Ovum’s cellular M2M forecast* foresees global connections growing 162% over the next five years to reach 530 million. Asia and Oceania will have the most connections (over 200 million by 2019), followed by Europe and the Americas. According to Ovum, operator revenue share of the total cellular M2M market stands to rise to US$25bn by 2019. As of 2013 operator revenue was largely comprised of managed connectivity (43%) and network-level data transport (36%). However, with figures anticipating the largest revenue opportunity to be within other layers (integration is expected to account for almost 50% of total M2M revenue in 2019), operators need to look beyond connectivity to reap the bigger rewards.
“Over the past few years, as the hype around Internet of Things has taken off – driven by some wildly exaggerated forecasts – we’ve seen operators take a gentle approach to M2M. Staying within their main expertise, most have taken on management of the connectivity layer, yet as conventional wisdom tells us, only minor returns will be made here,” says Jamie Moss, senior analyst at Ovum. “Instead, operators need to leverage their other capabilities, namely their ability to aggregate large amounts of data around their customers. We’re seeing device and application management become the new focus in M2M, and the ability to collect vast amounts of data will be of considerable value. Data itself has intrinsic worth, but it is the business decisions made based on the aggregation and analysis of that data that are the greatest source of value for enterprises and their connected service provider partners.”
As the M2M opportunity continues to develop, so will the business models that operators are adopting to gain a greater share of the revenue. Ovum’s research into the cellular M2M market has highlighted five key models. Some operators are developing end-to-end services internally as an offshoot of their own supply chain needs. Others are crafting bespoke, end-to-end solutions for individual enterprise partners, although this remains the exception. An increasingly common strategy involves outsourcing to acquire M2M specialisation, which is being done in three ways. Some operators have acquired dedicated M2M service providers to own that intellectual property, resell those services into other markets and use the assets acquired to develop new services. Others have partnered with specialists from other markets, working in unison to deliver connected, value-added variants of existing services. Lastly, some operators have opted to license suites of third-party M2M services from aggregators.
“Ultimately M2M is all about the enterprise partner (not ‘customer’) of the operator. M2M is a market with unique dynamics, where the aim of the operator is to become embedded in the long-term business strategy of the enterprise, not to simply be their current service provider. In order for the M2M market to realise its potential, operators must educate enterprises in the utility that connectivity brings. Enterprises should never have to become experts in connectivity, however, as that knowledge is part and parcel of the managed service that the operator must provide for them,” concludes Moss.