|Topic:||Breakthrough potential: Machine to machine in emerging markets|
Macario Namie is Vice President – Marketing in Jasper Wireless. Mr Namie has over 14 years of Software-as-a-Service experience in enterprise solutions.
Prior to Jasper Wireless, Mr Namie was Director of Worldwide Product Marketing at WebEx, the leader in on-demand collaborative solutions. In this role, he was responsible for definition and execution of go-to-market plans across a range of WebEx solutions for the eLearning, Sales, Marketing, Help Desk, Customer Support and R&D industries. Mr Namie also held senior marketing roles at ePeople and Lycos and formed his own company focused on staff augmentation for customer support organizations.
MacarioNamie holds a B.A. from the University of California, Berkeley.
M2M has come to mean any apps that are driven by automated systems, at least at one end of it, if not both. More advanced African countries have already installed M2M services that are particularly useful in Africa, e.g. security monitoring, fire alerts, anti-theft devices, tracking vehicles and goods and so on. However, the main issue remains the level of ARPU. For many industries, embedded connectivity is viewed purely as a cost. M2M operators should look to automate away much of the costs, to improve margins. They need a platform with a flexible business model that can address multiple device types for any demographics in different vertical markets.
At the end of 2011, there were six billion mobile subscriptions in the world, according to the International Telecommunication Union. In wealthier, ‘developed’ economies mobile penetration exceeded 100 per cent some time ago with the land grab for new subscribers fading into distant memory.
Analyst house Berg Insight recently quoted that the global number of mobile network connections used for wireless M2M communication increased by 37 per cent in 2011 to reach 108 million. A clear indication of the potential M2M has to rapidly develop, creating vast amounts of data traffic in the process.
Machine to machine connectivity promises almost limitless growth potential, but the ARPU is low. The global mobile boom, however, has helped push down the cost of entry everywhere. Cost savings, in combination with the drive for further growth means M2M is gaining momentum globally, not just in ‘developed’ markets, for both personal use and within the enterprise.
The availabilityof mobile broadband technology to link dispersed moving devices has popularised telemetry, the remote monitoring and controlling of devices through M2M communications, particularly in rural locations. The next generation of wirelessly connected devices will span many other industries, including automotive, construction, machinery, healthcare, consumer electronics and energy.
From remote medical diagnostics, through smart automated meters that ‘read’ themselves, to transport tracking solutions that improve route optimisation, connectivity opens vast possibilities for industrial growth, productivity and collaboration. Emerging regions like Africa and the Middle East are catalysts for developments in M2M technology and are well positioned to support enterprise growth and drive further expansion.
Africa & Middle East
Africa is a vast land mass featuring every conceivable type of terrain stretched across 54 states recognised by the UN (United Nations). The physical, regulatory and cultural challenges of making mobile connectivity ubiquitous in Africa are daunting, to say the least, but grouping the whole of Africa together under one umbrella means missing out on a continent rich with outstanding opportunities.
Connectivity in Africa is growing quickly and its economies are stabilising. Africa features ambitious technology hubs and is increasingly being seen as a prime location for service providers to further their investments. A burgeoning M2M sector could be the technology that helps connect the entire continent.
Many developing countries have opted to build out mobile networks, leapfrogging fixed line infrastructure development due to the costs and limitations associated with deployment. As a result, mobile networks are spreading quickly. Network operators are leveraging this investment for gains beyond the subscriber handset to support a multitude of verticals that use M2M technology such as enterprise applications in sectors such as automotive, smart grid, tracking, security and mobile healthcare.
In economically established and technologically savvy South Africa, Kenya and Nigeria, cellular networks are already being used for M2M connectivity to develop healthcare and m-payment technologies but there are three key verticals utilising M2M on the continent.
In South Africa, anti-theft initiatives are being welcomed by enterprises and consumers with open arms. In a world of transporting goods where shipments and deliveries are often intercepted, it has become ever more important to track vehicles. As such, businesses are realising the operational benefits and efficiency savings of real-time data monitoring, showing the segment has strong potential for growth. Additionally, consumers gain greater advantages to recoup their vehicles in the event of theft with real-time tracking.
Security is a basic need for both businesses and individuals. Security applications with integrated machine-to-machine technology can simplify and automate alarm monitoring and management, freeing up security resources and lowering costs. Cellular based M2M technology can also increase flexibility and availability while lowering installation costs. A security system can be automated to send alerts when it notes something is defective and remote monitoring can confirm situations or provide approval which eliminates false alarms.
M2M applications can automate remote property surveillance, eliminating the need to monitor various screens and show only those cameras filming abnormal activity. Surveillance systems can be linked with alarm management applications to create a record of criminal activity and alert authorities.
Connected smoke detection systems can not only automatically alert fire authorities or a security company, they can also provide vital information such as the exact room where the fire is located. Remote monitoring can also help determine causes and allow responders to activate only the fire suppression systems necessary, lowering the costs related to damage and fighting the fire itself.
M2M can simplify alarm management by reporting entry or damage as well as provide the exact location of concern, i.e. the window or door. Connected sensors can provide real-time details of a trespasser’s route, increasing safety for security personnel and supporting investigations.
Introduced in Africa as a means of reducing the dangers of carrying cash, mobile money is growing steadily in several East African countries including Rwanda, Tanzania, Uganda and Kenya with the introduction of M-Pesa. Nigeria and South Africa also began experimenting with the contactless payment when Absa bank and MasterCard inserted a chip on the bank staff’s phone handsets to enable them to pay for goods at coffee shops and canteens, which was well received.
According to the 2011 information economy report, in Africa there are 84 million mobile handsets already capable of using the Internet and seven out of ten are expected to be Internet-enabled by 2014. Today, we are seeing six million of those mobile owners using mobile money to pay for goods.
The cashless society benefits consumers through increased convenience, more service options, reduced risk of cash-related crimes, cheaper access to (out-of-branch) banking services and access to credit. For corporate entities: faster access to capital reduced revenue leakage and reduced cash handling costs. For government: increased tax collections, greater financial inclusion and increased economic development.
For mobile operators, much has been said about M2M being a low ARPU business. That is certainly true. In most markets, M2M ARPU is about ten per cent or less than that of traditional handset subscriber. On the basis of ARPU alone, M2M would not look like a viable market. However, when combined with churn and acquisition cost, M2M can in fact be an excellent market. The key metric operators should consider is margin. Of course, the key to high margin in a low ARPU business is eliminating costs. The M2M / Connected Devices Platform used by the operator should look to automate away much of the costs of serving this market.
For enterprises looking to build a connected device business, economics comes down to the business model. For many industries, embedded connectivity is viewed purely as a cost. Finding a flexible business model that takes into account the unique usage profile of the device across all demographics can help to optimise costs. For some industries, such as consumer electronics, embedded connectivity is an additional revenue stream. Using a connected device platform to employ advanced up-sell and cross-sell techniques can yield significant revenue opportunities.
For module and chipset manufacturers, economics really comes down to scale. Eliminating many of the cost and complexity barriers above will help energise the market. Organic mass market adoption drives volume. Of course, finding opportunities to accelerate market adoption can go a long way.
By addressing each of the market factors above, the vision of multi-billion connected devices globally will surely become a reality, and Africa and the Middle East regions are poised to play a key part in this scenario. Through partnerships – such as those between operators and connected device platform providers that can be found all over the world – this new ecosystem can evolve to provide the technology and support necessary to power successful M2M devices.
Berg Insight forecasts that global shipments of cellular M2M devices will grow at a compound annual growth rate (CAGR) of 24.6 per cent to reach 152.2 million units by 2016. However, to fulfil demand, increasingly advanced, large-scale M2M applications require advanced service enablement platforms that integrate remote devices, mobile networks and enterprise applications.
Emerging markets are being primed for the introduction of mass deployments in the coming decade but to ensure success there needs to be long-term growth and innovation that comes from experimentation within individual sectors. Currently many firms either don’t understand M2M technologies or have doubts about their true business benefits. M2M’s breakthrough potential lies in entrepreneurs and existing companies using the technologies to create wholly new products and services or in adding better quality of experience to existing services.