informa-sap: turn m2m potential into profit

M2M Communications Turn Potential into Profit

Camille Mendler Catherine Lynch

Principal Analyst Senior Director

Informa SAP Next-Gen Billing

Webinar: February 21, 2012

Agenda

• Introduction

• Riding M2M rollercoaster

• Triaging M2M opportunities

• Securing profitability

• Conclusions & recommendations

• Q&A

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Source: Flickr/cliff1066â„¢, Paul Kelpe

M2M: Multiple contexts, infinite possibilities

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Source: Flickr/RaeAllen

Industrial

Personal

Urban

A simple aim: Communicate intelligence from a vast,

non-sentient world to enrich our daily lives and work.

wellness

home

security

entertainment

public safety

energy

extraction

transport

production

distribution diagnostics

health

travel

The challenge: Pricing, rating, charging & billing

€ $ £ ¥

Sensors Network Monetization

4

Source: SAP

Many beliefs about the M2M market are wrong

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Value:

Delivering M2M data

Opportunity:

Targeting the right

vertical apps

Problems:

External, due to supply

chain fragmentation

Networks:

M2M networks are public

Myths:

Communications:

M2M will become

broadband

Implication: It’s time to shed light on market realities.

Source: Informa Telecoms & Media

Surveying the field

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South America & Caribbean,

5% North America, 12%

Middle East & Africa, 13%

Asia Pacific, 18%

Western & Eastern

Europe, 52%

Survey respondents from 50 countries

Totals may not add to 100% due to rounding. n=263. Source: Informa-SAP M2M Communications Survey

Telecom operator

39%

MVNO 2%

Satellite operator

2%

MVNE 3%

Telecom software

vendor / ISV 9%

Cloud services provider

4%

Telecom equipment

vendor 19%

Device, module,

chipset maker 6%

Integrator / consultancy

17%

Survey respondents across the M2M supply chain

Implication: Respondents had to be involved in the M2M supply chain; we also conducted 15 interviews.

1% 4%

31% 18% 24%

68% 78% 76%

CSPs Integrators Telecom equipment

vendors

% o

f re

sp

on

de

nts

2015: M2M contribution to total revenues

17% 29%

14%

62% 44% 67%

21% 27% 18%

CSPs Integrators Telecom equipment

vendors

Today: M2M contribution to total revenues

5% or more

Less than 5%

Zero

M2M market expectations are bullish!

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Implication: If these expectations are met, this would equate to a $65B+ M2M market for mobile network operators alone by 2015.

% o

f re

sp

on

de

nts

n=111 CSPs (telecom operators, satellite providers & MVNOs),

n=45 integrators, n=49 telecom equipment vendors Source: Informa-SAP M2M Communications Survey

Riding the M2M rollercoaster

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Nothing is really typical in M2M

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Implication: Every M2M deal is unique, but underlying costs are the same.

Buying a data plan is the most common M2M pricing model in use.

SLA-based, app-based or revenue share models remain uncommon.

26%

10%

19% 19%

8% 8% 3%

3%

5%

0%

5%

10%

15%

20%

25%

30%

% o

f M

2M

se

rvic

e p

rovid

ers

Number of SIMs

‘Typical’ deal: M2M SIMs

Totals may not add to 100% due to rounding. n=118 Source: Informa-SAP M2M Communications Survey

30% 29% 28%

5% 3% 5%

0%

5%

10%

15%

20%

25%

30%

35%

NA / DK < $3 $3-$5 $5-$7 $7-$9 >$9

% o

f M

2M

se

rvic

e p

rovid

ers

ARPU per SIM ($)

‘Typical’ deal: ARPU

Structural barriers are the biggest concern

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Implication: Diverse concerns, primarily about ROI.

8%

14%

15%

17%

17%

20%

29%

35%

43%

49%

Traffic management

Lack of M2M roaming

Security / privacy concerns

Billing / charging complexity

Unstable partner landscape

Technology immaturity

End-to-end service mgmt

Low ARPU, low margin, low ROI

Unproven business models

Fragmented ecosystem

Barriers to success in M2M

All respondents, n=263

Source: Informa-SAP M2M Communications Survey

No. 1

for CSPs

• Managing and monetizing

different partner relationships

• Low return on investment

• Some concern about

technical standards

• Surprisingly low ranking of

security and privacy

Machine

Revenue capture in the value chain is complex

Middleware

& Apps Comm.

Device Sensor Network Network

Enterprise

Integration

Presentation

Vendors Vendors Service

Providers Service

Providers Service

Providers

System

Integrators

Resellers & Solution Providers

€ $

€ €

$

€

£

11

Source: SAP

Operationally, what’s critical for M2M success?

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Implication: E2E service management & flexible billing are table stakes for all. A minority prioritizes the analysis of M2M data.


Top 5 M2M operational focus areas

CSP

Telecom equipment

vendor Integrator

Telecom software

vendor / ISV

Device, module,

chipset maker

Cloud service

provider

End-to-end service mgmt ▲ ▲ ▲ ▲ ▲ ▲ Partner mgmt ▲ ▲ ▲ ▲ ▲ Flexible billing ▲ ▲ ▲ ▲ ▲ ▲

Security & fraud ▲ ▲ ▲ ▲ Network traffic

& signalling loads ▲ ▲ ▲ ▲

Ordering & provisioning ▲ Cross-border roaming ▲

Business analytics ▲ ▲ ▲ n=111 n=49 n=45 n=23 n=16 n=12

A bit-pipe future for telcos is widely expected

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17.5%

18.6%

46.0%

41.2%

27.0%

24.5%

9.5%

15.7%

0% 20% 40% 60% 80% 100%

All survey respondents

Telecom operators (mobile, fixed, integrated)

% of respondents

Telecom operators are destined to be bit-pipe providers in the M2M market. Agree or disagree?

Strongly agree Somewhat agree Somewhat disagree Strongly disagree

Implication: This is a self-fulfilling prophecy without a change in mindset – and the right tools.


The M2M revenue opportunity is shifting

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2012 2015

M2M revenue

distribution

Consulting, integration, software development

Security, demand response, performance management

Decision support, reports and alerts, analytics


Implication: The M2M market is at an intermediate stage.

Communications services, associated communications hardware

M2M services must align to end-user needs

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Utilities Oil & Gas Rail

Top 5 communications

headaches

1. Connecting remote locations

2. Cost of connectivity

3. Data security

4. Staff technical skills

5. Managing multiple networks


2. Rising bandwidth needs

3. Data security





3. Staff technical skills

4. Supplier reliability


Technologies used

Public cellular (2G/3G), fiber, wifi,

private radio/microwave, satellite,

wireless mesh, WiMAX, powerline

Public cellular, (2G/3G) fiber, wifi,


wireless mesh, WiMAX, LTE

Public cellular (2G/2G), fiber, wifi,


wireless mesh

Source: Informa 2011 vertical industry end-user surveys, n=241 respondents

Implication: M2M intelligence must extend to enterprises’ remote assets beyond the reach of public networks.

M2M intelligence matters

Example: Motorway tolls for subscribers

– Autoroutes Paris-Rhin-Rhône

• Management of "Liber-T" On Board Units

• For individuals and enterprise fleets

• Flexible discounts:

• Volume based, time based, location based

• Recurring fee, one shot fees, for fleets

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Triaging high-value M2M opportunities

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We’re getting smarter about M2M segmentation

Various inter-related trends:

• Developing cross-industry M2M

solutions – Eg: Pay-as-you-drive insurance

touches transport, automotive, financial

services

• Creating new annuity revenues – Eg: Remote product diagnostics as a

service (eg: photocopiers, printers)

• Marketing B2B2C opportunities – Eg: Smart metering for utilities’

consumers

• Targeting SMEs – Eg: Low-cost fleet management

12.7%

3.6%

0.9%

2.7%

4.5%

10.9%

11.8%

11.8%

14.5%

15.5%

20.0%

20.0%

27.3%

46.4%

51.8%

Don't know / undecided

Other

Military / defence

Agriculture / food

Oil and gas / mining

Manufacturing / industrial

Integrators

Public safety

Consumer electronics

Operators / MVNOs

Health

Financial services

Automotive

Utilities

Transport and logistics

% of CSPs

CSPs’ target industries for M2M

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Implication: Focus is shifting to specific apps versus specific industries.


In M2M, Grannies and Gangsters are alike

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Sourc

e: F

lickr/

A30_T

sitik

a

Implication: Seek horizontal application of M2M functionality.

Elder care Felon tracking

Many worry about the ‘long-tail’ nature of M2M applications.

But functionally, many similarities exist between apps.

These can be cross-marketed to build profitable scale.

Triaging for M2M success: App categories

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Category Description

Static Monitor assets in fixed locations, such as soft-drinks

machines or photocopiers.

Nomadic Rely heavily on mobile networks to track people and

assets on the move, such as trucks and shipping

containers.

Transformational Create a brand-new annuity revenue stream for the end

customer, such as pay-as-you-drive insurance.

Horizontal Applications that are functionally similar across various

industries (see previous example).

Implication: Applications which match multiple categories have a greater potential for scaled success.

There’s a missing link: Long-tail wireless

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Implication: These vendors can bridge between public and private M2M – they are both partners and competitors for CSPs.

• Long-tail wireless vendors

support vertical applications

• Eg: industrial automation, SCADA

• Serve challenging locations

public cellular can’t easily reach

• With unlicensed & licensed spectrum

• Support ‘bottom-up’ M2M

• Appetite to diversify through annuity

revenue streams

• Example: CalAmp, modem/router vendor

• Key verticals: automotive, oil & gas, fleet,

logistics, public safety, rail, utilities, direct broadcast satellite

• Technologies: GPS/GPRS, LTE, private radio,

satellite, WiFi, WiMAX, Zigbee • Annuity: 235,000 customers for vehicle

tracking, vehicle finance, fleet management, remote car start services

• Alliances: Strategic alliance with nPhase (Verizon); works with AT&T, Numerex, Rogers, Sprint, Vodafone

M2M connectivity will grow explosively

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Implication: Some CSPs believe that revenues from public cellular M2M will be big enough to fight for.

More things to connect… …the connectivity pot grows Public (cellular) will not be the sole beneficiary

2012

2015

2020+

‘Private’ M2M will dominate

Using familiar (eg: WiFi) and unfamiliar protocols

(eg: WirelessHART)

Back to the future: Alliances

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Implication: Battle lines are being drawn to control public cellular M2M.

Airlines Telcos M2M

Orange

Deutsche Telekom

Telia Sonera

Sprint

MACH

Verizon Wireless

Global alliances and hubs for cross-border M2M should cut costs and

speed service activation. Often focused on large multinationals, they

must also serve SMEs with M2M roaming needs.

Vodafone

Syniverse

Securing profitability

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Let’s review M2M business models & challenges

• Flexible platform with low ongoing cost of ownership

• Scalable platform to scale for high volume

• Low ARPU unit value Low-cost model

• Reduce operational costs

• Support mix of recurring & usage based micro payments

• High volume billing & high availability architecture Massive scale

• Handle settlement & commission for complex value chains

• Support retail & wholesale pricing models

• Global support

• Analytics promote greater efficiency

Multi-party value chain

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Profitability

variable

What is it? Internal

CSP issue

External

market

issue

Can it be

outsourced?

Structure Reporting structure of internal M2M

division.

_ _

Accounting Internal metrics used to determine

M2M profit and loss.

_ _

Roaming Cost to deliver cross-region M2M

services.

_

Platforms Service management costs

and capabilities.

_

Modules Dependency of M2M service pricing

on module costs.

_ _

Partners Partner pay-out models supported.

Charging M2M pricing models supported.

It’s time to look further within

Implication: Many profitability variables lie within a CSP’s control.


We say:

Conclusions

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Value:

Delivering M2M data

Opportunity:

Targeting the right

vertical apps

Internal issues are underplayed

Value lies in the data

Opportunity lies in horizontal apps

Problems:

External, due to supply

chain fragmentation

M2M networks are also private

Networks:

M2M networks are public

Myths:

M2M will remain largely narrowband

Communications:

M2M will become

broadband

Implication: M2M is a huge opportunity – choose a sustainable role.


Q&A

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Thank you!

Camille Mendler

[email protected]

For more M2M market intelligence, contact:

EMEA Jamie Moss

[email protected]

Sheridan Nye

[email protected]

Asia Charles Moon

[email protected]

Latin America Marceli Passoni

[email protected]

North America Andy Castonguay

[email protected]

mailto:[email protected]






SAP Next-Gen Billing: Run better M2M services

• Supports flexible pricing for retail and wholesale

models

• Support for end to end service management

• Low cost platform for high volume, low value

transactions

• Handles complexity in partner settlement

• Leverage analytics to interpret data & sell « greater

efficiency »

For more information, contact: [email protected]


informa-sap: turn m2m potential into profit

Technology

m2m deal

m2m networks

m2m success

m2m sims

m2m contribution2015

analysis of m2m

m2m service providers

m2m market expectations