There’s some evidence that the machine-to machine communications (M2M) market is now maturing after years of under-performing against expectations. But, from an end user’s perspective, services can still seem fragmented. So, M2M Now editor, Jeremy Cowan met Kfir Dan-Ari of Amdocs in London to ask how services can be improved.
Kfir Dan-Ari: M2M is a very fragmented business, it is still very vertical. Even the most experienced CSPs worldwide still tell us how, for each significant opportunity, they look for the different components of the solution and see how they can do it.
Now it’s changing; more and more of our customers are talking about the need to consolidate, look for commonalities, create more efficient processes.
It’s a good time to look at customer experience, because the discussion was – and in a way, still is – focused on technology, gadgets and cool applications. But as the market matures, there is room now to talk about what the customers buy, and what the customers are getting.
M2M Now: Do you think it’s significant that the M2M market may at last be maturing, judging by the recent spate of mergers and acquisitions? Companies are being bought for their skills and customer bases, and to bring in-house what used to be outsourced in the partner ecosystem.
KD-A: Yes, definitely. One of our key customers in the UK is now looking at bringing more business from MVNOs and getting them back in-house, meaning leaving the low ARPU*, high volume M2M line of business handled by MVNOs, but keeping the high ARPU, high end services provided directly by them.
There is another significant indicator. More and more service providers are saying, ‘I want fewer and more reliable partners.’ That means fewer risky, niche solutions where they don’t know what will happen with them. They would like better control, better visibility of the solutions they use. They want to own the customers; clear-cut with no-one in the middle.
There are many verticals out there; they cannot chase each one of them and provide end-to-end (services), so what else can they do? For example, Orange have been talking about providing customers with big data analytics capabilities, for example developing applications in healthcare.
So, it’s really interesting that they say the portion of revenue they make on healthcare connectivity is 20%. I think it’s amazing; we often hear the CSPs’ complaints, that they only know how to sell connectivity. But then we see more examples of how they do more.
M2M Now: What else are you seeing CSPs doing beyond connectivity?
KD-A: Project management, hosting, data storage and analytics. They do application development for doctors to browse information gathered from patients.
M2M Now: It’s not usual is it for CSPs to make as much as 80% out of services other than connectivity?
KD-A: No, it’s still mostly connectivity. Still, it’s a question: what are the main barriers? I think most of them are related to business – how to sell; how to sell to hospitals, how to sell healthcare, how to engage with the healthcare services; how to face regulations, and what vertical or verticals to choose?
M2M Now: What are the other most attractive industry verticals?
KD-A: Utility and automotives; these are the leading verticals for mobile carriers to enter today.
M2M Now: What other factors should we see to be sure we’re achieving some market maturity in M2M?
KD-A: Global connectivity is one. It will enable the ASPs to offer predictable and unified services. They will expect CSPs to support that. But also to secure the quality of service, which in roaming is a critical thing, because I think it’s run on ‘best effort’, which is not good enough for many quality of service-sensitive M2M applications. There are additional aspects; subscription management, how to engage with partners, how to support the more complex and innovative business models.
CSPs are at the hub of this operation, or at least they can be. We just spoke to another European customer with a lot of affiliates. He was saying that the ASPs come to them and ask for connectivity. They don’t ask for more, because they don’t know whether the CSPs can offer them more.
Sometimes, for the CSP, especially for their sales force, it’s easier to meet their (sales) quota by selling what they sell best – connectivity. But it starts to be more interesting where the service providers can provide additional value, such as billing-on-behalf and splitbills, which really opens the door for more complex B2B2C models.
There is also the business aspect; bringing additional partners, bundling offerings, connecting retail business to M2M. In most of the customers that we meet, the M2M business units are totally separate from the retail and other business units. They have their own P&L, and that makes a lot of sense, because it’s a different business.
But I think part of the maturing process is being able to look at the CSP as a whole. I’ll give you an interesting example from a US customer. He was approached by a car manufacturer, and a connected car device provider.
The head of the M2M business unit there said, ‘Okay, I need to provide connectivity and integration.’ So for the connectivity, he went, of course, to the network division of the same carrier, and said, ‘I want to support x million cars tomorrow.’
They said, ‘That’s nice, but come back in a year because we are dealing with retail first. This is our top priority.’
So this guy had to buy connectivity from an MVNO to sell to that connected car partner. Now, if you think this is ridiculous, this MVNO bought connectivity from the network division of the same carrier. Can you imagine how ridiculous that is? So, this is indeed an interim solution, but it reflects the situation where M2M wholesalers look for creative ways to close deals with partners.
I’m saying this because the M2M business units are, in many cases, isolated business units. They have their own IT; they have their own network needs, and they are, in a way, wholesalers. They care about business; they don’t care about selling bits or bytes. They care about the P&L.
Now, as the market matures, it’s time for the CSP to say, ‘Okay, I have the retail arm and the wholesale arm and the M2M arm. Now let’s try to combine them. Let’s have John Smith, my customer, who is buying my connectivity services, and who has bought a connected car service from my connected car partner. Let’s have him enjoying this bundle, and maybe I can bring more partners, content partners, insurance partners. Let’s have him surrounded by this bundled offer that can really give them a consolidated experience.’
This is where the CSPs really put themselves in a unique position, because none of their ASP partners can do that. None of the ASPs can see the full picture.
Usually they see the customer from a narrow angle: as a connected car customer, or a healthcare patient. That leads me to business intelligence (BI) and analytics. I know there are a lot of challenges there: regulations, especially in cross-country or crosscontinent BI.
So it’s quite challenging, but there is a lot to do, because the CSPs have a lot of information about John Smith. They know where he lives, if he has a family, and if he’s tech-savvy. Does he consume a lot of services? Is he paying on time?
This is incredibly valuable data for the ASP. This is without even going into the vertical-specific info; just analyse this information and provide it under the regulations to the ASP, and then the CSPs can give value.
It becomes even more interesting when CSPs start combining it in a cross-vertical. If I know about your driving behaviour and your healthcare behaviour, and I know that you consume such and such services, then maybe I can generate a certain package that is interesting for you with an insurance partner.
M2M Now: Yes, but first of all, you have to get past the challenges of handling data within a given geography, because these seem to be regulatory nightmares. And it’s getting worse not better with the EU, China, or the Americans. ‘You can only deal with this data in this geo.’
KD-A: I fully agree, but this is where the money is for the CSPs. Even with the little they can do, it will take them much higher in the value chain, in terms of revenue at least, but also in terms of the benefit they can give to customers.
M2M Jargon Buster:
ARPU = Average Revenue Per User
ASP = Application Service Provider
B2B2C = Business-tobusiness- to-consumer
CSP = Communication Service Provider
MVNO = Mobile Virtual Network Operator
P&L = Profit & Loss centre