February 18, 2012
The 10 Million dollar M2M question is how to support thousands of business processes in tens of thousands of businesses in an efficient and scalable way. Beecham Research’s M2M Sector Map (see Interesting reading) makes the point of the fragmented and complex market very well. Mobile operators typically have few services with very many users while most potential users of M2M will have industry specific or even company specific needs in relatively small numbers. This is why most connected devices in cellular networks today are terminals in large volumes (typically electricity meters or eReaders) with small ARPU but also little work required by the operator per terminal deployed. The issue with this is that the electricity meters are rolled out primarily due to political decisions and one can argue that eReaders, iPads, etc are just big mobile phones and not really M2M solutions.
The other type of deployments today are primarily those where the value gained is big enough to pay for integration, software development, customization, etc. And these are “real” M2M solutions leveraging the value of connecting things and putting computing on top.
I come to think of the “bankruptcy gap” in between the only two viable business models over time: low price/low cost/high volumes and high price/great perceived value/customization. In the bankruptcy gap you will find average products with average prices. There is an obvious risk today to address the bulk of the very fragmented M2M market: quite an effort to provide what the customer want and price sensitiveness due to not big or clear enough benefits is a scary combination.
This looks similar to the bankruptcy gap but with one big difference: the driver putting businesses across industries into the bankruptcy gap is commoditization of products and services. But in the case of M2M we are in the early days! How can this be?
I think the situation is dangerous since it threatens to once again leave us with a great idea, a lot of energy and efforts, poor results and many investments and opportunities wasted. To me the key reasons why we face an artificial bankruptcy gap in M2M now are:
– Parts of the solutions, like plain vanilla 2G data subscriptions, are more or less commodities today. Other connectivity for M2M like PLC, Satellite, Wi-Fi, Rfid, NFC and PSTN are not commoditized and combinations of them are complex to deal with.
– Today it is too much effort to develop, integrate and support the M2M applications. Robust, efficient, large scale service delivery platforms are needed supporting standardized complete development stacks, different networks and numerous APIs.
Good news is that there is progress in these areas. Most mobile operators have or will deploy Service Enablement Services (SES) taking care of horizontal requirements on top of the connectivity. Module and equipment vendors, independent start-ups and others are working on similar often cloud based offerings and some of them support combinations of different connectivity technologies. Many standards development organizations have recognized the need for a common cost-efficient M2M service layer that can be embedded in different hardware and software to provide robust connectivity between terminals and the application servers. The ITU Focus Group on Machine-to-Machine Service Layer, initially focused on e-health, announced January 16 is a good example.
The best way to avoid another M2M flop is to ensure strong collaboration in establishing a rock solid common M2M service layer with standardized protocols and APIs and to always start working on real customer problems to avoid brilliant answers to questions we don’t know.
December 27, 2011
Utilities normally come up first when talking M2M. Primarily electricity but also water and gas. It’s huge global businesses and infrastructures dealing with things that are closely related to the sustainability issues as well as safety and security, everyone on the planet including politicians are involved one way or another and on top it’s one of few areas where M2M solutions already have been used in large scale. Many utility companies have telecommunication business experience which makes them knowledgable buyers.
Smart Grid is the white paper or vision for how the electricity industry will cope with the new world where production, distribution and consumption of electricity is managed in real time all around the grid and where usage is optimized over time. The basic idea is to connect everything and add computing on top. If the smart grids happen we are looking at a new industry of “Internet size” in 30-50 years which has made many large corporations starting to dig there already.
Given the limitations of our globe it is obvious that we have to do something and I am convinced “connecting and computing” is a major part of it. But the scale of the project means it will take a lot of time, financing has to be sorted out, concepts and solutions have to be proven and so on, which explains why we still see primarily pilot projects and trials. And when it happens big way, most of it will be a game for large players with big projects and thin margins like most infrastructure business.
The first step towards the smart grids are connected electricity meters for automated meter reading (AMR) and we are in the middle of that huge roll out project right now. Global shipments of smart meters exceeded 100M 2011 and is estimated to be 250M by 2016 (ABI Research). EU wants 80% of the meters to be smart by 2020 and Italy and Sweden are already done. North America has already more than 50% meters connected (Berg Insight) after the American Recovery and Reinvestment Act (ARRA) which included US$ 43 Billion plus tax incentives for the energy sector. Also Asia is speeding up their efforts with Japan having the most advanced power grid monitoring systems in place, China announcing a five year AMI plan, Singapore working on their Intelligent Energy System and South Korea their Smart Grid Demonstration Project. Some 1,5B smart meters will be deployed during the next 10 years and meter manufacturers like Landis & Gyr, Sensus and Itron and communication module providers like Telit, Cinterion and Sierra Wireless are all working hard to capture this big business opportunity. But since the traffic per smart meter is tiny (probably less than half MB per year) it is not obvious that the smart meters is the salvation for network providers. A mix of different technologies is used to connect the meters to the central applications. Reportlinker estimates 38% of M2M connections in the utilities industry today to be cellular connections growing to 57% by 2020. MAN, including power line communications (PLC) and community WiFi, accounts for 53% today and is estimated to 28% by 2020.
Even though energy companies and governments are keen on rolling out smart electricity meters some consumers are not. Several US consumer groups like in Naperville, Illinois, are fighting the smart meter roll-outs in order to give the consumers the option to stay with the old meters. But more often consumer groups are pushing smart meters to put the consumers in control.
Replacing meters for electricity, water and gas with smart ones is only the beginning. Making the grids smarter will require a lot of relevant networks and IT systems to be made available. The grids are also part of the national critical infrastructure protection efforts why I believe we will see governments getting very much involved in how to build, operate and protect this infrastructure onwards.