|Issue:||Europe II 2013|
|Topic:||The evolving machine-to-machine market|
|Author:||Robert E. Sell|
|Title:||President and CEO|
Robert E. Sell is Group Chief Executive of Accenture’s Communications, Media & Technology operating group, which serves clients in the communications, electronics, technology, media and entertainment industries. Mr Sell is also a member of Accenture’s Global Management Committee.
Previously, Mr Sell was the managing director of Accenture’s Communications, Media & Technology North America operating unit. In that role Mr Sell was responsible for setting the overall vision and strategy, for sales and revenue growth, and for client relationship management in the United States and Canada. During his career with Accenture, Mr Sell has served in a variety of leadership roles, across a number of industries and has managed Accenture’s business relationships with some of its largest global clients.
Robert E. Sell received his undergraduate degree in economics from Lafayette College.
Companies are increasingly embedding networking technology in their products and the devices they use are steadily becoming more intelligent and interconnected. M2M (machine-to machine) communications and systems are used for security cameras, traffic sensors, navigation systems, home appliances, payment systems, healthcare devices, ticketing systems, and vending machines among others. Companies, though, are finding it is an exceedingly complex task to put together the right alliances and find workable business models, pricing, branding and assembling the technology platforms that provide interoperability.
Technology is intended to make our lives easier and more productive. Many consumers and business users are experiencing this through the devices they use daily, which are steadily becoming more intelligent and interconnected. Smart thermostats capable of learning the homeowner’s behaviour, and cars connected to the owner’s personal social media site, where the car posts a message when it’s time for an oil change, are examples of how the advent of ‘smart’ technologies. The advent of machines, sensors, and control equipment ‘talking’ to each other’ – is having an enormous impact both on users and on the wide array of businesses that have a role in making it all possible.
This is where the challenges arise. For although smart technologies may make life easier, finding the business models, pricing, branding and the right technology platform for providing interoperability can be exceedingly complex.
The technology underlying these smart applications is machine-to-machine (M2M) networking, where remote devices wirelessly monitor and report their statuses to other machines. As more physical objects develop two-way interactions with the network, a growing complexity of developing, deploying, and managing M2M applications is emerging.
Challenges for operators abound
The M2M revolution has certainly arrived. Just consider the numerous networked devices now fixtures in everyday life – such as security cameras, traffic sensors, navigation systems, home appliances, payment systems, healthcare devices, ticketing systems, and vending machines.
Now, M2M is poised to revolutionize several industries, creating new opportunities for growth, efficiency and profitability. But, as typical of any technological trend at its start, standards are lacking, outdated business models are being revised and the role of important players like mobile network operators are being carved out. And mobile operators will continue to be bombarded with an explosion of data traffic in their networks, compelling them to determine how to maximize profit in the key traffic growth area. As an added challenge, the technologies involved in M2M are varied. They include SIM card-based communication, as well as other ways to connect things to each other, by using RFID, WiFi and ZigBee, in addition to GSM, 3G and 4G, broadband, Internet and private wide area network (WAN) used to connect equipment.
Up to this point, mobile network operators have been at the vanguard of the M2M revolution, due to their investment in wireless infrastructure. However, going forward, they will find themselves facing new challenges and opportunities that distinguish the M2M era from the handset era. They will need to review old assumptions, such as revenue metrics, usage patterns, support needs, partnering relationships, and business models. The good news is rapid change leads to new opportunities, and operators are well positioned to seize these developing opportunities. However, they will face the challenge of efficiently sifting through an abundance of opportunities and expend resources only in areas that promise the most lucrative, long-term revenue streams.
One of those potentially lucrative revenue streams for M2M is in-vehicle connectivity or telematics. In 2012, U.S. wireless operators inked major deals with automotive giants that have the potential to reach into other verticals, such as health, asset tracking and home automation. In Europe, Magneti Marelli, part of the Fiat group, has been developing and managing digital entertainment and communication solutions and services – including GPS navigation, in-vehicle tracking security and diagnostic systems. These systems are designed to improve the onboard driving experience for both drivers and passengers in a wide range of vehicles. In the global energy sector, BP, one of the world’s largest oil companies, has embarked on a pilot program that enables BP to use telematics to track rail shipments of chemicals, incorporating technologies that include satellite communications, solar power, global positioning, weight, temperature, and impact sensors. Other industries – retail and health care – are poised to network their products in vast ways over the next decade.
Increasingly, businesses from diverse industries are coming to the realization that M2M networking is strategic to their future. However, there is a disagreement on the most effective approach to bringing new, networked, products to market. Where innovation is concerned, many approaches will coexist, and smart players will keep their options open.
Standardizing M2M platforms
Interoperability – networking across different devices and services – is one of the biggest challenges in the M2M segment. Most Internet-ready TVs and automotive entertainment systems use a common platform that enables networking. Over time, it’s expected that a value chain will evolve that sets standards and facilitates interoperability across currently incompatible platforms.
Meanwhile, consumers want simplicity and interoperability. Our research shows that consumers with multiple Internet-enabled devices want a single supplier or source for everything, rather than a different supplier for each device. Depending on where they live, consumers said software companies, television services providers, or their landline telephone companies could be single suppliers, creating an opportunity for these companies to be squarely in the emerging M2M value chain.
Core competency considerations and partnerships
Perhaps the two most critical features of the M2M market will be establishing partnerships and focusing on core competencies for the common benefit of all involved. In fact, to resolve some of the issues of delivering global M2M network coverage, some wireless operators are creating alliances.
For example, in an effort to reduce M2M barriers, one group of seven major European mobile operators in recent months teamed up to form a global alliance to enhance the M2M value proposition for their respective customers. The preliminary goal is to provide connectivity solutions for roaming as well as variety of M2M managed and value-added services. The formation of such an alliance illustrates how operators will need to work together in order to maximize the potential, and reduce the complexity, of connected device services. Meanwhile, consumers want simplicity and interoperability. Our research shows that consumers with multiple Internet-enabled devices want a single supplier or source for everything, rather than a different supplier for each device. In M2M, network connectivity will be paramount, as customers have come to expect that their devices will work consistently in all conditions and convey data accurately.
Despite these positive efforts, some M2M players regard working with mobile network operators as a challenge rather than an opportunity. To address this, mobile network operators can:
• Consider relationships with non-traditional companies for sets of offerings that address special needs.
• Encourage and support innovation by small companies, offering test kits, flexible pricing, streamlined certification, and full testing support.
• Provide remote diagnostics that sends an alert to M2M players when a device needs repair before customers notice a problem.
• Remotely deploy firmware updates to enhance device security and performance, as PC companies upgrade their operating systems and applications.
• Provide a store of content – such as entertainment or useful applications – that could be used on any compatible device, such as news and weather uploaded to an LCD screen on a refrigerator door.
• Improve customer support capabilities to determine if a problem is device or network-related.
Security, IT integration factors
Naturally, security is also a concern for enterprises and can have a financial impact down the road if system requirements are not incorporated at the application and network level to protect the data. Imagine a trucking company whose competitiveness depends on using M2M networking to route its trucks. The physical devices also need protection, since stolen SIM chips can potentially be used to drive up enormous telephone bills.
Currently, systems integrators may be among the best equipped parties to address questions on platforms, managing communications protocols among M2M players, and more – and to properly integrate the necessary components, software and services from a range of vendors. These integrators have the right mix of technology span and business reach to help bring M2M solutions to market.
Leveraging M2M-generated data
With more connected devices and sensors generating massive volumes of data, network management and planning will play a key role That means, as M2M applications such as patient monitoring, home automation and automotive diagnostics systems evolve, there will be an increased focus on how to better manage M2M generated data for strategic decision making and in turn tailoring services to meet specific customer needs.
In fact, we will work together with GE Aviation to provide airlines and cargo carriers around the world with intelligent operations services. These services will focus on improving efficiency by leveraging aircraft performance data, prognostics, recovery and planning optimization solutions. As a result, operators will be able to utilize both predictive and real-time data to plan and recover from potential disruptions with software applications that will include an analytics dashboard, operations workbench, mobile-enabled access, integration architectures, and complementary technology and services such as business process redesign, systems integration, data analysis and customer decision support.
Netting it out
Considering the surge of companies embedding networking technology in their products, M2M is poised to transform the way people, devices and systems interact with one another. To deliver enhanced user experiences on the one hand and create new revenue streams on the other, all parties involved must recognize that many approaches will coexist. Flexibility, and willingness to consider new business models, will help pave the way to success in delivering M2M applications.