The 7th annual M2M conference hosted by Orange Business was held in the stunning confines of the Palais d'Egmont in Brussels (which actually houses the Belgian Ministry of Foreign Affairs) on the 13 September 2012. There were a range of sessions throughout the afternoon and evening and the first one I attended looked at the business case and revenue opportunities for M2M.
According to Emmanuel Routier, Director International M2M Center, Orange Business, the M2M business model has three phases of maturity. The first is straightforward business-to-business (B2B), where providers can help the customers realize process efficiencies and the consequent cost reduction that this brings. This phase is the bread-and-butter of the M2M market and still makes up the bulk of market revenue.
The second phase is where providers help businesses address the consumer market, the so-called B2B2C market. An example of this is the Amazon Kindle, which is a device that automatically downloads content that consumers buy online. The third phase is the connected society, where everything is connected, which creates brand-new new business and revenue opportunities.
Routier cites Nespresso as an example of how the business model can evolve. The company initially put SIM cards in their coffee machines to help them save costs, by making it easier to identify faults and fix machines. However, the data they collect through the connectivity is a treasure trove, providing them with information on consumer drinking habits.
massively connected
These connected coffee machines were part of the massive growth in M2M devices highlighted by the next speaker: John Dillon, VP marketing software and services business at Alcatel-Lucent. With a growth rate of 990% between 2011 and 2015, M2M devices will number 12 billion at the end of the period. This even outstrips the expected growth of mobile video consumption (880%) over the same period.
This massive spread of connectivity will create a new range of business opportunities and efficiencies. “Connectivity is driving innovation,” he explained. For example, a city in the Netherlands has put SIM cards in dustbins, which allows them to optimize the route of their fleet of dustcarts.
Consumers are very enthusiastic about this increase in connectivity and in fact most of them appear to want all of their devices to be connected, says Dillon. For example, Dillon says that Bell Labs research indicates that 72% of consumers want remote controlled energy devices and 77% connected in-home healthcare. “Some people are prepared to pay more for the service if it is connected,” he says. In fact 21% of them expressly said that they would do just that in the research.
This huge demand and addressable market will generate $1 trillion by 2020, says Dillion, up from 200 billion in 2011. But the revenue opportunity is not found in data traffic, because this will only represent around 2% of the total. Instead, it will be found in systems (15% of revenue) and more significantly in services (83%).
The systems revenue will be important for part of the value chain and includes activity such as integration, support, managing end-points, diagnosing problems, implementation and decommissioning. But the service revenue is far and away the biggest revenue opportunity. According to Dillion the biggest opportunities by 2020 will be in consumer, healthcare, automotive, intelligent buildings and retail.
To demonstrate how companies are using M2M to generate revenue and make savings, the session then heard from two customers: SITA and Qualcomm Life.
efficiencies in air transport
According to Paul O’Boyle, portfolio director, wireless and mobility, SITA, M2M can help the air transport industry (ATI) solve its inherent complexity. He looked at the specific case study of aircraft turnaround. This activity is actually a critical factor in airline profitability: the quicker airlines can get their planes ready for takeoff again, the more flights they can do per day and the more seats they can sell.
For example, Ryanair has managed to reduce its aircraft turnaround time to 25 minutes, from the industry-standard 45 minutes. This timesaving across the board has allowed it to operate one additional flight per day, which generates a staggering extra €3 million a day of revenue. It can do this, because it uses smaller airports which have much less demands on their services.
The question is how can other airlines achieve the same turnaround speed at busier airports such as London Heathrow or Frankfurt? O’Boyle says that mobile data and M2M can place a key role in delivering it. For example, it can help optimize the routes of all the service vehicles in the airport. This includes the busses taking away passengers, the refueling and resupply trucks.
M2M can also help you locate these key assets and stop them going missing, which happens surprisingly frequently in large airports. Connecting assets also offers potential revenue opportunities, such as targeted airline adverts in passenger busses.
O’Boyle had four tips for others looking to deploy M2M:
- coverage is key: airports have many areas that have no network, so they had to roll out additional infrastructure
- compliance: standards are vital for anyone looking to roll out a global solution
- education: if your customers don’t understand value of the solution, it is hard to build the business case
- business process: changing business processes offers the most potential for M2M
The second customer example came from Qualcomm Life. Brian Niznik, Senior Development Director at Qualcomm Life showed a device it had developed that essentially M2M-enabled all of a consumers’ health devices. It is targeting the growing market for consumers who have to manage their chronic diseases at home.
The 2net device connects to the devices at home transparently to the user and establishes a secure connection over the Orange network to the healthcare provider. What is key is that it is easy to use. “We want it to be like the Amazon Kindle,” explained Niznik. “Consumers just buy a book – everything else is seamless. We want to do the same in healthcare, so that users don’t need to configure the wireless network or pair a Bluetooth device, for example.”
I will post up further blogs from the event next week covering the smart grid and some research from Machina that looks at the development of the M2M market.
Anthony
After a Masters in Computer Science, I decided that I preferred writing about IT rather than programming. My 20-year writing career has taken me to Hong Kong and London where I've edited and written for IT, business and electronics publications. In 2002 I co-founded Futurity Media with Stewart Baines where I continue to write about a range of topics such as unified communications, cloud computing and enterprise applications.