 | Issue: | Europe II 2013 |
| Article no.: | 4 | |
| Topic: | M2M – beyond connectivity | |
| Author: | Anand Gonuguntla | |
| Title: | Co-Founder & CEO | |
| Organisation: | Centina Systems | |
| PDF size: | 201KB |
About author
Anand Gonuguntla is the Co-Founder, President and CEO of Centina Systems; he has over 15 years’ experience in the telecom industry.
Prior to his current role, Mr Gonuguntla was the Director of Systems and Software Engineering at Xtera. Mr Gonuguntla also held management positions in software and program management at Fujitsu. He has published papers in the Proceedings of the ACM and holds a patent in network management.
Anand Gonuguntla holds a master’s degree in Electrical Engineering from the University of North Dakota, and a bachelor’s degree in Electronics and Communications Engineering from Jawaharlal Nehru Technological University, India.
Article abstract
In the coming years, M2M promises to be among the most rapidly growing uses of mobile networks. The return on selling connectivity alone, however, will be low. Operators must invest in creating value-added services that help end users turn their M2M data into valuable information and services. Since the ARPU for M2M is low, operator must depend upon the quality of service, flawless connectivity and bandwidth to retain customers and the efficient processing of large volumes to build profit margins.
Full Article
Machine-to-machine (M2M) communications are poised to take off, as the ubiquity of mobile broadband and the adoption of cloud-based services and processes, continues apace. The so-called Internet of Things, which which promises to connect everything from cars and utility meters to refrigerators and sofas to the cloud and to each other, is a vision with the power to transform industries as well as lifestyles.
To dominate M2M services effectively, operators will require a number of new OSS/BSS and back-office features that offer visibility into network and service performance in a granular, real-time way.
Operational challenges
Generating revenues with M2M requires, first and foremost, operational efficiency. As with classic telematics, the ARPU per device will be small, so the business model depends upon volume and bolstering margins by reducing costs. Operators are moving to open-access platforms, networks and policies to encourage rapid service growth based upon Internet-connected innovation. This, nevertheless, puts added pressure on operators to reconsider their business models and BSS/OSS investments, to drive increasing operational efficiencies and improved agility in order to capture the growing cloud services opportunity.
M2M also drives a renewed focus on assuring the customer experience. Many M2M deployments are mission critical: consider smart grid, remote-controlled heating and cooling systems, or connected cars – all of these implementations have little tolerance for downtime. Operator who cannot guarantee service levels, connectivity and bandwidth to support these services will not survive in this market.
Many of these services will be running on mobile data networks – a finite resource. As the proliferation of M2M devices escalates, operators will need to employ a performance management solution that gives them control over network resources, so that they can better correlate data consumption to network capacity, thus ensuring maximum payback on their network investments.
Further, according to a report from the Carbon War Room, a big barrier for service providers trying to roll out new M2M services is a lack of performance data – this makes it difficult to prove ROI to end users. “Potential clients need to understand M2M technologies’ value proposition as these technologies often require significant upfront investment,” the report said. “Actual data and analytics for making projections and monitoring results have not been fully integrated into products or sales”.
Thus, operators must work to build data collection and analytics into their offerings. “By creating and updating tools to provide robust metrics, companies can help make their value proposition more apparent to potential clients,” the firm said.
Assessing the market
As of today, there are about 1.5 billion Web-connected PCs and fewer than one billion Web-connected phones. Famously, Ericsson CEO Hans Vestberg predicted last year that the Internet of Things would reach 50 billion endpoints by 2020. That roughly translates into seven devices for every single person on the planet, and generally suggests that everything – and that means everything – will become a wirelessly connected device, from gas pumps to refrigerators to cars.
More near-term, however, the scope of the opportunity is significant for the operator willing to take the operational challenges on head-on. A recent study from Juniper Research has found that the telematics and consumer electronics sectors are rapidly becoming the two anchor industries for the M2M market, challenging the heretofore-dominant position of smart metering as the area with the most actual deployment. The report forecasts that the market for M2M and embedded devices will reach 400 million by the end of 2017, up from a little more than 110 million at present.
Analysts are beginning to agree when it comes to the rate of growth for machine-to-machine connections worldwide. IMS Research for instance expects the market to more than triple by 2016 compared to 2011, reaching around 326 million devices as carriers look for growth opportunities by rolling out new tools and platforms to facilitate the development of mobile broadband M2M applications. Berg Insight essentially agrees, forecasting 359.3 million total M2M connections in 2016.
Juniper Research predicts that revenue from products and services delivered via embedded consumer electronics devices will reach US$6.4 billion in 2014. According to IMS, operators will be looking for more ways to get revenue out of the M2M market as it expands; the research firm estimates that only 10 to 30 percent of the overall value in the M2M market comes from carriers providing actual connectivity for devices. As such, carriers are looking to get more revenue providing value-added services to solution developers as well as end-to-end applications to end-users.
Operators with the right operational infrastructure can find added value beyond packaging devices and connectivity together. “Mobile operators are not simply providing managed connectivity services to the cellular M2M market but increasingly are connecting the dots among M2M ecosystem players, including suppliers and developers – and this benefits the market as a whole,” said IMS analyst Sam Lucero. “Examples of this proactive role by mobile operators range from establishing module supply programs to developing partnerships with platform vendors and solution suppliers to reduce overall complexity in the value chain”.
While connectivity is critical for M2M adoption, the challenge is for M2M telcos to provide both connectivity and the intelligence to improve customers’ productivity.
“The key to revenue in M2M space is in the intelligence component of the M2M equation”, said Frost & Sullivan senior industry analyst, Yiru Zhong. “Because intelligence has different meanings and value to different customers, Frost & Sullivan expects an M2M telco market leader to emerge by tailoring a menu of M2M intelligence for a broad spectrum of customers – including small and medium-sized enterprises (SME) – and by offering both communication and computing capabilities to simplify customers’ M2M adoption processes.”
A solid OSS foundation with granular, near real-time visibility into the customer’s network and service performance is one big linchpin to achieving that kind of intelligent network approach to the M2M opportunity.
Market lessons
Tier 1 machine-to -machine (M2M) telecom service providers in Europe are seeking ways to move beyond basic connectivity to avoid commoditization, particularly given the entry of operators focused on providing wholesale M2M capacity – that is depressing pricing in Europe already.
Frost & Sullivan’s Zhong points to Deutsche Telekom’s M2M Marketplace platform as an example of how to find new revenue sources as the average income from M2M connections declines. DT’s M2M Marketplace approach is unusual; it promotes a technology- and user-agnostic trading market aimed at bringing buyers and sellers together, indirectly allowing the DT platform to cover a wide range of customers.
Other operators, including Telefónica’s O2, Orange Business Services and Vodafone Global Enterprises are also pushing forward with their M2M strategies, according to Frost & Sullivan, but Zhong warned that while many European operators have strong IT capabilities that lets them precisely monitor service performance, only a few have clear and consistent capabilities that match their mobile footprint.
“The first measure of success was winning major car original equipment manufacturer (OEM) contracts and smart meter projects,” Zhong said. “The challenge is to convert these relationships into more than M2M connectivity contracts.”
Juniper Research’s Anthony Cox noted that competition is set to get steeper. Russia’s Megafon and Sweden’s TeliaSonera will use cloud-based infrastructure from Ericsson to support fresh M2M initiatives. He said that what operators really need in the M2M environment to bolster revenues and profitability is the ability to activate and manage devices without incurring significant cost.
“Appreciating the unique challenges that M2M holds has led a host of players in the M2M industry, from module vendors to operators, to create the application programming interfaces (API) that really bring value to M2M,” said Cox. “M2M, after all, is as much about creating value from the information that connected devices feed back (to humans and other machines) as connecting them in the first place.”
Despite the rapid pace of change and innovation, savvy operators can tailor an OSS strategy for M2M that involves not just guaranteeing connectivity, but also the customer’s experience across a plethora of devices. Operators will need to provide their M2M end users with a full range of analytics and leverage that information to provide additional IT-oriented managed services. This requires additional software investment, but as 2013 promises to see a growing wave of M2M adoption, it’s an investment operators cannot afford to pass up.
