At analyst and consultancy firm Arthur D Little’s recent “The Internet of Things – Defining the Smart Ecosystem” conference in Munich, delegates discussed opportunities and potential in the emerging world of M2M communications.
While the headline numbers have attracted considerable attention, realities are likely to be somewhat different. Arthur D Little expects slower, but still significant growth with, for example, the German M2M market representing 2% of overall ICT spending by 2013.
As Arthur D Little pointed out in their event summary, partnerships within the M2M ecosystem will be critical for success – and telecoms operators need to determine the role they will play. Partly, this will come through ownership of M2M platforms and connected devices, but it’s not recommended that operators develop the applications – instead, operators have a critical role as enablers of M2M communications. What’s more, operators have other opportunities to carve out a valuable stake.
First, operators with a broad footprint can offer seamless connectivity options, ensuring global reach for those M2M applications that demand it. Secondly, although OTT providers have already made significant investments in cloud-based infrastructure that can support a range of M2M applications, as such applications increase in complexity, ownership of the end-to-end network could create opportunities for operators to differentiate further on quality of service.
Not all M2M applications will be equal and while many have low data demands, the sheer volume will inevitably place some strain on the network. Operators are well placed to manage these demands because only they have end-to-end control of the network infrastructure. But ownership isn’t enough: they will need to offer differentiated service levels in order to meet the demands of different data flows. This means they must be able to support full visibility and control of M2M data, directly from the device and as it traverses the network.
So the third area in which operators can capture value is through the provision of sophisticated control mechanisms that operate at the level of M2M devices and can be leveraged to ensure that the flows of M2M data are treated appropriately. This goes beyond mere ownership of the network and implies a level of control that only operators are likely to be able to achieve. As the M2M market develops, capitalising on existing competitive advantages and investing in new differentiation possibilities will be critical to maintaining leadership.
If M2M markets become as attractive as has been suggested, the market will likely fragment as new entrants are drawn to it. Operators will be anxious not to lose out to OTT and cloud-based players, and must take steps to avoid conceding their market position.