Frost & Sullivan identify the next layer of M2M revenue opportunities

Following our report (Sept 2, 2011) that IBM is to accelerate smart city data analytics with the acquisition of i2, comes a new report from Frost & Sullivan. According to their analysis, the next layer of M2M revenue opportunities for the ICT sector will come from M2M in Government and the Smart Cities concept.

The Smart Cities concept, defined by Frost & Sullivan as an interconnected urban environment with citizens leading a fully digitalised lifestyle, can be further developed with a committed government hand in employing M2M technology. By setting up a conducive framework for leveraging different types of urban stakeholders, the government can also benefit from improved delivery of local government services and a positive environment to attract investments.

“The government must play a critical role in overcoming any coordination issues by managing interests of various urban stakeholders such as energy service providers, environment services providers, transportation, tourism, and most importantly digital citizens,” says Yiru Zhong, Industry Analyst for Frost & Sullivan ICT group.

“The degree of smartness may currently be limited to the well defined M2M functions of track and trace, remote monitoring, status updates and security access. However, the future of Smart Cities depends on the rate at which new and smarter M2M applications can be developed for business critical processes in the above sectors.”

Frost & Sullivan found that, the M2M market in EU27 in 2010 registered another year of high growth, increasing almost 60 percent year-on-year to reach approximately 20 million M2M SIMs. “Telco companies have built their growth by successfully targeting Tier 1 customers and expanding into new geographic markets in their operational footprint,” added Zhong.

With their reorganisation to address M2M opportunities, operators are also seeking partnerships to roll out the Smart Cities concept. There are a few prominent examples of telecom service providers working with local city councils on electric vehicle charging or environmental service providers on smart energy services. The expectations are for telecom service providers to find a new and sustainable revenue stream in facilitating this beyond a pure connectivity perspective.

The pace of eco-system development will depend on how quickly important partners are tapped in the various industry value chains. This is vital not only for companies to find the best possible candidates but also to establish first mover advantage by maintaining a level of exclusivity for a period of time.

“The implication on competitive dynamics within a wider M2M service provider space is the rate of new market entry,” comments Ms. Zhong. “As more telcos jump into the M2M space, competition will increase and the urgency to establish a market leadership in richer M2M applications becomes more critical.”

As cities evolve into clusters of smart communities, the importance of ICT players successfully adapting to remain relevant market players for their customers cannot be overstated. However, in a highly competitive market, M2M providers should look for new revenue streams for a sustainable market edge.

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