M2M Market Analysis: When is an SDP a silo? Is an enterprise SDP necessary?

SDP Global Summit

20th-22nd September 2011

www.alanquayle.com/blog

© 2011 Alan Quayle Business and Service Development

Structure

• M2M Background

o Hierarchy of Devices

o Mobile M2M is a small piece of M2M

o ETSI!!!

o M2M Architecture

o Market Sizing

• DT, Gemalto and BMW Case Study

• Quick Operator Activity Round Up

• Battle Over Who Does What

• Likely changes in the M2M Market

• Final Note on the Enterprise SDP

M2M Background

• M2M is an abbreviation for machine-to-machine, a technology that supports wired or

wireless / mobile communication between devices.

o Wide area wireless networks, e.g. cellular/mobile GSM/LTE and CDMA

o Wired access (in particular industrial Ethernet),

o Wireless LAN (WiFi) and Wireless PAN (Zigbee)

• M2M technology evolved from telemetry, that allows the remote measurement and

reporting of information of interest to the system operator.

• In the past, telemetry systems were the exclusive domain of very large well financed

organizations.

o Large oil and gas companies and electric utilities, through the use of extensive customer built

dedicated data networks, were some of the first organizations to widely use telemetry.

o Also space agencies used telemetry to monitor satellites and manned spacecraft.

M2M is not new, its been around since at least the 1960s.

Mapping the Hierarchy of Devices

4B Mobile devices

1.2B Static devices

0.5B Fleet

0.5B Industrial devices

2B Controllers / Sensors

50B Microprocessors

M2M covers everything from sophisticated mobile computing devices, through to a simple microcontroller in the refrigerator, the common component is they‟re „connected‟ devices

M2M Background

• Advancement of technology, with improving capabilities and coverage of

wireless networks as well as the adoption of IT systems is making wireless M2M

available to all organizations and even individuals.

• In the space of a few decades, the technology has found a multitude of

applications across all industries.

o M2M is used in telemetry, data collection, remote control, robotics, remote monitoring,

status tracking, road traffic control, offsite diagnostics and maintenance, security

systems, logistic services, fleet management and telemedicine.

o Frequently wired and wireless communication technologies compete for the same

applications.

• However, wireless is the only option when wide area mobility is required – for

instance in automotive applications.

Mobile is only a small (and emerging) part of the M2M market

ETSI Definition

And now ETSI is getting in on the act with their own set of definitions...

Mobile M2M Architecture: The Values in the Verticals

Devices

M2M Terminal M2M Module Chipset

Networks: GSM/LTE/CDMA/Other

Fleet Management Car Telematics

Smart Grids Industrial Retail

Security

Applications

Though functionally similar, M2M solutions vary greatly across applications. This necessitates a vertical / channel based strategy for fulfillment. Critically most

operators lack the ability to deliver vertically focused solutions.

Example M2M Components

M2M Modules

M2M Terminals

Typical M2M Architecture

Machine, e.g. Car

M2M Module

IP Connectivity, mobile network,

internet, LAN M2M Gateway

Application Server

M2M Gateway and Application Server are the domain of IT companies such as Oracle, IBM and HP, who have an existing vertically focused / channel business.

Operators will struggle against their expertise and channel incumbency.

Enterprise / MSP

IBM‟s scale in M2M solutions goes far beyond all operators

M2M Market Structure

Vertical focus matters intensely!

Total M2M Device Revenue across Industry Segments

M2M devices presents $12B

market by 2013, according to

Harbor Research.

M2M Software and Services Revenue ($ Million)

Supply chain & logistics and asset management will dominate revenue in the software and services – by 2013 its potentially a $150B market. Device revenues are less than 10% of this.

DT, Gemalto and BMW Case Study

• BMW is embedding the Machine-to-Machine (M2M) solution from Deutsche Telekom and Gemalto in its

latest car models to enable emergency call (eCall) services.

o Deutsche Telekom is the first network operator whose automotive MFF-SIMs solutions are built into an industrial product series.

• Wide scale deployment started in 2009 and to date, over 200,000 BMW cars in use across Europe are

already equipped with the M2M solution

o Deutsche Telekom provides the central component for the mobile-based emergency system with wireless

communication link for vehicles all over Europe, in cooperation with its roaming partners.

o Gemalto developed a highly durable Machine Identification Module (MIM), the dedicated M2M-Form-Factor (MFF)

SIM, to meet the quality requirements of the automotive environment.

• The solution enables a reliable connection to BMW Connected Drive‟s driver assistance and information

service via Deutsche Telekom and its roaming partners‟ networks. The service includes an assistance

center that dispatches swift help in emergency situations. Activation of the crash sensors in the car

triggers an automatic call to the call center and reports the exact car position. The emergency call can

also be set up manually if car trouble occurs.

• Deutsche Telekom sees huge market opportunities considering there are over 350 million cars in Europe

alone.

DT has been able to deliver more the just connectivity. T-Systems is key.

M2M-Form-Factor (MFF) SIM

Designed for rugged outdoor applications

This is the key point of operator‟s focus on being more than pipe providers, being solution providers enables them to better access the value delivered.

Flexibility in billing options is key

Operators continue to struggle in finding the right pricing. There are no standard contracts or revenue splits. Every deal is custom at the moment.

Quick Operator Activity Round-up • AT&T: 12M SIMs, Hertz, BMW, Nissan; USA technologies (vending machine transactions); Amazon

Kindle, Barnes and Nobles nook; Garmin, TomTom; Progressive Insurance

o T-Mobile US: 3M SIMs, GuidePoint, OnAsset, PROCON, PassTime, Lok8U, Alarm.com, IContain, and The IPS Group

• Deutsche Telekom: 5M SIMs, BMW, Navigon, Biotronik, Cargobull Telematics, MAN-Telematics, Toll

Collect, Stadtwerke Emden, car2go.

• Telefonica: 4M SIMs, Securitas, ABB, Iberdrola Endesa, Tyco ADT, Sermepa

• Telenor Connexion sold its M2M Service Delivery Platform to Ericsson, who is using it as the

centerpiece of its M2M offerings to the operator market (managed service)

• Verizon: 9M, Onstar (others not disclosed – why build on a dead interface?)

• Vodafone: 6M SIMs, AMS, a New Zealand provider of smart metering systems; Bglobal, smart metering

program; Technocom ; Ctrack/Digicore, fleets of vehicles; Taxameter Centrale, parking management

systems; British Gas, for smart metering service; TomTom; and Hyundai.

When we examine the deals, few break out beyond connectivity, BMW and DT with eCall is the largest exception. In Amazon Whisper Net WiFi not Mobile is the most popular option.

Battle over who does what and how much the enterprise pays, the more players, the more cost, the less margin!

Consulting Sale and Integration

Solution Monitoring and Reporting

Device Installation

Network Monitoring and Reporting

Billing and Customer Care

Connectivity Hardware

Applications

Device Monitoring

Likely Changes to the M2M Value Chain

• Supply-chain consolidation and realignment

o Technology vendors and chip manufacturers will acquire the modem/module

manufacturers

o IT Solution vendors will acquire platform vendors and ASPs to complete their solutions

with horizontal and vertical solutions. Creating solution sets with fleet management,

utility management, distribution, asset management, education/government sector, etc.

o Much like in the IT sector, communications companies like AT&T, Orange/FT, Vodafone

and Verizon Wireless will be a channel to market and purely as a network provider

• Channel empowerment

o IBM, HP and the NEPs will copy what Cisco did in educating its channel in the “Cisco

way” of networking. Using publications and courses to educate an entire generation of

networking engineers, in essence making the Cisco way of networking the de facto way of

networking.

o Providing lots of free equipment, training and marketing $$$ to make their technology

simply the one the channel knows and trusts best.

Operators face a significant challenge to break outside of connectivity. Need to focus on verticals and channel management, both skills in which few operators have achieved success.

Final Note on the Enterprise SDP

• Enterprise problem is different from the consumer problem as enterprises manage

their own data and processes.

• Enterprise middleware is the Enterprise SDP, e.g. Oracle Fusion (which is based on

SOA)

• NEPs / Telcos generally have little credibility in this IT domain

o Lack IT consulting sales credibility (NTT, BT and Verizon have aggressive M&A strategies in

such IT skill sets)

o DT has T-Systems which bought VW‟s IT department

• M2M SDP is just a silo!

• Operators need to get much more commercially focused fast else will be a dumb pipe

Technology is a given, its all about the ecosystem (fulfillment channels)