Home EuropeEurope I 2012 The rise of the machines

The rise of the machines

by david.nunes
Phat Huynh Issue:Europe I 2012
Article no.:9
Topic:The rise of the machines
Author:Phat Huynh
Title:Managing Director and Head of Marketing & Sales
Organisation:Telekom Austria Group M2M
PDF size:275KB

About author

Phat Huynh is Managing Director and Head of Marketing & Sales at Telekom Austria Group M2M. Phat Huynh started his career as a management consultant in New York City before he joined mobilkom austria AG as Product Marketing Manager in 2008.

Article abstract

The number of mobile connected devices is expected to grow from more than six billion today to 12 billion in 2020. Some forecasts even predict 50 billion. But M2M is a new type of business with very different requirements than traditional voice and mobile broadband. Telcos and solution providers need to combine their assets in order to create joint solutions. Partnerships will be crucial but telcos are in the best starting position to take an integrating role in the M2M ecosystem.

Full Article

Machine-to-machine (M2M) communications is currently the most talked about growth opportunity for the ICT industry and there is very little doubt that the market is maturing. The GSMA estimates the number of connected devices will grow to 24 billion by 2020 making M2M one of the top themes of the GSMA’s annual Mobile World Congress. Research shows that the number of total connected devices is expected to increase from approximately nine billion today to more than 24 billion in 2020, and within that, mobile connected devices will grow 100 per cent from more than six billion today to 12 billion in 2020. This explosive growth will support an addressable revenue opportunity for mobile operators of nearly US$1.2 trillion by 2020, a sevenfold increase from expected revenues in 2011, and will also provide significant growth potential for the entire ecosystem. Industry giants such as Ericsson and Cisco even estimate a total number of 50 billion connected devices within that same timeframe.

Quantitative estimates aside we are facing a very promising development of the M2M business. In a couple of years it will be common for cars, domestic appliances, service centres and applications to be connected to each other online. M2M allows for an unprecedented range of applications for both retail and business customers, making it one of the most compelling topics of the entire ICT industry.

Whilst Asia is expected to see the most growth potential, Europe isn’t far behind. This potential has seen a number of bold moves from Europe’s telecoms industry players, with a number of partnerships, joint ventures and acquisitions from both operators and technology companies, not to mention the development of dedicated M2M operations by all major operators.

Historical perspective

To understand these ambitious intentions and the on-going activities in the telecoms industry, we need to go back a few years. The first M2M deployments based on cellular connectivity took place over a decade ago, when devices were costly, connectivity was slow and unreliable and software applications were custom made for each use-case. Triggered by regulatory and legislative requirements like automated meter reading, eCall and road-toll systems as well as new business models like connected eBook readers or business processes requiring real-time data transfer, M2M projects have now reached a critical mass. As the market matures, costs of devices are dropping while software and platform developers are specialising on delivering applications for a multitude of customer needs making it easier than ever to deploy and utilise M2M technologies.

Framework conditions will also have a positive impact on the development of M2M applications. On the one hand, declining unit costs for hardware along with increasingly refined and efficient service platforms are benefitting pricing schemes and, on the other, the current legal framework within the EU, e.g. concerning smart metering and mandatory emergency call systems in new vehicles, is fostering innovations in the M2M business area.

While the roles of hardware and software suppliers are well understood mobile network operators are struggling to find their spot in the complex M2M ecosystem. Naturally connectivity is at the core of any telecommunication providers’ service, but given the seemingly endless opportunities arising from M2M the quest for a larger share in the value chain is obvious. Mobile network operators have quickly realised though that M2M is a new type of business with very different requirements than traditional voice and mobile broadband. With dedicated business units they have enriched their propositions with elaborate service delivery platforms and specialised infrastructure allowing them to provide managed connectivity services tailored to the needs of large M2M deployments in a scalable, secure and cost efficient manner.

By exposing programming interfaces towards customers and software developers, mobile network operators have taken the first steps towards providing application enablement functionalities – a step that allows them to grow further into the vertical value chain. With enhanced functionalities and value added services ranging from simple monitoring and reporting tools, over complex business support systems to centralised application hosting in the cloud the possibilities to extend the service portfolio are manifold. Despite what seems to be a natural evolution these developments are based on conscious strategic decisions that come with great investments and efforts. Only those who will be able to complement the technological enablers with proper go-to-market strategies and extensive industry knowhow will reap the benefits.

The value of M2M communications

However, the value of M2M communication lies in the solution it offers for the customer. Understanding customer needs is the key to successfully offering M2M services. A challenge that is particularly difficult given the wide range of application areas and the many highly specialised niches in which the projects are being deployed – even more so when the regional and local peculiarities make it difficult for international players to promote their services. Vertical industry knowhow and the capabilities to consult customers on the deployment of these new technologies and their potential impacts on business processes are crucial for success.

While most solution providers understand the technical requirements in their respective niche very well, they traditionally lack the regional market access and the communication and service delivery channels to the customer – assets that telcos have successfully established and utilised. For decades telcos have learned to offer their services to the complete range of industries across all segments of customers starting from consumers and private households to small and medium sized enterprises and multinational corporations.

Converged operators in particular, who offer fixed, mobile and unified communication or even IT outsourcing services, have the experience to market, sell and to deliver complex solutions to their customers. With their strong customer relations, their expert sales knowhow as well as the financial stamina to carry out long-lasting sales projects and large scale deployments, telcos have the skills and resources that are also crucial in marketing M2M solutions.

After the technological hurdles, the greatest challenge for telcos and solution providers will be to combine their assets in order to successfully sell their joint solution. The vast number of industries, application areas and different customer segments require the partnerships to be flexible enough to adjust. At the same time partnership frameworks will only work when the efforts for acquiring and managing those partners are economically feasible, with risk and reward-sharing business models that allow both parties to mutually benefit.

In the consumer business for Internet services, telcos have failed to grab a significant share of the value chain beyond plain Internet access. Time will tell if telcos will be able to leverage their unique assets in M2M, but there is little doubt that partnerships are going to be crucial and that telcos are in the best starting position to take an integrating role in the M2M ecosystem.


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