Machine-to-machine (M2M) service offerings appear to be on the rise, but there are areas of the telecom market where carriers may not have the infrastructure to support front-end B2B M2M services. In this article, Alex Brisbourne parses out the market and offers some resolution as to where M2M can and should become the business of big carriers, and where it likely will not.
Machine-to-machine (M2M) service offerings appear to be on the rise. Over the past 18 months, the market has witnessed a remarkable increase in cellular carrier proclamations about M2M service offerings. Sprint launches an “M2M Collaboration Center.” Vodafone teams up with Intel to develop comprehensive M2M solutions. AT&T now includes “M2M device adds” in its Quarterly report. Even the media now characterizes the largest telecom carriers as being in an “M2M race.” By any casual analysis, the modern day battleground for subscribers has shifted over to M2M communications.
However, as one who has been personally involved in the M2M market since its humble beginnings, I remain skeptical that the primary carriers have the unabashed interest in making M2M “their business” that they would have us believe. To be sure, there are certainly segments of connected device applications where carriers are well suited to provide end-to-end services, and where doing so indeed matches with their fiduciary goals. However, there are also many areas of the market that are simply too demanding, where carriers just don’t have the infrastructure to support front-end services. In this article, we will parse out the market and offer some resolution as to where M2M can and should become the business of big telecom carriers, and where it likely will not.
The trouble with generalization
Although carriers seem to believe that all M2M is created equal, there are actually two key segments emerging at the macro-level: M2M for business and M2M that touches the consumer. This is an important distinction, and it really is a misnomer to group these M2M categories under the same heading.
Consumer examples include devices such as e-book readers, personal trackers, netbooks, connected photo frames and the like. These happen also to be the products that one envisions when hearing the term the “Internet of Things” — sundry objects wirelessly connected to one another, to the Internet and to back-end computer systems, all designed to enrich our personal lives.
Business-to-business (B2B) M2M, on the other hand, is characterized by applications that can help enterprises save money, make money or mitigate risk. Examples include remote asset management and maintenance, industrial and environmental monitoring (E.g., gas pipelines, wind power generators or landfill runoff), supply chain security and “smart” utility metering. These applications are not being adopted to provide some entertainment or lifestyle value. Rather, they contribute to a business’s bottom line.
Not surprisingly, here is precisely where we begin to see the M2M service model diverge from the true business interests of the big telecom carriers.
The IT conundrum
Of late, there’s been an interesting shift in the tone of M2M requisitions from business customers, as well as from which department they originate in the organization. Historically, adoption has not been a top-down phenomenon. Rather, requests for M2M services have come from product or line-of-business managers. But recently, M2M is gaining traction at the CIO level, as the executive suite seeks more effective means for data collection and data mining across the enterprise.
In turn, the carriers view M2M as a way to make good on deep-rooted enterprise relationships already existing on the cellular connectivity side. When large customers ask for M2M, the last thing telecom carriers are going to do is say “no.” Unfortunately, this is a bit like the blind leading the blind; carriers, despite their undisputed prowess at delivering basic connectivity, are still learning as they go when it comes to M2M. This is why we’re seeing sweeping M2M announcements from major carriers about supporting M2M “application integration” and “development.” They need to signal to the market that they’re doing the right things.
But the simple truth is that B2B M2M is extremely demanding. If M2M is being deployed specifically to help an enterprise make money or save money, it must work 24X7, everywhere, every time. Customers need seamless front-end interfaces that can be disseminated across enterprise business users. There is a huge degree of technology integration involved in M2M start-up, from establishing VPNs and complicated IP-address management schemes, to speedy device certification; network redundancies are a must. Moreover, these customers need remote diagnostic capabilities, specialized billing arrangements and a highly customized provisioning process. For example, if a device has gone rogue and is connecting to the network when it shouldn’t be, the customer needs to know before it runs up exorbitant airtime costs against the bottom line. Fiscal accountability is paramount.
Candidly, telecom carrier business models are just not set up to work this way. Such a granular, intensive process is fundamentally at-odds with the primary fiduciary responsibility to investors to quickly add device connections and boost average revenue per user (ARPU).
Enabling global devices
More and more, business-driven M2M services carry an additional requirement: the ability to cross national boundaries in a seamless, cost-conscious manner. The demand is particularly strong for any company — such as Caterpillar, John Deere or Trumbull Industries — whose business is built upon ensuring continuous operation of an asset, anywhere on the globe. It also bears out in the global supply chain, where a company needs to track a cargo shipment, or a single item in a cargo bay, as it makes its way across the globe.
Here, we have seen carriers proclaim “extended global roaming footprints for M2M connectivity.” All well and good, but if M2M applications are going to work on an exacting basis anywhere on the globe, carriers must be able provide multiple forms of connectivity. Not only must satellite services blend with cellular services, but competing cellular technologies must also be available to the M2M user, to ensure ubiquitous connectivity over oceans and in every single terrestrial pocket where a device could find itself. This convergence holds the key to a more compelling, non-roam based solution that can readily be consumed by fiscal-minded global enterprises.
What we can expect from the big telecom carriers in 2011
Over the course of this coming year, the market will begin to more clearly delineate between M2M applications that are of a “turn it on and go” nature and those that must mesh more neatly with the DNA of global business. Big carriers will (and rightly should) be the front-runner in cases where they can simply add the device to a new or current subscriber’s data plan and start billing. They can support the big number consumer projections and the ARPU will remain at a level to their liking. Nobody can beat the carrier itself at providing basic connectivity, relatively inexpensively, across a broad base of subscribers.
However, if the application needs to integrate with enterprise IT and adhere to stricter fiscal and operational imperatives, carriers may not be so quick to jump in especially since they are noncommittal on maintaining 2G services over the long term. (2G is and will remain bread and butter technology for B2B M2M applications for some time to come for a variety of cost, power and form factor reasons).
While this is a storyline worth watching closely, I believe business-driven M2M connections will stay in the domain of the specialized network operators that have been handling M2M since it was a nascent industry.
Alex Brisbourne has been president and COO of KORE Telematics since its inception in 2003 and has more than 20 years of experience in wireless, enterprise and fixed-line telecom industries. In his current role, he brings a uniquely qualified perspective from the front lines of applied machine-to-machine communications and embedded wireless. He speaks regularly at business and technology conferences and is frequently called on as an expert source for trade and business-related articles. He sits on the Advisory Board of a number of technology companies in the USA and Canada.