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Riding the M2M Revenue Wave

Heavy Lifting Analyst Notes
Heavy Lifting Analyst Notes
Heavy Lifting Analyst Notes
1/28/2013
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In telecom, operators are looking to M2M as a means of alternative revenue in an environment where traditional voice services have reached penetration. But in the scheme of things, service providers will have to move beyond just providing connectivity for M2M and provide value-added services if they want to benefit fully from the M2M "explosion," because the operator that provides the most appealing combination of connectivity, cost savings, value-added offering and comprehensive M2M ecosystem will ultimately be the one to win and retain customers. In Heavy Reading's recent multi-client study on M2M, we surveyed 60-plus unique global operators. Some of the key highlights that came out as part of this survey are: M2M is still in its infancy as part of operators' overall business operations. The majority of operators report that M2M currently makes up less than 5 percent of their company's overall revenue. Thirty-seven percent of global respondents feel that five years from now, M2M services will make up 5 percent to 10 percent of their revenue, followed by 22 percent feeling that it will make up 10 percent to 15 percent. About one third of operators feel they have M2M offerings in all vertical markets. Twenty-one percent to 35 percent of all survey respondents report that they are currently offering M2M services in the vertical markets of automotive/telematics/fleet, manufacturing, energy, security and video surveillance, health care, consumer electronics, connected home and smart building management. Twenty percent to 33 percent of all respondents report they plan to offer M2M services in these vertical markets in 2013. Globally operators feel revenue from M2M will increase over the next five years but not astronomically. Though operators expect an increase over the next five years, none of the operators strongly feel revenue from M2M will be up more than 20 percent five years from now. Operators expect transaction volumes to increase. The majority of respondents from all operator types expect a 10 percent to 20 percent increase in transaction volumes over the next five years. Most operators currently see themselves as a wholesale provider and a connectivity provider in the M2M value chain, but in the future look to partnerships. The majority of global respondents feel their current role in the M2M value chain is as a connectivity provider (85 percent), followed by a wholesale provider (75 percent). Five years from now, the majority of global respondents see themselves as a partner with OTT M2M players (93 percent), followed by a provider of premium pricing plans for M2M traffic (80 percent) and a provider of device management and services capability (77 percent). The B2B M2M business model is currently the most popular, but five years from now most operators look to a multiparty model. Seventy-one percent of global respondents have implemented the B2B M2M business model, followed by B2C (70 percent) and low-cost model (use existing retail infrastructure) (45 percent). In five years, 86 percent of global respondents expect to implement the multiparty model (global connectivity hub) followed by blending own M2M platform with network management (82 percent). Operators look to quality of service as a differentiator. Seventy-five percent of global respondents report they use quality of service to differentiate their M2M offerings followed by customer services (67 percent) and network speed/performance (62 percent). Lack of zero-touch service activation, integrated configuration management and ability to create permanent roaming agreements and tariff plans with selected partners are seen as a serious problem that will inhibit full support of their company's M2M operation. Forty percent of global respondents feel that lack of zero-touch service activation is a serious problem inhibiting full support of their M2M operation, followed by lack of ability to create permanent roaming agreements (37 percent) and lack of integrated configuration management (36 percent). The majority of all operator types plan to support M2M in the cloud. The majority of respondents (63 percent) plan to support M2M in the cloud. The majority of survey respondents feel that concern with data security will be the most major obstacle regarding deployment of M2M services. The majority of respondents feel that concern with data security will the most major obstacle regarding deployment of M2M services in the cloud, followed by the need to transform business processes and unproven ROI. -- Ari Banerjee, Senior Analyst, Heavy Reading

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