Informa-SAP: Turn M2M Potential into Profit


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This webinar discusses M2M opportunities and threats for communication service providers, based on a global research and survey program of M2M market stakeholders.

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Informa-SAP: Turn M2M Potential into Profit

  1. 1. M2M CommunicationsTurn Potential into ProfitCamille Mendler Catherine LynchPrincipal Analyst Senior DirectorInforma SAP Next-Gen BillingWebinar: February 21, 2012
  2. 2. Agenda• Introduction• Riding M2M rollercoaster• Triaging M2M opportunities• Securing profitability• Conclusions & recommendations• Q&A Source: Flickr/cliff1066â„¢, Paul Kelpe 2 ©All rights reserved
  3. 3. M2M: Multiple contexts, infinite possibilities A simple aim: Communicate intelligence from a vast, non-sentient world to enrich our daily lives and work.Personal wellness travel security home entertainment Urban energy health transport public safetyIndustrial extraction distribution diagnostics production Source: Flickr/RaeAllen 3 © All rights reserved
  4. 4. The challenge: Pricing, rating, charging & billing Sensors Network Monetization €$£¥ Source: SAP 4
  5. 5. Many beliefs about the M2M market are wrong Myths: Problems: External, due to supply chain fragmentation Value: Delivering M2M data Opportunity: Targeting the right vertical apps Networks: M2M networks are public Communications: M2M will become broadband Source: Informa Telecoms & Media Implication: It’s time to shed light on market realities. 5 © All rights reserved
  6. 6. Surveying the field Survey respondents Survey respondents across the M2M supply chain from 50 countries Integrator / consultancy 17% South America & Caribbean, Device, 5% North America, module, Telecom 12% chipset maker operator 6% 39% Western & Middle East & Eastern Africa, 13% Telecom Europe, 52% equipment vendor 19% Asia Pacific, MVNO 18% 2% Satellite Cloud MVNE operator services Telecom 3% software 2% provider 4% vendor / ISV 9%Totals may not add to 100% due to rounding. n=263. Source: Informa-SAP M2M Communications Survey Implication: Respondents had to be involved in the M2M supply chain; we also conducted 15 interviews. 6 ©All rights reserved
  7. 7. M2M market expectations are bullish! Today: M2M contribution 2015: M2M contribution to total revenues to total revenues 5% or more 21% 18% 27% Less than 5% % of respondents % of respondents 68% Zero 78% 76% 62% 44% 67% 29% 31% 17% 14% 18% 24% 1% 4% CSPs Integrators Telecom CSPs Integrators Telecom equipment equipment vendors vendors n=111 CSPs (telecom operators, satellite providers & MVNOs), n=45 integrators, n=49 telecom equipment vendors Source: Informa-SAP M2M Communications Survey Implication: If these expectations are met, this would equate to a $65B+ M2M market for mobile network operators alone by 2015. 7 © All rights reserved
  8. 8. Riding the M2M rollercoaster 8 ©All rights reserved
  9. 9. Nothing is really typical in M2M ‘Typical’ deal: ARPU ‘Typical’ deal: M2M SIMs 35% 30% % of M2M service providers % of M2M service providers 30% 29% 26% 30% 25% 28% 19% 20% 19% 25% 15% 20% 10% 10% 8% 8% 5% 15% 5% 3% 3% 0% 10% 5% 3% 5% 5% 0% NA / DK < $3 $3-$5 $5-$7 $7-$9 >$9 ARPU per SIM ($) Number of SIMs Totals may not add to 100% due to rounding. n=118 Source: Informa-SAP M2M Communications Survey Buying a data plan is the most common M2M pricing model in use. SLA-based, app-based or revenue share models remain uncommon.Implication: Every M2M deal is unique, but underlying costs are the same. 9 © All rights reserved
  10. 10. Structural barriers are the biggest concern Barriers to success in M2M • Managing and monetizing Fragmented ecosystem 49% different partner relationships Unproven business models 43% No. 1 Low ARPU, low margin, low ROI 35% for CSPs • Low return on investment End-to-end service mgmt 29% Technology immaturity 20% • Some concern about Unstable partner landscape 17% technical standards Billing / charging complexity 17% • Surprisingly low ranking of Security / privacy concerns 15% security and privacy Lack of M2M roaming 14% Traffic management 8% All respondents, n=263 Source: Informa-SAP M2M Communications Survey Implication: Diverse concerns, primarily about ROI. 10 © All rights reserved
  11. 11. Revenue capture in the value chain is complex Presentation Comm. Middleware Network Network IntegrationSensor Device & Apps Machine EnterpriseVendors Vendors Service Service Service System Providers Providers Providers Integrators € € $ € € £ $ Resellers & Solution Providers Source: SAP 11
  12. 12. Operationally, what’s critical for M2M success? Top 5 Telecom Telecom Device, Cloud M2M operational CSP equipment Integrator software module, service focus areas vendor vendor / ISV chipset maker provider End-to-end service mgmt ▲ ▲ ▲ ▲ ▲ ▲ Partner mgmt ▲ ▲ ▲ ▲ ▲ Flexible billing ▲ ▲ ▲ ▲ ▲ ▲ Security & fraud ▲ ▲ ▲ ▲ Network traffic & signalling loads ▲ ▲ ▲ ▲ Ordering & provisioning ▲ Cross-border roaming ▲ Business analytics ▲ ▲ ▲ n=111 n=49 n=45 n=23 n=16 n=12 Source: Informa-SAP M2M Communications SurveyImplication: E2E service management & flexible billing are table stakesfor all. A minority prioritizes the analysis of M2M data. 12 © All rights reserved
  13. 13. A bit-pipe future for telcos is widely expected Telecom operators are destined to be bit-pipe providers in the M2M market. Agree or disagree? Strongly agree Somewhat agree Somewhat disagree Strongly disagree Telecom operators (mobile, 18.6% 41.2% 24.5% 15.7% fixed, integrated) All survey respondents 17.5% 46.0% 27.0% 9.5% 0% 20% 40% 60% 80% 100% % of respondents Source: Informa-SAP M2M Communications Survey Implication: This is a self-fulfilling prophecy without a change in mindset – and the right tools. 13 © All rights reserved
  14. 14. The M2M revenue opportunity is shifting 2012 2015 Decision support, reports and alerts, analytics Security, demand response, performance management Consulting, integration, software development M2M revenue Communications services,distribution associated communications hardware Source: Informa Telecoms & Media Implication: The M2M market is at an intermediate stage. 14 ©All rights reserved
  15. 15. M2M services must align to end-user needs Utilities Oil & Gas Rail Top 5 1. Connecting remote locations 1. Connecting remote locations 1. Connecting remote locationscommunications 2. Cost of connectivity 2. Rising bandwidth needs 2. Managing multiple networks headaches 3. Data security 3. Data security 3. Staff technical skills 4. Staff technical skills 4. Cost of connectivity 4. Supplier reliability 5. Managing multiple networks 5. Managing multiple networks 5. Cost of connectivity Technologies Public cellular (2G/3G), fiber, wifi, Public cellular, (2G/3G) fiber, wifi, Public cellular (2G/2G), fiber, wifi, used private radio/microwave, satellite, private radio/microwave, satellite, private radio/microwave, satellite, wireless mesh, WiMAX, powerline wireless mesh, WiMAX, LTE wireless mesh Source: Informa 2011 vertical industry end-user surveys, n=241 respondents Implication: M2M intelligence must extend to enterprises’ remote assets beyond the reach of public networks. 15 ©All rights reserved
  16. 16. M2M intelligence mattersExample: Motorway tolls for subscribers – Autoroutes Paris-Rhin-Rhône • Management of "Liber-T" On Board Units • For individuals and enterprise fleets • Flexible discounts: • Volume based, time based, location based • Recurring fee, one shot fees, for fleets 16
  17. 17. Triaging high-value M2M opportunities 17 © All rights reserved
  18. 18. We’re getting smarter about M2M segmentationVarious inter-related trends: CSPs’ target industries for M2M Transport and logistics 51.8%• Developing cross-industry M2M Utilities 46.4% Automotive 27.3% solutions Financial services 20.0% – Eg: Pay-as-you-drive insurance Health 20.0% touches transport, automotive, financial Operators / MVNOs 15.5% services Consumer electronics 14.5%• Creating new annuity revenues Public safety 11.8% – Eg: Remote product diagnostics as a Integrators 11.8% service (eg: photocopiers, printers) Manufacturing / industrial 10.9%• Marketing B2B2C opportunities Oil and gas / mining 4.5% – Eg: Smart metering for utilities’ Agriculture / food 2.7% consumers Military / defence 0.9% Other 3.6%• Targeting SMEs Dont know / undecided 12.7% – Eg: Low-cost fleet management % of CSPs Source: Informa-SAP M2M Communications Survey Implication: Focus is shifting to specific apps versus specific industries. 18 ©All rights reserved
  19. 19. In M2M, Grannies and Gangsters are alike Source: Flickr/A30_Tsitika Elder care Felon tracking Many worry about the ‘long-tail’ nature of M2M applications. But functionally, many similarities exist between apps. These can be cross-marketed to build profitable scale. Implication: Seek horizontal application of M2M functionality. 19 ©All rights reserved
  20. 20. Triaging for M2M success: App categories Category Description Static Monitor assets in fixed locations, such as soft-drinks machines or photocopiers. Nomadic Rely heavily on mobile networks to track people and assets on the move, such as trucks and shipping containers. Transformational Create a brand-new annuity revenue stream for the end customer, such as pay-as-you-drive insurance. Horizontal Applications that are functionally similar across various industries (see previous example). Implication: Applications which match multiple categories have a greater potential for scaled success. © All 20 rights reserved
  21. 21. There’s a missing link: Long-tail wireless• Long-tail wireless vendorssupport vertical applications • Example: CalAmp, modem/router vendor • Eg: industrial automation, SCADA • Key verticals: automotive, oil & gas, fleet, logistics, public safety, rail, utilities, direct• Serve challenging locations broadcast satellitepublic cellular can’t easily reach • Technologies: GPS/GPRS, LTE, private radio, • With unlicensed & licensed spectrum satellite, WiFi, WiMAX, Zigbee • Annuity: 235,000 customers for vehicle• Support ‘bottom-up’ M2M tracking, vehicle finance, fleet management, remote car start services • Appetite to diversify through annuity revenue streams • Alliances: Strategic alliance with nPhase (Verizon); works with AT&T, Numerex, Rogers, Sprint, Vodafone Implication: These vendors can bridge between public and private M2M – they are both partners and competitors for CSPs. 21 © All rights reserved
  22. 22. M2M connectivity will grow explosivelyMore things to connect……the connectivity pot growsPublic (cellular) will not bethe sole beneficiary 2020+ 2015 ‘Private’ M2M will dominate 2012 Using familiar (eg: WiFi) and unfamiliar protocols (eg: WirelessHART)Implication: Some CSPs believe that revenues from public cellular M2Mwill be big enough to fight for. 22 © All rights reserved
  23. 23. Back to the future: Alliances Airlines Telcos M2M Orange Sprint Deutsche Telia Telekom Sonera Verizon Vodafone Wireless MACH Syniverse Global alliances and hubs for cross-border M2M should cut costs and speed service activation. Often focused on large multinationals, they must also serve SMEs with M2M roaming needs.Implication: Battle lines are being drawn to control public cellular M2M. 23 © All rights reserved
  24. 24. Securing profitability 24 © All rights reserved
  25. 25. Let’s review M2M business models & challenges • Flexible platform with low ongoing cost of ownership Low-cost model • Scalable platform to scale for high volume • Low ARPU unit value • Reduce operational costs Massive scale • Support mix of recurring & usage based micro payments • High volume billing & high availability architecture • Handle settlement & commission for complex value chains Multi-party • Support retail & wholesale pricing models • Global support value chain • Analytics promote greater efficiency 25
  26. 26. It’s time to look further within Profitability What is it? Internal External Can it be variable CSP issue market outsourced? issue Reporting structure of internal M2M _ _ Structure division. Internal metrics used to determine _ _ Accounting M2M profit and loss. Cost to deliver cross-region M2M _ Roaming services. Service management costs _ Platforms and capabilities. Dependency of M2M service pricing _ _ Modules on module costs. Partners Partner pay-out models supported. Charging M2M pricing models supported. Source: Informa Telecoms & Media Implication: Many profitability variables lie within a CSP’s control. 26 ©All rights reserved
  27. 27. Conclusions Myths: We say: Problems: Internal issues are External, due to supply underplayed chain fragmentation Value: Value lies in Delivering M2M data the data Opportunity: Opportunity lies in Targeting the right horizontal apps vertical apps Networks: M2M networks are M2M networks are public also private Communications: M2M will remain M2M will become largely narrowband broadband Source: Informa Telecoms & Media Implication: M2M is a huge opportunity – choose a sustainable role. 27 © All rights reserved
  28. 28. Q&A 28 © All rights reserved
  29. 29. Thank you!Camille Mendlercamille.mendler@informa.comFor more M2M market intelligence, contact:EMEA AsiaJamie Moss Charles charles.moon@informa.comSheridan Nyesheridan.nye@informa.comLatin America North AmericaMarceli Passoni Andy
  30. 30. SAP Next-Gen Billing: Run better M2M services• Supports flexible pricing for retail and wholesale models• Support for end to end service management• Low cost platform for high volume, low value transactions• Handles complexity in partner settlement• Leverage analytics to interpret data & sell « greater efficiency »For more information, contact: