Analysys Mason M2M Insights MNOs Mar2013 RDME0
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Transcript of Analysys Mason M2M Insights MNOs Mar2013 RDME0
About Analysys Mason | 1
© Analysys Mason Limited 2013 March 2013
M2M insights for mobile network operators
March 2013
Steve Hilton
Executive summary
Mobile network operators (MNOs) have an opportunity to seize upon the burgeoning growth in the machine-to-
machine (M2M) ecosystem. The number of wireless M2M device connections around the world looks set to
grow strongly from 102 million in 2012 to 2.0 billion in 2021. Total worldwide M2M connectivity revenue will
increase from USD6.5 billion to USD51 billion during the same period.
This Viewpoint provides five recommendations to help MNOs foster growth in their M2M businesses.
Invest in a dedicated M2M team and infrastructure.
Focus on a communications-rich offering with value-added services.
Establish credible partnerships.
Ensure network security with robust, scalable device certification processes.
Implement a solution-based business model.
These recommendations (see Figure 1) are based on Analysys Mason’s research and discussions with MNOs
around the world.
Figure 1: Elements of a successful M2M business [Source: Analysys Mason, 2013]
Dedicated M2M team and
infrastructure
Communications-rich offering with
value-added services
Credible partnerships
Secure network with device certification processes
Solution-based business model
M2M insights for mobile network operators | 2
© Analysys Mason Limited 2013 March 2013
This Viewpoint presents insights into the latest developments and challenges facing MNOs, and looks at the
principal requirements of enterprise M2M buyers. It then presents the results of proprietary research into the net
present value (NPV) of device connectivity management platforms; this research has shown that M2M service
platforms supplied by vendors can create a NPV that is more than double that of those deployed under other
models such as internal development or using legacy platform infrastructure.
Recommendations for operators
MNOs offering an M2M solution can benefit from following these five recommendations.
Dedicate a team and technical infrastructure specifically to M2M business. The MNOs that have the
most successful M2M businesses have teams that are dedicated to M2M business activities including
marketing communications, product marketing, sales support, platform support and partnership
management. These MNOs have the human resources to best address the unique needs of the M2M
ecosystem, which include long sales cycles, intensive presales effort and a solutions-based sales approach.
MNOs that dedicate M2M infrastructure – primarily at the platform layer, but also key pieces of network
hardware such as core elements – will also be able to bring solutions to market more quickly, provide a
more customised M2M solution to enterprises, and offer better service-level agreements (SLAs) to help
improve customers’ critical business processes. A dedicated team and infrastructure are required for any
MNO wanting to enter the M2M market, irrespective of its long-term growth strategy.
Focus on communications plus a series of value-added services. MNOs should offer M2M solutions that
focus on communications, plus a clearly defined set of value-added services including billing and rating,
billing on behalf of enterprise customers, customer support as a service, network connectivity, consultancy
services and other systems integration that has an impact on networks and communications. MNOs should
also develop a robust set of SLAs around their network and ancillary services to help differentiate their
M2M offerings and provide enterprise-grade quality of service (QoS). We generally do not recommend that
MNOs offer a large number of M2M applications. Applications development, testing, implementation and
management are competencies often better done by other players in the M2M ecosystem. MNOs may have
the resources and skills to compete develop some M2M applications, but identifying and selecting these
applications requires careful business and technology planning.
Seek well-known, credible partners for key infrastructure and connectivity platform enablement.
Picking well-known M2M partners that offer unique M2M solutions and integrated offerings is critical for a
well-run M2M business. A partner’s technology offering is important, but equally important are those
partners that bring enterprise customers to an M2M business. We highly recommend finding partners that
have experience with enterprise customers in key M2M sectors, including energy/utility, automotive,
healthcare and industrial/heavy manufacturing. Partners should have extensive R&D capabilities and the
ability to support an MNO’s business needs at an international level. Those partners that have a deep
understanding of core networks can provide ancillary support and ensure optimal integrations between
established and new infrastructure. It is also important to choose partners that can support multiple MNOs
and facilitate the creation of worldwide M2M footprints. Enterprises seek simplicity in the provisioning and
management of devices, so having multiple MNOs using the same platforms adds value to an enterprise’s
M2M deployment.
Protect businesses and infrastructure with appropriately designed certification processes and
support. M2M certification processes are critical to protect business and network assets. M2M certification
processes also need to be specifically tailored to the unique needs of M2M suppliers rather than traditional
smartphone suppliers. Partners can offer outsourced certification support for M2M businesses. Certification
M2M insights for mobile network operators | 3
© Analysys Mason Limited 2013 March 2013
also helps device manufacturers to reduce support and usage costs and time to market, thereby lowering the
total cost of an M2M solution for enterprises.
Follow a solutions-based sales approach that addresses the changing nature of M2M business models.
M2M pricing must be uniquely created to support enterprises’ changing business models. MNOs must
consider various M2M pricing strategies, including subscription sales, pay-per-use and prepaid approaches
in B2B, B2C and B2B2C models. These strategies help link an MNO’s success to the business models of
enterprise customers.
Forecast
The market for M2M services is one of the fastest-growing areas within the communications sector. The
worldwide market for mobile M2M device connections will increase from 102 million devices in 2012 to
2.0 billion connections in 2021 (see Figure 2). The fastest-growing sectors will be utilities, healthcare, security
and automotive/transport, growing at respective compound annual growth rates of 51%, 44%, 36% and 27%.
The largest sectors by number of connections by 2021 will be utilities, with 1.3 billion, followed by automotive
and transport with 451 million, and security with 279 million.
Figure 2: Mobile M2M device connections and developed markets’ share of connections, worldwide, 2011–2021
[Source: Analysys Mason, 2013]
Total revenue from worldwide M2M connectivity is forecast to increase from USD6.5 billion in 2012 to
USD51 billion by 2021, at a CAGR of 26% over the forecast period. Mobile operators’ share of worldwide
revenue will increase from 74% to 84% during the same period, because most new M2M deployments will be
over mobile networks. Mobile networks generally provide enterprises with a more affordable connectivity
solution for most of the device connections in our forecasts. MNOs and their partners are also creating solutions
to increase the speed of deployments and management of solutions, thereby making mobile networks more
desirable relative to other M2M connectivity options.
0.08 0.10 0.14 0.19
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2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
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Mobile M2M connections Developed markets' share of connections
M2M insights for mobile network operators | 4
© Analysys Mason Limited 2013 March 2013
We expect that MNOs in developed countries will continue to focus their efforts on building scalable, multi-
regional M2M business during the next 2–3 years, in order to capture the anticipated revenue growth. We expect
these operators to focus on the M2M deployments with the highest ARPU and most readily understood business
models, namely M2M solutions in the automotive and transport, utility and security sectors (see Figure 3).
Figure 3: M2M connectivity revenue by industry sector and total connectivity ARPU, worldwide, 2011–2021
[Source: Analysys Mason, 2013]
The financial services, government, and automotive and transport sectors will have the highest ARPU rates
throughout the forecast period. The financial services sector generally demands high levels of security and SLAs
associated with its connectivity. This allows operators to charge a premium compared with lower-quality
connections. Government-sector applications involve video-based solutions requiring higher ARPU-generating
fixed-line connectivity. Automotive sector solutions, particularly fleet management, continue to provide healthy
ARPU, because enterprises find strong returns on investment in reducing fuel consumption and labour-related
expenses associated with fleet operations.
Key challenges for MNOs offering M2M services
This section examines three key challenges for MNOs as they consider offering M2M services (see Figure 4).
We present some of the overall strategic insights and recommendations for MNOs, which highlight some of the
pressing concerns and opportunities faced by MNOs in developed and emerging regions. These insights also
include key recommendations for building successful MNO M2M businesses. We then discuss some common
current and future M2M requirements of enterprises. These requirements drive strategic and tactical plans for
MNOs and the partners supporting them. Finally, we look at the value of M2M partnerships with particular
emphasis on the platform layer. M2M partnerships that provide both technology and sales channel enablement
are poised for optimal success in the market.
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Utilities Security Automotive and transport
Healthcare Retail Government
Financial services ARPU
M2M insights for mobile network operators | 5
© Analysys Mason Limited 2013 March 2013
Figure 4: Key challenges for MNOs offering M2M services [Source: Analysys Mason, 2013]
Strategic insights and recommendations for MNOs
Opportunity prioritisation – key industry sectors
MNOs are focusing on a small number of key industry sectors in order to attain the highest levels of M2M
growth. These sectors, according to MNOs, will yield the highest cash flow during the next few years.
According to data collected from seven large MNOs and recently published in Analysys Mason’s M2M
scorecard for communications service providers: 2012,1 MNOs are focused most keenly on the automotive,
energy and security/surveillance sectors. Figure 5 presents the average rankings for industry sectors that MNOs
gave in the M2M scorecard.
Figure 5: Top M2M industry sectors for MNOs [Source: Analysys Mason, 2013]
Industry sector Ranking of importance
(1 = most important; 10 = least important)
Automotive 1.1
Energy 3.7
Security/surveillance 4.9
Consumer electronics 5.3
Asset tracking 5.7
Industrial/manufacturing 6.1
Retail 6.4
Healthcare 6.9
Financial services 8.2
Smart cities 8.5
Given the myriad opportunities in the evolving M2M ecosystem, MNOs must identify their target industry
sectors. Success is likely to depend on operators’ ability to target a small number of sectors with the greatest
potential. However, niche opportunities are also available for all MNOs, either because of unique geographical
coverage or established enterprise relationships. Niche opportunities may arise in the heavy equipment or
construction sectors, in mining and agricultural sectors, or in the government or public safety sectors.
1 Available at www.analysysmason.com/Research/Content/Reports/M2M-CSPs-scorecard-Jan2013-RDME0/.
• Opportunity prioritisation
• Dedicated business unit considerations
• Network security and device certifications
• Solutions-based business model
Strategic insights and recommendations
• Communications-centric offerings
• Service level agreements (SLAs)
• Value-added services
• Simplicity in geographic roll-out
Enterprise requirements
• Economies of scale
• Time-to-market considerations
• TCO comparisons for platform deployment models
Partnerships and platform
M2M insights for mobile network operators | 6
© Analysys Mason Limited 2013 March 2013
Dedicated business units
MNOs need dedicated M2M business units. Large and small MNOs benefit from centralised M2M teams that
are responsible for M2M product development, platform support and marketing. Sales organisations can be both
centralised and local. According to our M2M scorecard, small MNOs need organisations of around 50
employees, whereas larger CSPs need 150 or more employees for an M2M business unit. MNOs in the process
of forming M2M business units should create a structure similar to the one put in place by TeliaSonera.
“TeliaSonera Global M2M Services is a dedicated unit within the TeliaSonera group with a full global M2M
business responsibility.”
– Hans Dahlberg, TeliaSonera (Head of Global M2M Services)
The TeliaSonera Global M2M Services unit is set up with the following functions, reporting to a global head of
TeliaSonera M2M.
Product management: Global ownership of the M2M product portfolio and offerings.
Special sales: Driving M2M sales activities across all regions. Supports local sales teams with local
dedicated special sales resources and drives individual M2M opportunities.
Partner and marketing: Responsible for partner programmes and ecosystem creation, providing the full
value-chain of joint customer solutions. The programme also heads up global M2M marketing and public
relations.
Network security and device certifications
Maintaining mobile network security is important for any MNO and an M2M business needs to consider the
impact it makes on overall network security. One of the key considerations for maintaining network security is
creating acceptable device certification processes for an M2M business.
Several years ago, the standard mobile device certification processes used by MNOs were onerous when applied
to the M2M world. MNOs generally expected their M2M suppliers to follow the same device certification
processes as suppliers of smartphones and feature phones, which led to extremely long and expensive M2M
device certification processes. However, MNOs now have device certification processes tailored to the needs of
the M2M ecosystem.
As MNOs increase the scale of their businesses, we believe they should revisit their M2M device certification
processes and in some cases consider outsourcing these processes to third parties like Ericsson. Communications
equipment vendors can supply device certification programs that scale with MNOs’ M2M businesses. These
programs, when coupled with other pieces of an M2M portfolio, can allow an MNO to focus on the pieces of the
M2M supply chain of greatest value.
“Ericsson’s global market leadership makes it a true one-stop-shop for device and application verification”
– Glenn Lurie, AT&T (President of Emerging Devices, Resale and Partnership)
M2M insights for mobile network operators | 7
© Analysys Mason Limited 2013 March 2013
Solutions-based business model
Discussions with enterprises about pricing should be solution-based rather than focused on a price per megabyte
per device or connection. MNOs must price M2M solutions to highlight the value of the connectivity plus
ancillary services. Tariffs that mimic consumer mobile broadband service are not necessarily the best option for
enterprises or MNOs. Enterprises require unique M2M pricing to match the alternative M2M business models.
These business models – B2B, B2B2C and B2C – require MNOs to consider subscription-based pricing, pay-
per-use and prepaid M2M rate plans.
Telenor Connexion has a useful approach to pricing M2M connectivity solutions. Telenor Connexion uses a
solution sales approach, not a simple SIM sales approach that is used in the consumer mobile broadband sector.
It prices its products and services according to the enterprise’s requirements in terms of:
level of service
types of information being collected off the network
desire for its managed services offerings
need for integration support
expectations around enterprise-grade security.
“Our solution-based selling approach is essential in understanding and delivering on our customers’ key
requirements. Our solutions and processes are integrated into our customers’ solutions so a traditional SIM-
based sales approach is simply not applicable. We seek to empower our customers’ businesses and make them
more competitive.”
– Robert Brunbäck, Telenor Connexion (Chief Marketing Officer)
Telenor Connexion does not simply price each M2M SIM at a flat or capped rate. Those consumer-style
business models minimise the overall value of the enterprise connectivity solution, deliver a sub-optimal
solution to the enterprise customer and therefore can result in negative end-user experiences associated with the
complete M2M solution.
Enterprise M2M requirements
Enterprise M2M buyers have varying requirements for solutions and ongoing support. However, enterprise
buyers have some common expectations when they engage with MNOs.
Communications-centric offerings
The core of an MNO’s offering should be focused on communications and the value communications bring to
an M2M solution. When large enterprises purchase any technology solution, they generally seek best-of-breed
suppliers. Enterprises purchase M2M solutions from MNOs because MNOs are specialists in communication
services. The entirety of an MNO’s M2M solution should hinge on the communications-related value of the
offering. Hitachi Construction Machinery’s General Manager, IT Promotion Office Corporate Management
Division, Fujio Matsuda states this concisely when speaking of his relationship with Telenor Connexion: “Our
relationship with Telenor Connexion allows us to take advantage of their global scale and footprint, including
their strong track record of M2M managed connectivity solutions and mission-critical experience managing
large-scale roll-outs.”
Some MNOs are focusing on the overall M2M customer experience. The customer experience extends from the
early-stage awareness of an MNO’s offering, through the sales process and implementation. MNOs that excel in
M2M insights for mobile network operators | 8
© Analysys Mason Limited 2013 March 2013
providing a holistic customer experience can reduce churn, increase customer share-of-wallet and increase the
probability of solution upselling.
According to Dr Arkav Juliandri, General Manager of Cloud and Machine-to-Machine at XL Axiata, “Rather
than being trapped in the M2M price wars, XL believes that the industry must provide a better customer
experience to its M2M enterprise customers. Especially for a new business like M2M, better customer
experience is mandatory to support our expected exponential growth.” As illustrated by Hitachi Construction
Machinery, Telenor Connexion and XL Axiata, M2M offerings from MNOs must not be perceived as a low-
quality, easily substitutable connectivity solution. Differentiation between MNOs often relates to the actual or
perceived differences in the quality of the communications network and ancillary services, such as customer
support, accompanying the underlying communications.
Service-level agreements (SLAs)
Enterprises expect high-quality M2M offerings from MNOs. Therefore, MNOs must position their solutions
similarly to other enterprise-grade communications solutions and offer a relevant and supportable set of service-
level agreements (SLAs) that reduce business and technology risks for the enterprise buyers. These SLAs allow
MNOs to differentiate their offerings from other MNOs and convince enterprises of the quality of the solution.
According to Analysys Mason’s M2M scorecard, the best MNOs are able to provide SLAs associated with their
network, platform, SIM-related logistics, customer support, trouble escalation, certification processes, and
various other ancillary services that are meaningful for M2M customers. Not all enterprise buyers require SLAs,
but MNOs that can offer solution assurances are more likely to convince enterprise buyers of the uniqueness and
high quality of their offerings, compared with MNOs unable to offer SLA assurances.
Offering SLAs is only one way that MNOs can convince enterprise buyers of the quality and reliability of their
M2M services. Many MNOs dedicate infrastructure for M2M services; these dedicated infrastructure
components assure a reliable and uniquely tailored M2M solution for enterprise buyers. The most commonly
dedicated infrastructure includes the device connectivity management platform (often incorporating relevant
billing and rating tools), HLR and GGSN.
According to TeliaSonera, “There are many different elements that need to be dedicated to M2M. At the
network layer, we believe the core network nodes should be dedicated, including the GGSN, HLR and SMSC.
At the platform layer we have dedicated M2M rating, billing and a device connectivity platform. In addition, we
believe it is important to have a dedicated web interface for enterprise customers’ self-service, and specific,
dedicated APIs for various integrations.”
Value-added services
Many enterprise buyers are looking for an MNO to simplify the communications portion of an M2M purchase.
Many enterprises are willing to purchase additional value-added services from an MNO, particularly if those
value-added services are related to the communications portion of an M2M solution. Depending on an MNO’s
expertise and familiarity, these value-added services could include: SIM logistics support; billing and other
operational systems support; portal design, development and testing; helpdesk support; packages of network
consultancy services; and fixed-line, enterprise communications for secure, dedicated access.
Many MNOs and some MVNOs bundle these types of value-added services into their offerings. An example
would again be Telenor Connexion’s engagement with HCM is an example. Telenor Connexion offers HCM
four M2M solution components, including M2M connectivity, an operational services platform, a series of
consultancy-related activities to drive continuous process improvement and a quality-of-experience package
comprising rich SLAs and a service/helpdesk. By offering a solution with connectivity plus value-added
M2M insights for mobile network operators | 9
© Analysys Mason Limited 2013 March 2013
services, Telenor Connexion creates a higher level of satisfaction, revenue and profit for its customer while
differentiating its M2M connectivity offering from those of other operators (see Figure 6).
Figure 6: Aspects of the Telenor Connexion M2M solution for Hitachi Construction Machinery [Source: Analysys
Mason, 2013]
Data aggregation and analysis and the actual enterprise applications are important aspects of an M2M solution
for an enterprise buyer, but we believe that this layer of the solution is usually better provided by service
providers other than MNOs. Independent software vendors, OSS vendors, systems integrators and specialty
application consultancies have the resources, experience and cost structure to offer enterprise application, data
aggregation and analysis solutions.
Some MNOs have more experience in offering applications than others, but we recommend that MNOs
carefully consider the financial and resource commitment required to successfully offer M2M applications and
data aggregation and analysis. Communications operators have dabbled in offering applications in the past and
some are partnering with, or in some cases, acquiring services companies, that create, test, implement and
manage M2M applications. However, an MNO must make trade-offs in choosing its M2M focus areas. MNOs
can possibly offer applications or data aggregation and analysis for particular M2M solutions, but in these cases
the MNO must carefully weigh the overall value of the solution to the business and the opportunity costs
involved.
Geographic requirements – M2M alliances
Enterprise buyers who are procuring multinational or worldwide M2M services expect their MNO partners to
provide a solution matching their geographic needs. These requirements sometimes necessitate a virtually
worldwide footprint, at other times the geographic requirement is limited to a single country.
These geographic requirements can prove difficult for many MNOs. Multinational roaming agreements are
common in the mobile ecosystem, but the needs of enterprise buyers often extend beyond simple roaming
requirements that impose stringent business model limitations. Enterprise buyers require common portals for
provisioning, billing, trouble ticketing and other pieces of systems management.
Operational services platform
Continuous process
improvement
Quality of experience
Carrier M2M connectivity
• Single provider
• 110-country deployment
• Complex billing and invoice
splitting
• Custom reporting
requirements
• Customised pricing plans
• Joint technical workshops
• Technology and operations
roadmap development
• Future service design
• Network availability SLAs
• Service object SLAs
• Logistics enablement SLAs
• Service desk availability
M2M insights for mobile network operators | 10
© Analysys Mason Limited 2013 March 2013
In order to start meeting these enterprise needs, MNOs have been forming operator alliances generally built
around underlying MNO device connectivity management platforms. We believe these alliances provide more
clarity around inter-carrier agreements for M2M roaming and eventually common platforms used by the carriers
to facilitate simpler, cost-effective provisioning and management of SIMs. This would allow enterprises to have
a common interface between enterprise resource planning applications or inventory management systems and
multiple MNOs’ device connectivity management platforms.
According to Orange Business Services, “Orange strongly believes that the Global M2M Association (GMA)
together with Deutsche Telekom and TeliaSonera is a great performance lever for M2M solutions
implementation and management. Through this partnership, Orange commits to delivering best-in-class and
seamless M2M services to customers across an extended European footprint, while sharing beneficial
knowledge and processes with the GMA members and partners. Today in Europe, the GMA covers 28 countries
representing 450 million people.”
We believe these MNO alliances will also address some of the more complex, inter-operator systems
management challenges that enterprises face. The goal of these alliances is to increase QoS for M2M solutions
both on-net and off-net. Being able to offer multi-country, multi-regional or worldwide SLAs to customers
depends partially on an MNO’s ability to provide consistent QoS when an M2M device is off-net. This requires
inter-operator co-ordination of systems; a key mandate for these MNO alliances. On the technology side,
platform vendors and SIM vendors have started to integrate deeply in order to support new requirements
imposed by these MNO partnerships.
There are several M2M alliances.
Global M2M Alliance –formed by Deutsche Telekom, Orange and TeliaSonera. In 2012, these operators
agreed to work on roaming-related issues, systems management and other aspects of providing an
enterprise-grade M2M solution.
Multi-operator M2M Alliance –formed by Etisalat, KPN, NTT DOCOMO, Rogers Communications,
SingTel, Telefónica, Telstra and VimpelCom. These operators all use some version of the Jasper Wireless
M2M device connectivity platform.
Vodafone Alliance – formed by Vodafone and several other operators, including Belgacom, which all use
the Vodafone M2M device connection management platform.
AT&T – AT&T’s ambition is to play a worldwide role in the M2M ecosystem. AT&T uses its AT&T
Control Center Powered by Jasper Wireless or its custom-built Enterprise on Demand platform for device
connectivity management.
Partnerships and the value of the M2M platform
Partnerships between MNOs and technology vendors are critically important in the M2M ecosystem. No single
MNO is able to offer an enterprise a complete M2M solution, including chipset manufacturing, module
manufacturing, equipment design, worldwide connectivity, platform enablement, portal development,
application development, application management and systems integration. Partnerships are required to make
the enterprise purchasing, implementation and ongoing management process feasible.
One of the most important partnerships is that between the MNO and the provider of its M2M device
connectivity platform. The device connectivity platform provides an MNO with three key benefits.
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Faster time-to-market – Implementing a vendor’s device connectivity management solution allows an
MNO to launch M2M solutions more quickly than if the MNO had to build its own solution. Solutions can
be implemented and launched within weeks, whereas it could take an MNO more than a year to custom-
build its own device connectivity management solution.
Continuous platform improvement – Implementing a vendor’s device connectivity management solution
benefits an MNO as the vendor makes ongoing product improvements to the platform. Vendors provide
these platform improvements – funded by substantial R&D – in subsequent product releases and allow the
MNO to offer new services to its customers. The best vendors also allow their products to be customised for
specific MNO needs, affording MNOs added flexibility.
Economies of scale – When an MNO launches its M2M business it needs a way to provision affordably
and manage non-traditional devices in a financially sustainable way. The ARPU associated with M2M can
be 10% or less than that of traditional smartphone and feature phone ARPU. Therefore, the costs of
developing and running the operational support systems must match the expected revenue of the M2M
business. Providers of device connectivity management platforms offer their solutions on a pay-as-you-go
model. This reduces risks for the MNOs that adopt the solution and provides an affordable way to scale the
system. If an MNO were to custom-build its own solution, it could incur large software and systems
development costs, plus sizeable fixed costs of maintaining the system, irrespective of the number of M2M
device connections.
The device connectivity platform market is led by two major players – Ericsson and Jasper Wireless – which are
capable of delivering these three key benefits. Each has a strong MNO user base and developed solution
portfolio. They have also formed strong synergistic partnerships with SIM vendors Gemalto and Giesecke &
Devrient (G&D), respectively, to manage dynamic SIM provisioning. Given the market positions of these
device connectivity platform vendors, we do not anticipate others successfully entering this market in a
substantial way.
Analysys Mason recently completed an in-depth study looking at the operating cash flow impact of MNOs’
choice of one of the three implementation approaches for M2M device connectivity platforms.
No M2M platform: The MNO elects to have no specialised device connectivity platform and chooses to
use its legacy management platform, which is most commonly used for management of smartphone, mobile
broadband and embedded laptop SIMs. The primary costs associated with this approach would be the
incremental costs of using the legacy management platform.
In-house platform: The MNO elects to build, test and implement its own device connectivity platform
using either its own IT staff or systems integrator staff. The primary costs associated with this approach
would be the incremental development costs of a new device connectivity platform.
Vendor-supplied platform: The MNO elects to use a vendor-supplied M2M platform like the Ericsson
Device Connection Platform, a cloud-based device connectivity platform. The primary costs associated with
this approach would be pay-as-you-go usage fees to the vendor, based on the revenue generated from M2M
sales to an MNO’s customers.
“Over the five-year model horizon, the vendor-supplied M2M device connectivity management platform can
create a net present value that is over 100% more than either of the other two M2M management system
deployment options.”
– Analysys Mason, analysis of NPV of device connection platform.
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© Analysys Mason Limited 2013 March 2013
At a relatively low volume of 1 million device connections, the vendor-supplied M2M connectivity management
platform allows an MNO to create 14% more net present value (NPV) than an in-house developed solution, and
71% more NPV than using legacy platform infrastructure (that is, no unique M2M solution) in a five-year
period. The higher NPV from the vendor-supplied solution derives both from costs savings from deployment
and integration, and revenue generation from faster time-to-market and enhanced features (see Figure 7).
Figure 7: Five-year net present value of three M2M device connectivity management platforms with 1 million
device connections [Source: Analysys Mason, 2013]
At 3 million device connections, the vendor-supplied M2M platform also provides a higher NPV than both
alternative deployment options. At 3 million connections, the vendor-supplied M2M platform yields a NPV that
is 137% higher than the option where an MNO has no specialised M2M device connectivity platform. The NPV
from the vendor-supplied M2M platform is also 13% higher than the next-best alternative, the in-house built
M2M solution (see Figure 8).
However, none of these NPV calculations takes account of the significant risks of building an in-house solution.
These risks include potential development and integration delays; misspecification of system requirements; and
changes in M2M market dynamics during the implementation process. These risks, if factored into the model,
would increase the NPV of the vendor-supplied M2M platform, making it an even more desirable approach than
the two other deployment options.
The vendor-supplied M2M connectivity management platform solution with its cloud-based, pay-as-you-go
pricing model, allows an MNO to share the risk of an M2M implementation with its vendor partner, by reducing
total cashflow outlays significantly during the five-year model horizon. During the five-year model horizon, the
vendor-supplied solution could create a NPV that is more than 100% higher than either of the other device
connectivity system deployment options.
0
20
40
60
80
100
120
No platform In-house platform Vendor-supplied platform
Net
pre
se
nt va
lue
(U
SD
mill
ion
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M2M insights for mobile network operators | 13
© Analysys Mason Limited 2013 March 2013
Figure 8: Five-year net present value of three M2M device connectivity management platforms with 3 million
device connections [Source: Analysys Mason, 2013]
Conclusion
MNOs that seize the opportunity to build vibrant, communications-centric M2M businesses have a chance to
capture their fair share of a USD51 billion connectivity revenue business by 2021, plus billions more dollars’
worth from value-added services including managed services, network systems integration and consultancy
services. Offering M2M services to industry sectors including energy/utilities, automotive/transport, healthcare,
public safety, security/surveillance, consumer electronics and others gives MNOs the ability to supplement their
established enterprise lines of businesses with a series of new offerings.
Enterprise buyers require high-quality, reliable M2M solutions from MNOs. The best MNOs are establishing
dedicated business units and infrastructure to take advantage of the opportunities. They are carefully weighing
the various M2M opportunities presented and selecting partners that can provide both world-class technology
and channel-to-market support. These MNOs will be rewarded with national and international M2M business
opportunities during the next decade and beyond.
0
50
100
150
200
250
300
350
400
450
No platform In-house platform Vendor-supplied platform
Net
pre
se
nt va
lue
(U
SD
th
ou
sa
nd
s)
About Analysys Mason | 14
About Analysys Mason
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