M2M: an idea whose time has come

M2M  has been on a gentle growth curve for several years, but now the announcements and alliances are building. We recently saw Ericsson and Swisscom partner up to push M2M to Swisscom's corporates.  More recently, in an attempt to get close to global coverage, Europe's Orange and US telco Sprint Nextel have buddied up for a roaming agreement which will enable them to push out roaming SIMs (subscriber identity modules) across the globe so that things like containers (for instance) and their attached M2M modules can roam the world being handed off to the participating telcos.

Without such agreements a mobile M2M provider with ambitions to operate on a global scale has to negotiate special arrangements with each operator. The deal gives Sprint's M2M modules the ability to roam through 180 countries. Expect this year, and the looming Mobile World Congress, to feature a steady stream of these announcements.

It's an idea who's time has come," says Jeremy Green, Principal Analyst in Ovum's Telco Strategy Practice. "M2M speaks to a lot of concerns out there at the moment: there's sustainability and climate change; a general desire to do more with less; and the push to  be more economically efficient by running tighter supply chains.  It's ticking lots of boxes."

In addition, M2M is seen as an inevitability in terms of network growth - once all the world's people are connected service providers and equipment vendors will naturally turn to linking 'things' and processes.

"It's critically important to the telecoms industry," says Matt Hatton, a director at M2M specialist, Machina Research. "It could represent up to 40 per cent of the growth of the connected devices part of telecoms industry over the next 10 years," he says. 

"In terms of revenue across the vertical segments, we think M2M represents about 700 billion Euros across the value chain.  And for network operators we calculate there's an addressable market of 250 billion Euros, about 36 per cent of the whole, of which we think they'll get about 40 billion. "

"That's quite a reasonable opportunity," continues Hatton. "If they position themselves well, they may do more, if not they may do less. However, if they are limited to just carrying the data then even by 2020 there will only be a small opportunity - maybe 4 billion Euros," he cautions. 

But Hatton agrees that a data-only scenario is worst-case. Telcos will also be involved in device deployment, management and maintenance and this will boost potential earnings to around 15 to 20 per cent of the addressable opportunity of  250 billion Euros.

We've heard about M2M several times over the past 10 or 15 years. what has changed to really make it take off this time?

"The difference now is that telcos have shed their delusions of grandeur," says Green. "Last time around a lot of them believed that they were in a position to deliver end-to-end applications and that they would link with the back office systems, deliver the applications and do the professional services. The language nowadays is much more about ecosystem and partnership. They can't do all of it themselves."

"And they're now partnering with bigger players," Green continues.

"It used to be just  little grease-under-the-fingernails type integrators - very labour intensive for particular vertical applications.  Now we have software-oriented integrators and the cloud is talked about much more."

What about the potential roadblocks?

"Telcos get a bit upset about SIM regulations around the world," says Green, "but the real, real important barrier is the absence of a standard framework - so M2M doesn't demand a bespoke project for each vertical."

Green believes things currently feel a bit like 1990 just before the Web arrived.  "At the moment in M2M, although there are frameworks developing, everything has to be developed bespoke.  Players will talk about how they're targetting a particular vertical. You can't use a single application across verticals because it's all customized."

Machina Research's Hatton agrees, although he thinks the silos are probably here to stay for the foreseeable future. 

"There are so many different dynamics involved with each of the verticals," he says. "Some verticals are new, some have been around for a long time and they all have different needs.  In reality what we call M2M are really lots of silo'd applications."

And then there is that problem of telco value.  If the industry make the environment too open, telcos naturally feel that the economic advantage will flee to the edge of the network, as it did with the Internet and now with mobile broadband and the smartphone.

"At the moment telcos are caught in a vice," says Green.  "On the one hand they want this (M2M) to be very big, but on the other hand they want to keep control of it, and the two things don't work well together.  The choice is, you can have a small slice of a big pie or a big slice of a small pie. At the moment they seem to be going after the big slice option."

But some of the large system integrators have a different view about this, says Green, and in their Powerpoint diagrams telcos can often feature only as connectivity providers, if they feature at all.

"The main missing bit is a top-down framework so that companies can focus on the M2M bit they're good at and take the other bits for granted.  It just doesn't exist at the moment."

"Standards would help an awful lot with apps developers developing across multiple operators and fields," agrees Hatton, "but the unfortunate thing is that we have such a diverse range of verticals, many of which already have their own de-facto or explicit standards."

"It's such a diverse field that it's almost impossible to imagine there being anything more than a patchwork of standardisation here and there. For instance the requirements for the utilities sector as regards smart metering are likely to be very different from those of the healthcare sector," he says.

So how will the industry break the log-jam, if log-jam there be?

"In the end it will come from the IT industry who will probably just make standardisation happen because it has to," claims Green.  "The only other possibility is that it's going to come from some bunch of nerds that we've not heard about yet."

 

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