M2M: a partnership-driven market with enough potential for all participants
Informa’s Embedded Connectivity event this September was spearheaded by an operator panel of unprecedented influence and expertise: Eric Brenneis, the Global Head of M2M at Vodafone; Emmanuel Routier, the Director of the International M2M Centre at Orange Group; and Angel Garcia Barrio, the Head of M2M for Telefonica O2. T-Mobile’s VP of Data Solutions and M2M, Mathias Elsner, was also scheduled to be present, but was unfortunately unable to be there on the day.
The Carrier Role
Defining the role that the wireless carriers would have in the future of the M2M market was a recurring theme of the conference. All three carrier groups were clear in their belief that they had an important role to play, that it is a valid investment for them to directly target the M2M market, that their opportunity to generate service revenue will only continue to grow; and that their active involvement in the M2M market will only serve to enhance their respective brand names.
All three carriers were also clear about the nature of that role – to provide the connectivity portion of any M2M solution and to act as an enabler for the creation of other companies’ value-added, service-based business models. These companies may be individual enterprises working directly with a carrier, to develop an M2M enabled product to better serve their own end-users. Or they may be MVNOs and aggregators that purchase wholesale amounts of data from carriers, to use as a component in the creation of bespoke, turnkey M2M solutions for their own enterprise customers.
Either way, the carriers are not positioning themselves as end-to-end service providers, nor are they trying to control the M2M value chain. They realise that the portion of overall M2M service revenues that connectivity alone is likely to account for will be small, but they are comfortable with this. This is because their role allows them to concentrate on leveraging their traditional core competency of managing access network infrastructure rather than attempting to become software solution providers.
Similarly, M2M MVNOs and aggregators are not at odds with the carriers on whom they rely for the connectivity component of their services. They see the carriers as trusted partners that they work in tandem with in order to enable both parties’ businesses to grow. For aggregators do just that for a carrier: funnel a multitude of smaller-scale, enterprise business-specific M2M deployments into a larger channel of M2M connections, that the carriers provide connectivity for at the wholesale level via their MVNO and aggregator partners.
This gives carriers a greater reach then they would otherwise have in provisioning enterprises that have specific SLA requirements or that need a quantity of M2M connections that the carrier can not economically cater for personally. As a general rule of thumb it appears that carriers will work directly with enterprises whenever there are at least 10,000 M2M SIMs required, as well as when those enterprises do not require the end-to-end services of MVNOs and aggregators but wish to put together their own M2M product offerings.
It is in these instances that carriers can then refer enterprise customers to their own network of trusted M2M specialists, in the form of module manufacturers, device manufacturers and systems integrators. The carriers’ M2M business model is consequently a combination of the provision of wholesale connectivity and directly providing larger enterprises with SIMs and customised data tariff plans. However, the carriers’ role should not be considered to be simply that of a pipe but instead as an increasingly efficient and intelligently-managed pipe.
Intelligent Data Transport
Along with the establishment of carriers’ M2M business units we have seen the deployment of M2M-specific service management platforms, that turn the provision of M2M connections into a true managed service and take the carrier’s role beyond that of simple wholesale. M2M service management platforms add greater scalability for the on-demand activation of bulk quantities of SIMs, in order to target increasingly large customers, as well as providing greater flexibility when it comes to the creation of custom M2M data tariffs.
M2M data tariffs can now be based upon such factors as: the volume of data to be transported, the throughput rate and/or latency, the predictability of the transmissions, the lifespan of the solution, roaming requirements, as well as any special billing requirements. Discounts may then be applicable to the calculated rate per-SIM, depending on the volume of connections required. Another common but critical feature of such platforms is the ability to allow enterprises to self-manage – and have on-demand visibility of – their networks of connected devices via a web interface.
But the development of automated, self-service, general-purpose managed service platforms for what is, in essence, the bulk transport of data does not mean that carriers are predisposed to be incapable of serving specific verticals. Where the business opportunity is large enough and where the service implementation is sufficiently homogeneous – and therefore easily repeatable – from one deployment to the next, there are opportunities. As demonstrated by Orange Business Services’ Fleet Performance solution, which exists independently of their overall M2M strategy, as well as Telekom Serbia’s Point-of-Sale terminal network and their network of connected cash registers.
Similarly, the ‘hand-off’ to MVNOs and aggregators of any business from enterprises that have complex or specific M2M SLA requirements, does not mean that MVNOs and aggregators are only restricted to serving companies that require a low volume of M2M connections. Some MVNOs are in discussion for the closure of deals that could win them 100,000-plus connections from a single enterprise customer. Furthermore, companies that require the services of aggregators can start off small, but through the success of their M2M strategy grow in size considerably; creating tens of thousands of connected devices for third party specialists to manage via their virtual networks.
Looking to the Future
Put simply, it seems to be the case that there is enough business in the M2M industry at present to satisfy all of the participants in the service provision value chain. There is also enough scope in the immediate future to ensure that the co-operative partnership-led nature of the M2M business today can continue without carriers and third party service providers needing to turn on each other to compete for the same business. This is because both parties will continue to bring different yet vital functionality to the market.
Not every wireless carrier has adopted the same ‘open model’ as Vodafone, Orange and Telefonica O2 yet, in accepting the role of being an underlying enabler for the M2M industry. Some still prefer to close themselves off and to target the M2M market as an end-to-end solution provider. There will be instances where a carrier can perform this function. But to try and do so exclusively seems likely to at best limit the full potential for generating new business and at worst to actually impede the development of the market.