By Yiru Zhong, Frost & Sullivan senior industry analyst, ICT Europe
Since the 50 billion connected devices future was announced by Ericsson in 2009, we have eagerly anticipated a positive impact of this substantial market opportunity on the telecoms industry.
Three years on, telecoms companies have made significant progress in capturing immediate and well-defined market opportunities.
These are mostly in M2M SIMs for new cars on the back of E-Call legislation, in electricity meters as required by European Union’s and national government’s commitments on smart metering rollouts within the next decade, and a splatter of other applications around consumer and professional healthcare, traditional telemetry, security and industrial automation.
Yet, despite continuous efforts to fine-tune their M2M strategies, telecoms companies must be challenged to show a marked improvement in revenue and contribution to profits in the next few years.
Looking ahead, there are two glaring obstacles that must be overcome to further M2M revenue growth.
1. Prioritising services beyond connectivity
Almost all high profile M2M customer wins by mobile operators in the last three years involved simple connectivity.
Our dissatisfaction with the pace of market development lies with the lack of project wins that extend into additional services such as utilising machine data for analytics, enabling customers to develop new services or functionalities or entrenching telcos’ unique role as an aggregator or facilitator in a connected devices future.
Telecoms service companies can accelerate this by increasing customer awareness through a broad route-to-market strategy and developing the depth of customer needs.
A priority has to be a route-to-market strategy that also includes telecoms service providers’ M2M offerings for the small and medium enterprises (SME) customers.
Widening an M2M telecoms service provider’s reach to a spectrum of customers regardless of enterprise size can yield a more sustainable flow of revenue.
Frost & Sullivan estimates that a broad enterprise M2M strategy will also stimulate revenue growth by 22.3 percent in the next five years as more M2M functions or customer needs deepen.
Another priority for M2M telecoms service providers is to develop the depth of customer needs outside of traditional M2M logistics applications and current applications in smart electricity meters and connected cars for E-call compliance.
These higher revenue potential applications lie in industries where key business indicators such as efficiency, productivity and customer retention are self-evident drivers for embracing M2M services.
Frost & Sullivan predicts the emergence of M2M opportunities in industrial automation, retail sectors and even local governments.
A higher revenue potential of between 10 and 35 percent is achievable in the next five years, when we expect M2M revenue to be accompanied by utilising the intelligence generated from machine data or in enabling enterprises to develop new functionality or new services to their end customers.
2. Resolving the M2M roaming issue
The current state-of-play among M2M telecoms service providers can be thought of in three different groups.
First, there are ambitious operators keen to be the one-stop shop for M2M customers; with their aggressive global or regional market expansion plans and frequent fine-tuning of their strategies.
Second, there are operators with a similar vision but who decide to compete in a narrower geographic scope.
Third, there are those operators keen to emulate their mobile strategy of selling M2M capacity or simply M2M connectivity.
Such service providers’ market entry accelerates the rate at which machines are connected and the pace in which to arrive at a connected devices future.
While there remain external obstacles to market growth, there is also an internal constraint that can be addressed by the telecoms industry.
M2M connectivity roaming is one of the strongest obstacles to enterprise adoption – this opaqueness retards market adoption, particularly in the SME space.
We are hopeful that 2013 could be the year this issue comes to the attention of national telecoms regulator’s priorities to provide a coordinating hand across national boundaries.
Want to learn more about M2M? Click here to read our Q3 2012 special report "Beyond Connectivity"; Click here to watch videos of our M2M seminar featuring Telefonica, Arthur D Little, Machina Research & more.
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