Telematics and M2M: New business models

Telematics and M2M: New business models

The machine-to-machine (M2M) market is rapidly heating up. According to Gartner, growth in the category slowed during 2008 and 2009 but is now surging, growing by 30 to 40 percent annually, fueled in part by falling costs for cellular connectivity.

Mobile network operators see machine-to-machine connections as the most likely source of growth, now that cell phone penetration has passed 100 percent in developed markets.

Research firm Analysys Mason expects total worldwide M2M device connections in the automotive and transport sector to increase from an estimated 21.6 million in 2010 to 276.5 million in 2020.

Gartner identifies three types of organization providing M2M services: pure M2M plays, connectivity service providers (typically mobile network operators, or MNOs), and partnerships between MNOs and technology providers to create more comprehensive offerings. All of these have viable business models, according to Gartner.

Mobile versus stationary strategies

Roger Dewey, CEO of consultancy M2MV, says that MNOs need to think of mobile implementations—such as remote diagnostics, infotainment, and tracking services—differently from fixed wireless implementations, such as sensor monitoring. Aside from crash notifications and other safety services, Dewey says, automotive M2M communications can bear a certain level of service disruption.

“With a fixed wireless asset, you need to make sure you have good coverage and wireless connectivity at all times to the machine itself, particularly if it's streaming something, whether credit card data in cash registers or digital signage,” Dewey points out. “It’s less tolerant of latency.”

By the same token, many telematics connections can be completed during off-peak hours, such as updating and routine diagnostics or data transfers, easing demands on the network. Other machine-to-machine connections demand close to real-time connectivity, according to Tim Johnson, Sprint's emerging solutions strategic opportunities manager.

“There are all kinds of things organizations can do once they have real-time information about the vehicle and its status,” Johnson says.

These always- or almost always-connected services include transmitting information between vehicles and traffic lights or bridges as well as applications to tell mass transit users when the next bus will arrive.

Connectivity providers for machine-to-machine implementations typically do not have a commercial relationship with an end customer, according to Gartner, so they often maintain separate provisioning and billing systems.

These systems may have been developed internally or be provided by third parties like Jasper Wireless. Most operate a legacy platform for older connected device subscriptions as well.

Branding M2M services

Machine-to-vehicle communications, or M2V, could offer a new opportunity for greater connection with the end user/driver. This is something wireless network operators would love to have, but automakers are really desperate to have.

With the opportunity to bill comes the opportunity to market new services. The OnStar brand owns safety and security telematics while automakers are creating jazzy new brands for their infotainment services.

In the US, network operators seem willing to let automakers place their brands on services delivered to drivers while building their own brands as B2B connectivity and service enablers.

But it's not only billing that's seeing a transition from legacy enterprise systems to a more flexible approach. Dewey says a better-developed stack of services makes integration easier.

He notes that OnStar had to build its system from the ground up until the connection with the Verizon Wireless network.

"It's started to get easier because companies are developing platforms and middleware," he says. "Enabling technology has matured, so that, instead of having to build everything from the ground up, a company can simply develop the applications. That speeds your time to market, lowers development cost, and lowers your risk."

Relationships with end customers

Dewey sees lots of companies jumping into the service enablement business, but for the most part they're still trying to understand the space. “This is very early days for M2M," he notes.

Sprint's Johnson predicts there will be consolidation in the market, with some entities absorbing others. Meanwhile, his organization wants to be the orchestrator of other entities, allowing auto OEMs to work with a single partner—Sprint, for example—instead of managing modular partners.

He doesn't envision this as Sprint acting as a tier 1, exactly: "The OEM definitely has input into who the value chain consists of.

It's not that Sprint says, 'Thou shalt work with these partners.'" Sprint, he says, is willing to be collaborative with who those partners are and is happy to orchestrate.

One advantage Sprint and the other telcos have, in this case, is their robust relationships with end customers. In M2M, as in every other sector, the best technology may not win. Distribution is the key. Says Dewey, "If you don't have a very well-defined channel to the customer, you will fail."

This does not mean simply making a deal with an automaker, either, according to Dewey. "You need to understand the value chain for your particular application and be able to sell the value proposition through that value chain, all the way down to the end customer."

Susan Kuchinskas is a regular contributor to TU.

For more on M2M, join the sector’s other key players at Telematics Munich 2011 on November 9-10 in Munich.
 

 


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