013
Yiru Zhong, Senior Industry Analyst, ICT Europe
“50 Years of Growth, Innovation & Leadership”
Taking M2M to the Next Level in 2013 ICT Beat
Taking M2M to the Next Level in 2013 ICT Beat
© 2013 Frost & Sullivan Page 2
Since global telecommunications provider Ericsson announced its 50 billion connected
devices vision in 2009, the telecom industry has eagerly anticipated the tangible effects of this
substantial market opportunity. Four years on, telecom companies have made significant
progress in capturing immediate and well-defined opportunities, mostly focused on
applications:
• New cars (the result of the European Union (EU) legislation of eCall);
• Electricity meters (as required by European Commission and national government
commitments on smart metering rollout); and
• A range of other applications in consumer and professional healthcare, traditional
telemetry, security, and industrial automation.
However, despite continuous efforts to fine-tune their M2M strategies, telecom companies
will find it difficult to show marked improvements in contributions to total revenue and
profitability over the next few years. There has been a slow pace in market development and
M2M revenue performance over the past four years.
M2M Revenue Potential #1 - SMEs
Most high-profile M2M customer wins by mobile operators in the past four years involved
connectivity. Frost & Sullivan believes the slow pace of market development is reflected in a
lack of project wins that extended into additional services, such as utilising machine data for
analytics, enabling customers to develop new services or functionalities, and leveraging telcos’
unique role as an aggregator or facilitator in a connected devices future. Telecom service
companies can accelerate market development by increasing customer awareness through a
broad route-to-market strategy and further developing customer needs.
M2M offerings for small and medium enterprise (SME) customers are a priority. Widening an
M2M telecom service provider’s reach to a spectrum of customers, regardless of enterprise
size, can yield a more sustainable flow of revenue. Frost & Sullivan estimates that a broad
enterprise M2M strategy will stimulate revenue growth by 22.3 percent in the next five years
as M2M functions and customer needs evolve.
M2M Revenue Potential #2 – Business-Driven M2M Applications
M2M telecom service providers also must address customer needs outside of traditional M2M
logistics applications, and applications in smart electricity meters and connected cars for
eCall
compliance. These M2M applications with greater revenue potential lie in industries where
key business indicators, such as efficiency, productivity, and customer retention, are important
M2M servicedrivers. Frost & Sullivan predicts thatM2M opportunities lie in industrial auto-
mation, retail, and even local governments.
Revenue of between 10 and 35 percent more is achievable in the next five years, when we
expect M2M revenue to be derived from using intelligence generated from machine data or
enabling enterprises to develop new functionality or services for their customers.
A Diverging Path for M2M Telecoms Service Providers
M2M telecoms service providers can be split into three groups:
• Ambitious operators that are keen to be a one-stop shop for M2M customers. Such
providers have aggressive global or regional market expansion plans and frequently
fine-tune their strategies;
• Operators that compete in a narrower geographic scope; and
• Operators keen to emulate their mobile strategy of selling M2M capacity to specialist
M2M service providers (e.g., a telematics company or a home security company, or
simply selling straight M2M connectivity to their enterprise customers.
In the past year, mobile virtual network operators (MVNOs) have been tempted by M2M and
are considering a viable business model for market entry. A niche approach will help MVNOs
succeed for a number of reasons.
• There is sufficient competition in M2M connectivity platforms so that MVNOs can
choose from four options for providing basic M2M connectivity to their customers:
opting for M2M platform providers such as Jasper Wireless and Ericsson’s Connectivity
Platform; leasing their host’s M2M platforms; buying platforms from IT vendors, such as
Logica/CGI, Tieto and IBM; or buying from M2M modules manufacturers, such as Telit,
Sierra Wireless, and Cinterion.
• Sufficient M2M application opportunities exist in industries that have a well-defined
M2M scope that does not require international roaming. For example, we expect home
security and building automation to be M2M functions that require specialist providers;
they, in turn, are distinct customer targets for MVNOs.
• Sufficient lower-end M2M applications require only M2M connectivity. These are often
traditional telemetry applications, such as asset tracking and tracing, or vending machine
applications. These opportunities are easy to grasp without significant overhaul of
the MVNOs’ overall structure.
As such, Frost & Sullivan expects MVNOs or wholesale M2M telecom service providers to
become more vocal in 2013. This additional push will accelerate market development and
stimulate greater M2M innovation.
Taking M2M to the Next Level in 2013 ICT Beat
© 2013 Frost & Sullivan Page 3
Obstacles Remaining in 2013
The market entry of such service providers will accelerate the rate at which machines are
connected, as well as the pace at which a connected devices future is realised. While many
external obstacles to market growth remain, an internal constraint can be addressed by the
telecom industry.
M2M connectivity roaming is one of the most significant obstacles to enterprise adoption.
This opaqueness of roaming costs restricts market adoption, particularly in the SME space.
This issue could become a priority for telecom regulators to provide a coordinating hand
across national boundaries within the EU.
Another obstacle to M2M market development is the rate at which service providers target
the SME market. Deutsche Telekom’s M2M Marketplace approach, announced in 2012, is a
good starting point. Others, such as Vodafone and Telefonica, focus on this as part of their
overall enterprise strategy without explicitly simplifying the purchasing process for SMEs
M2M connectivity requirements. Without a relatively straightforward plug-and-play M2M
solution for SMEs, it is difficult to translate this opportunity into actual contracts. Our
prediction is that M2M telecom service providers might not see this as a great priority.
Instead, we expect providers with national ambitions or wholesale M2M providers to fulfill
this market need.
M2M market development also requires standardisation efforts. Many industry-led efforts aim
for a common protocol from M2M modules, M2M connectivity platforms, applications
software protocols to machines/devices. However, significant progress is unlikely since the
wider industry does not even agree on what must be standardised.
Looking forward, Frost & Sullivan expects market development to accelerate, led by more
market entry and significantly deeper and wider customer education for M2M adoption.
Taking M2M to the Next Level in 2013 ICT Beat
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