Download - Turning M2M Potential into Profit
M2M Communications Turn Potential into Profit
Camille Mendler Catherine Lynch
Principal Analyst Senior Director
Informa SAP Next-Gen Billing
Webinar: February 21, 2012
Agenda
• Introduction
• Riding M2M rollercoaster
• Triaging M2M opportunities
• Securing profitability
• Conclusions & recommendations
• Q&A
www.informatm.com
©All rights reserved
2
Source: Flickr/cliff1066â„¢, Paul Kelpe
M2M: Multiple contexts, infinite possibilities
www.informatm.com
© All rights reserved
3
Source: Flickr/RaeAllen
Industrial
Personal
Urban
A simple aim: Communicate intelligence from a vast,
non-sentient world to enrich our daily lives and work.
wellness
home
security
entertainment
public safety
energy
extraction
transport
production
distribution diagnostics
health
travel
The challenge: Pricing, rating, charging & billing
€ $ £ ¥
Sensors Network Monetization
4
Source: SAP
Many beliefs about the M2M market are wrong
www.informatm.com
© All rights reserved
5
Value:
Delivering M2M data
Opportunity:
Targeting the right
vertical apps
Problems:
External, due to supply
chain fragmentation
Networks:
M2M networks are public
Myths:
Communications:
M2M will become
broadband
Implication: It’s time to shed light on market realities.
Source: Informa Telecoms & Media
Surveying the field
www.informatm.com
©All rights reserved
6
South America & Caribbean,
5% North America, 12%
Middle East & Africa, 13%
Asia Pacific, 18%
Western & Eastern
Europe, 52%
Survey respondents from 50 countries
Totals may not add to 100% due to rounding. n=263. Source: Informa-SAP M2M Communications Survey
Telecom operator
39%
MVNO 2%
Satellite operator
2%
MVNE 3%
Telecom software
vendor / ISV 9%
Cloud services provider
4%
Telecom equipment
vendor 19%
Device, module,
chipset maker 6%
Integrator / consultancy
17%
Survey respondents across the M2M supply chain
Implication: Respondents had to be involved in the M2M supply chain; we also conducted 15 interviews.
1% 4%
31% 18% 24%
68% 78% 76%
CSPs Integrators Telecom equipment
vendors
% o
f re
sp
on
de
nts
2015: M2M contribution to total revenues
17% 29%
14%
62% 44% 67%
21% 27% 18%
CSPs Integrators Telecom equipment
vendors
Today: M2M contribution to total revenues
5% or more
Less than 5%
Zero
M2M market expectations are bullish!
www.informatm.com
© All rights reserved
7
Implication: If these expectations are met, this would equate to a $65B+ M2M market for mobile network operators alone by 2015.
% o
f re
sp
on
de
nts
n=111 CSPs (telecom operators, satellite providers & MVNOs),
n=45 integrators, n=49 telecom equipment vendors Source: Informa-SAP M2M Communications Survey
Riding the M2M rollercoaster
www.informatm.com.
©All rights reserved
8
Nothing is really typical in M2M
www.informatm.com
© All rights reserved
9
Implication: Every M2M deal is unique, but underlying costs are the same.
Buying a data plan is the most common M2M pricing model in use.
SLA-based, app-based or revenue share models remain uncommon.
26%
10%
19% 19%
8% 8% 3%
3%
5%
0%
5%
10%
15%
20%
25%
30%
% o
f M
2M
se
rvic
e p
rovid
ers
Number of SIMs
‘Typical’ deal: M2M SIMs
Totals may not add to 100% due to rounding. n=118 Source: Informa-SAP M2M Communications Survey
30% 29% 28%
5% 3% 5%
0%
5%
10%
15%
20%
25%
30%
35%
NA / DK < $3 $3-$5 $5-$7 $7-$9 >$9
% o
f M
2M
se
rvic
e p
rovid
ers
ARPU per SIM ($)
‘Typical’ deal: ARPU
Structural barriers are the biggest concern
www.informatm.com
© All rights reserved
10
Implication: Diverse concerns, primarily about ROI.
8%
14%
15%
17%
17%
20%
29%
35%
43%
49%
Traffic management
Lack of M2M roaming
Security / privacy concerns
Billing / charging complexity
Unstable partner landscape
Technology immaturity
End-to-end service mgmt
Low ARPU, low margin, low ROI
Unproven business models
Fragmented ecosystem
Barriers to success in M2M
All respondents, n=263
Source: Informa-SAP M2M Communications Survey
No. 1
for CSPs
• Managing and monetizing
different partner relationships
• Low return on investment
• Some concern about
technical standards
• Surprisingly low ranking of
security and privacy
Machine
Revenue capture in the value chain is complex
Middleware
& Apps Comm.
Device Sensor Network Network
Enterprise
Integration
Presentation
Vendors Vendors Service
Providers Service
Providers Service
Providers
System
Integrators
Resellers & Solution Providers
€ $
€ €
$
€
£
11
Source: SAP
Operationally, what’s critical for M2M success?
www.informatm.com
© All rights reserved
12
Implication: E2E service management & flexible billing are table stakes for all. A minority prioritizes the analysis of M2M data.
Source: Informa-SAP M2M Communications Survey
Top 5 M2M operational focus areas
CSP
Telecom equipment
vendor Integrator
Telecom software
vendor / ISV
Device, module,
chipset maker
Cloud service
provider
End-to-end service mgmt ▲ ▲ ▲ ▲ ▲ ▲ Partner mgmt ▲ ▲ ▲ ▲ ▲ Flexible billing ▲ ▲ ▲ ▲ ▲ ▲
Security & fraud ▲ ▲ ▲ ▲ Network traffic
& signalling loads ▲ ▲ ▲ ▲
Ordering & provisioning ▲ Cross-border roaming ▲
Business analytics ▲ ▲ ▲ n=111 n=49 n=45 n=23 n=16 n=12
A bit-pipe future for telcos is widely expected
www.informatm.com
© All rights reserved
13
17.5%
18.6%
46.0%
41.2%
27.0%
24.5%
9.5%
15.7%
0% 20% 40% 60% 80% 100%
All survey respondents
Telecom operators (mobile, fixed, integrated)
% of respondents
Telecom operators are destined to be bit-pipe providers in the M2M market. Agree or disagree?
Strongly agree Somewhat agree Somewhat disagree Strongly disagree
Implication: This is a self-fulfilling prophecy without a change in mindset – and the right tools.
Source: Informa-SAP M2M Communications Survey
The M2M revenue opportunity is shifting
www.informatm.com
©All rights reserved
14
2012 2015
M2M revenue
distribution
Consulting, integration, software development
Security, demand response, performance management
Decision support, reports and alerts, analytics
Source: Informa Telecoms & Media
Implication: The M2M market is at an intermediate stage.
Communications services, associated communications hardware
M2M services must align to end-user needs
www.informatm.com
©All rights reserved
15
Utilities Oil & Gas Rail
Top 5 communications
headaches
1. Connecting remote locations
2. Cost of connectivity
3. Data security
4. Staff technical skills
5. Managing multiple networks
1. Connecting remote locations
2. Rising bandwidth needs
3. Data security
4. Cost of connectivity
5. Managing multiple networks
1. Connecting remote locations
2. Managing multiple networks
3. Staff technical skills
4. Supplier reliability
5. Cost of connectivity
Technologies used
Public cellular (2G/3G), fiber, wifi,
private radio/microwave, satellite,
wireless mesh, WiMAX, powerline
Public cellular, (2G/3G) fiber, wifi,
private radio/microwave, satellite,
wireless mesh, WiMAX, LTE
Public cellular (2G/2G), fiber, wifi,
private radio/microwave, satellite,
wireless mesh
Source: Informa 2011 vertical industry end-user surveys, n=241 respondents
Implication: M2M intelligence must extend to enterprises’ remote assets beyond the reach of public networks.
M2M intelligence matters
Example: Motorway tolls for subscribers
– Autoroutes Paris-Rhin-Rhône
• Management of "Liber-T" On Board Units
• For individuals and enterprise fleets
• Flexible discounts:
• Volume based, time based, location based
• Recurring fee, one shot fees, for fleets
16
Triaging high-value M2M opportunities
www.informatm.com
© All rights reserved
17
We’re getting smarter about M2M segmentation
Various inter-related trends:
• Developing cross-industry M2M
solutions – Eg: Pay-as-you-drive insurance
touches transport, automotive, financial
services
• Creating new annuity revenues – Eg: Remote product diagnostics as a
service (eg: photocopiers, printers)
• Marketing B2B2C opportunities – Eg: Smart metering for utilities’
consumers
• Targeting SMEs – Eg: Low-cost fleet management
12.7%
3.6%
0.9%
2.7%
4.5%
10.9%
11.8%
11.8%
14.5%
15.5%
20.0%
20.0%
27.3%
46.4%
51.8%
Don't know / undecided
Other
Military / defence
Agriculture / food
Oil and gas / mining
Manufacturing / industrial
Integrators
Public safety
Consumer electronics
Operators / MVNOs
Health
Financial services
Automotive
Utilities
Transport and logistics
% of CSPs
CSPs’ target industries for M2M
www.informatm.com
©All rights reserved
18
Implication: Focus is shifting to specific apps versus specific industries.
Source: Informa-SAP M2M Communications Survey
In M2M, Grannies and Gangsters are alike
www.informatm.com
©All rights reserved
19
Sourc
e: F
lickr/
A30_T
sitik
a
Implication: Seek horizontal application of M2M functionality.
Elder care Felon tracking
Many worry about the ‘long-tail’ nature of M2M applications.
But functionally, many similarities exist between apps.
These can be cross-marketed to build profitable scale.
Triaging for M2M success: App categories
www.informatm.com © All
rights reserved
20
Category Description
Static Monitor assets in fixed locations, such as soft-drinks
machines or photocopiers.
Nomadic Rely heavily on mobile networks to track people and
assets on the move, such as trucks and shipping
containers.
Transformational Create a brand-new annuity revenue stream for the end
customer, such as pay-as-you-drive insurance.
Horizontal Applications that are functionally similar across various
industries (see previous example).
Implication: Applications which match multiple categories have a greater potential for scaled success.
There’s a missing link: Long-tail wireless
www.informatm.com
© All rights reserved
21
Implication: These vendors can bridge between public and private M2M – they are both partners and competitors for CSPs.
• Long-tail wireless vendors
support vertical applications
• Eg: industrial automation, SCADA
• Serve challenging locations
public cellular can’t easily reach
• With unlicensed & licensed spectrum
• Support ‘bottom-up’ M2M
• Appetite to diversify through annuity
revenue streams
• Example: CalAmp, modem/router vendor
• Key verticals: automotive, oil & gas, fleet,
logistics, public safety, rail, utilities, direct broadcast satellite
• Technologies: GPS/GPRS, LTE, private radio,
satellite, WiFi, WiMAX, Zigbee • Annuity: 235,000 customers for vehicle
tracking, vehicle finance, fleet management, remote car start services
• Alliances: Strategic alliance with nPhase (Verizon); works with AT&T, Numerex, Rogers, Sprint, Vodafone
M2M connectivity will grow explosively
www.informatm.com
© All rights reserved
22
Implication: Some CSPs believe that revenues from public cellular M2M will be big enough to fight for.
More things to connect… …the connectivity pot grows Public (cellular) will not be the sole beneficiary
2012
2015
2020+
‘Private’ M2M will dominate
Using familiar (eg: WiFi) and unfamiliar protocols
(eg: WirelessHART)
Back to the future: Alliances
www.informatm.com
© All rights reserved
23
Implication: Battle lines are being drawn to control public cellular M2M.
Airlines Telcos M2M
Orange
Deutsche Telekom
Telia Sonera
Sprint
MACH
Verizon Wireless
Global alliances and hubs for cross-border M2M should cut costs and
speed service activation. Often focused on large multinationals, they
must also serve SMEs with M2M roaming needs.
Vodafone
Syniverse
Securing profitability
www.informatm.com
© All rights reserved
24
Let’s review M2M business models & challenges
• Flexible platform with low ongoing cost of ownership
• Scalable platform to scale for high volume
• Low ARPU unit value Low-cost model
• Reduce operational costs
• Support mix of recurring & usage based micro payments
• High volume billing & high availability architecture Massive scale
• Handle settlement & commission for complex value chains
• Support retail & wholesale pricing models
• Global support
• Analytics promote greater efficiency
Multi-party value chain
25
www.informatm.com
©All rights reserved
26
Profitability
variable
What is it? Internal
CSP issue
External
market
issue
Can it be
outsourced?
Structure Reporting structure of internal M2M
division.
_ _
Accounting Internal metrics used to determine
M2M profit and loss.
_ _
Roaming Cost to deliver cross-region M2M
services.
_
Platforms Service management costs
and capabilities.
_
Modules Dependency of M2M service pricing
on module costs.
_ _
Partners Partner pay-out models supported.
Charging M2M pricing models supported.
It’s time to look further within
Implication: Many profitability variables lie within a CSP’s control.
Source: Informa Telecoms & Media
We say:
Conclusions
www.informatm.com
© All rights reserved
27
Value:
Delivering M2M data
Opportunity:
Targeting the right
vertical apps
Internal issues are underplayed
Value lies in the data
Opportunity lies in horizontal apps
Problems:
External, due to supply
chain fragmentation
M2M networks are also private
Networks:
M2M networks are public
Myths:
M2M will remain largely narrowband
Communications:
M2M will become
broadband
Implication: M2M is a huge opportunity – choose a sustainable role.
Source: Informa Telecoms & Media
Q&A
www.informatm.com
© All rights reserved
28
Thank you!
Camille Mendler
For more M2M market intelligence, contact:
EMEA Jamie Moss
Sheridan Nye
Asia Charles Moon
Latin America Marceli Passoni
North America Andy Castonguay
SAP Next-Gen Billing: Run better M2M services
• Supports flexible pricing for retail and wholesale
models
• Support for end to end service management
• Low cost platform for high volume, low value
transactions
• Handles complexity in partner settlement
• Leverage analytics to interpret data & sell « greater
efficiency »
For more information, contact: [email protected]