M2M is coming of age with both mobile operators and enterprises from across a wide array of vertical markets now looking to new connected services as a way to gain a strategic business upper hand. Juniper Networks recently published a report, M2M & Embedded Strategies research, focusing on the growth for M2M prospects and embedded devices across a variety of industries such as consumer electronics, metering, connected homes, telematics and healthcare. The report states that M2M connections will be the catalyst for more than $35 billion of service revenues across a diverse range of industry sectors by the end of 2016. The prospects for growth in those sectors are clear.
However, for every upside, there is a downside – and M2M is no different. Certainly the technology is opening up new means of creating revenue for operators and is set to play a major role in shaping the future of everything from the networks to consumer electronics. But despite this, there are areas that need honing to ensure that the new M2M ecosystem delivers a service and experience that is seamless in every way from design to connection through to billing and customer experience.
Working in this sector for more than seven years, we at Jasper Wireless have helped introduce the concept of M2M to operators (and through them to the consumers) to the point that it is now a part of everyday demands. From the Amazon Kindle to the new Nissan all-electric Leaf, a vast range of devices are being connected.
The Ecosystem
The M2M market is about more than mobile operators. The new ecosystem now includes thousands of different companies across a range of industries, many of whom have little or no experience in delivering connected services to devices. As an ecosystem, the challenge will be to ensure that M2M supports the range of connectivity requirements that are constantly emerging and evolving. In order to prevent a fragmentation within the ecosystem, where each new device comes with its own infrastructural requirements, operators need to deliver an M2M platform that is scalable and flexible and a common global standard.
User Experience
User experience is typically discussed in the context of consumer devices. But even in the most industrial of cases, an excellent user experience is still a vital aspect of a solution’s success. For most connected devices, the connectivity is an enabler of a larger, more important, component. For eReaders, the consumer buys books. For smart grids, the utilities manage energy consumption. For fleet companies, they see the real-time location of their assets.
Mobile connectivity is not the primary goal – it is a means to an end. For those of us in the mobile network business, this is a very fundamental shift in how we must think about the market. The phone, the laptop, the tablet – getting connected is the point. It is the end game. The user then decides how they want to make use of the connectivity. But in M2M, it is the connected service, not the connectivity itself, which is the focus.
In the M2M market, in almost all cases, there is no need for a discrete ’connect‘ action on the part of the end user, if there is in fact an ‘end user’ at all. Most of these devices – energy meters, cars, eReaders, health monitors – simply need to perform what they are supposed to do without any additional intervention by the end user, the installer or the clinician. Mobile connectivity should simply work out-of-the-box.
To accomplish this, operators must have the platform and systems in place to eliminate the complexity of embedded mobile connectivity. It starts with the development phase, providing device manufacturers with the design tools to build a high quality product and then continues with enabling companies to eliminate dead-on-arrival devices with network testing capabilities for use at the time of manufacture. Once at its final location, whether in the hands of an installer or a consumer, wireless services should automatically provision upon first power up – effectively enabling the device to simply work out of the box.
But great user experience doesn’t just end once the device is live and functional. Inevitably there will be instances where the device doesn’t perform as expected. With many M2M devices, the user of the device won’t have a direct relationship with the network operator – it is the device manufacturer that is the service provider. This means that when a consumer calls the manufacturer’s customer support team to report a problem, the technician needs all the key network diagnostics information they need to resolve the issue quickly. In many cases the M2M device is operating independent of any end-user, sending diagnostics or metering information back to a central database. In this case, the service provider needs real-time insight into all its deployed devices, able to activate, diagnose and de-activate devices remotely, without the need for an engineer to be called out.
Beyond ARPU
Based on average revenue per usage (ARPU), M2M technology may not seem a viable option for many operators. M2M ARPU is 10 per cent or less than the traditional handset subscriber. However, when the low bandwidth requirements, low churn and low acquisition costs are taken into account, the profitability for M2M is clear. The key metric operators should consider is margin.
Achieving a high margin in a low ARPU business rests on the operator’s ability to eliminate costs. When examining available M2M / connected device platforms, operators must look for a platform that is highly automated and that can streamline operational processes in order to protect profit margins.
For enterprises looking to build a connected device business, economics come down to the business model. For some industries, embedded connectivity is viewed as purely a cost – albeit one that could usher in new business practices that could in turn save money through improved operational efficiency. Meanwhile, in some industries such as consumer electronics, embedded connectivity can be an additional revenue stream. Using a connected devices platform to employ advanced up sell and cross-sell techniques can yield significant revenue opportunities.
If operators can address these challenges, M2M can grow to an unprecedented scale. As M2M connectivity continues to expand across industrial markets and develop in consumer markets, operators and developers have the opportunity to monetise this opportunity. Though still in its infancy, the M2M market holds the potential to increase demand and surpass the traditional handset market many times over.
