Frost & Sullivan Market Insight: Taking M2M to the Next Level in 2013


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Telecom service companies can accelerate M2M market development by increasing customer awareness and addressing specific customer needs

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Frost & Sullivan Market Insight: Taking M2M to the Next Level in 2013

  1. 1. March 2013Taking M2M to the Next Level in 2013 ICT Beat Yiru Zhong, Senior Industry Analyst, ICT Europe “50 Years of Growth, Innovation & Leadership”
  2. 2. Taking M2M to the Next Level in 2013 ICT BeatSince global telecommunications provider Ericsson announced its 50 billion connecteddevices vision in 2009, the telecom industry has eagerly anticipated the tangible effects of thissubstantial market opportunity. Four years on, telecom companies have made significantprogress in capturing immediate and well-defined opportunities, mostly focused onapplications:• 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 companieswill find it difficult to show marked improvements in contributions to total revenue andprofitability over the next few years. There has been a slow pace in market development andM2M revenue performance over the past four years.M2M Revenue Potential #1 - SMEsMost high-profile M2M customer wins by mobile operators in the past four years involvedconnectivity. Frost & Sullivan believes the slow pace of market development is reflected in alack of project wins that extended into additional services, such as utilising machine data foranalytics, enabling customers to develop new services or functionalities, and leveraging telcos’unique role as an aggregator or facilitator in a connected devices future. Telecom servicecompanies can accelerate market development by increasing customer awareness through abroad route-to-market strategy and further developing customer needs.M2M offerings for small and medium enterprise (SME) customers are a priority. Widening anM2M telecom service provider’s reach to a spectrum of customers, regardless of enterprisesize, can yield a more sustainable flow of revenue. Frost & Sullivan estimates that a broadenterprise M2M strategy will stimulate revenue growth by 22.3 percent in the next five yearsas M2M functions and customer needs evolve.M2M Revenue Potential #2 – Business-Driven M2M ApplicationsM2M telecom service providers also must address customer needs outside of traditional M2Mlogistics applications, and applications in smart electricity meters and connected cars foreCallcompliance. These M2M applications with greater revenue potential lie in industries wherekey business indicators, such as efficiency, productivity, and customer retention, are importantM2M servicedrivers. Frost & Sullivan predicts thatM2M opportunities lie in industrial auto-mation, retail, and even local governments.© 2013 Frost & Sullivan Page 2
  3. 3. Taking M2M to the Next Level in 2013 ICT BeatRevenue of between 10 and 35 percent more is achievable in the next five years, when weexpect M2M revenue to be derived from using intelligence generated from machine data orenabling enterprises to develop new functionality or services for their customers.A Diverging Path for M2M Telecoms Service ProvidersM2M 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 andare considering a viable business model for market entry. A niche approach will help MVNOssucceed 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 tobecome more vocal in 2013. This additional push will accelerate market development andstimulate greater M2M innovation.© 2013 Frost & Sullivan Page 3
  4. 4. Taking M2M to the Next Level in 2013 ICT Beat 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.About Frost & SullivanFrost & Sullivan, the Growth Partnership Company, works in collaboration with clients toleverage visionary innovation that addresses the global challenges and related growthopportunities that will make or break today’s market participants. For more than 50 years,we have been developing growth strategies for the Global 1000, emerging businesses, thepublic sector and the investment community. Is your organisation prepared for the nextprofound wave of industry convergence, disruptive technologies, increasing competitiveintensity, Mega Trends, breakthrough best practices, changing customer dynamics andemerging economies?Contact Us: Start the discussionCONTACT US +44 (0) 20 7343 8383 • •