Machine-to-Machine: next-generation communications for business

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1 Machine-to-Machine: next-generation communications for business A leadership perspectives white paper Recommended next steps for business and industry executives Issue 6 in a series

2 Executive Summary The decline in costs of M2M hardware, the increasing importance of connectivity, and the advent of the cloud paradigm for applications and services will help push M2M onto the business agenda in certain vertical sectors this coming year. The transportation sector is beginning to understand that wireless location services and existing communication technologies can help them better coordinate their fleets and maximise asset utilisation. Freight airline and logistics companies can use that same technology to streamline operations on the ground to speed delivery schedules. In rural areas of the Middle East with low population densities, M2M would allow bus operators to provide on-demand bus services, where passengers can SMS a request of a ride from buses assigned to specific areas but not specific routes. Embedded M2M systems could be also used to manage traffic light working patterns, with priority assigned to fire engines, ambulances and police vehicles. The applications are endless and the business opportunity is massive and untapped. Business case overview Machine-to-machine (M2M) communication is nothing new, and commercial M2M applications have been around for more than a decade. One early example is that of OnStar Corp, the General Motors subsidiary that provides subscription-based communications, in-vehicle security, hands free calling, turn-by-turn navigation, and remote diagnostics systems throughout the US, Canada and China. After several years of promise, M2M has now become a hot topic for business because of a number of trends in the market. Falling hardware costs, cheap and reliable mobile communications networks, new regulations, innovative applications and solutions, and technological developments are behind the latest uptake of M2M. In so-called M2M communications a device such as a sensor or meter is used to capture an event, such as a change in temperature or a shift in an inventory level, which is relayed through the telco wireless or wired network to an M2M application or software programme. Produced by du enterprise marketing in association with Ovum, a preferred knowledge partner

3 What is M2M? Remote Equipment Cold Storage Copier/ Printer Point-of Sale Billboard Parking Meter Vending Machine Energy Meter Vehicle, Truck Data Collection (Alerts, Measures, Locations...) Embedded Modem Sim Card Cellular Remote Control, Diagnostics, monitoring Back End IT Application Middleware Administrator M2M Server Intervention & Optimization Location & Tasks Support and Field Team Source: Jasper Wireless The M2M application effectively translates the captured event into meaningful and actionable information - for example, revision of a weather warning, or refresh of goods held in stock. This is accomplished through the use of telemetry, the language that machines use when in communication with each other, and a technology that allows remote measurement and transparent conveyance of remote information. The range of applications made possible with M2M technologies is virtually limitless, and the manufacturing, logistics and transportation sectors have become eager early adopters. Air freight fleets, trucking companies, commuter bus and taxi firms all see M2M as particularly useful because it provides them with valuable data in real time that helps ensure the smooth transit of goods and passengers.

4 For instance, M2M communication allows a logistics company to monitor the temperature of frozen foods on a refrigerated truck and send out driver alerts or remotely adjust controls, should there be problems. M2M modules fitted onto the truck will quietly and automatically capture all of this data and then transmit it over the wireless telco network to the company HQ, perhaps. In some machine-to-machine scenarios, M2M tags are loaded with different types of information, such as data about an object, information about the object itself, and some variable contextual data or status such as a specific location or temperature at that location. Think of a logistics firm tracking a pallet of frozen goods in transit. In other scenarios, M2M-enabled objects can provide intelligence about their status. A good example comes in the shape of smart parking meters which can transmit messages to drivers entering a goods yard or car park about which spaces are open. (It is reported that such a system could be even be programmed to allow for dynamic pricing and yield management, with available resources effectively sold at a price that is not fixed but is driven by the spot market rate.) In all these examples there is absolutely no reliance or intervention needed by human operators, despatchers or goods handlers. The technology is used to streamline the way transportation data is collected on the move from physical devices and incorporated into IT systems, without having to rely on people to do any manual processing. Fleet management applications that make it possible to pinpoint in real-time a vehicle s exact location means more streamlined logistics planning and scheduling. It also means that freight and drivers can be constantly monitored and secured. From tracking metrics, like miles driven and fuel consumed, to assisting in the efficient delivery of goods, M2M services are enhancing business process and customer experience in the transportation sector. M2M enables companies to reduce costs and improve service efficiency by transmitting data directly from one device to another. Produced by du enterprise marketing in association with Ovum, a preferred knowledge partner

5 Understanding the shape and nature of the market Market analyst companies reckon that businesses in the transportation vertical already are responsible for over 30% of all M2M applications. In terms of volume, market-watchers at Analysys Mason have estimated there were over 20 million device connections in the automotive and transport industry in The analyst house has said its latest market assessments suggest that the sector accounts for around 13% of M2M device connections today. Growth in the sector can be explained because the business case for M2M is easy to make, as it offers: obvious and easy-to-calculate gains in route planning and fuel efficiency, more effective fleet management through preventative maintenance, more on-time deliveries, and better customer service. Commercial and consumer M2M device connections by industry sector, worldwide, billion 3% 0.03 billion 1% Government, retail and financial services Healthcare Automotive and transport Total market: 2.1 billion connections worldwide Utilities Security Source: Analysys Mason, 2011 The value chain for M2M is complex and includes: SIM or chip manufacturers and module suppliers: these hardware suppliers provide the essential connectivity hardware in any mobile-centric M2M rollout; their hardware integrates fully into devices which are connected to the network. Operators have taken an increasingly central role in ensuring that their SIMs (or those of operator partners) are fully part of the device manufacturing process. This can be inordinately complex, and many operators have stated that new standards covering such innovations as mini-sims and ruggedised SIMs have acted as a market catalyst or, if not a catalyst, have at least lowered a barrier.

6 In the context of M2M, device manufacturers may find themselves transformed into service providers : it is often their brand (Kindle, TomTom, Garmin) that consumers see and associate with a service. Several operators have stated that the manufacturers they work with have scant experience of the transformation that moving from a product-oriented to service-oriented company can entail. More ambitious operators see themselves in an educational role vis-à-vis device manufacturers. Most commonly, though, operators perceive an opportunity to ensure their SIMs (or RFID chips, or fixed network access points) are tightly integrated into the device itself: in certain M2M deployments, the communications module must be ruggedised. An operator with a series of close working relationships or formal partnerships with device managers may find itself in an advantageous position with the enterprise customer: this customer is likely to view an operator with a stable of hardware manufacturer relationships as offering a more vertically integrated solution which can be brought to market quickly. Network services: these are mobile, fixed, or integrated operators. M2M solutions (e.g. smart metering) will normally require a number of types of fixed and mobile network access. All operators involved in M2M see their network expertise and their networks as value-adds - M2M traffic demands an optimised network. SIs and consultants: these are the organisations typically leading an M2M project for a large enterprise (whether the end user of these services will be an employee of the enterprise itself or a consumer). Their access to CxO-level decision-makers and their extensive mobility practices put them in a good position to work with enterprise to shape M2M projects. Enterprise/consumers: these are the end users of the M2M service. Typical B2B deployments centre on issues such as asset management (e.g. a fleet of vehicles, an inventory, a network). B2B2C deployments focus on, naturally, consumer services (e.g. in-car navigation, home alarm monitoring, e-readers, digital frames). But B2B and B2B2C deployments have one thing in common: crucially, the end user has absolutely no view of which operator provides the network service, and nor does he or she have any reason to care. Chip vendor: NXP, Qualcomm, TI Customer: Koniva Minolta, BMW, Amazon M2M module supplier: Sierra Wireless, Cinterion, Siemens Systems Integration: IBM, Getronics, T-Systems M2M device manufacturer: Foxconn, Indenticom, GenX M2M MVNOs 7 aggregators: Numerex, KORE Telematics, Wireless Logic Connectivity provider: AT&T, Telenor, Vodafone, du Application middleware provider: Axeda, Opengate M2M platform provider: Jasper-Wireless, nphase Produced by du enterprise marketing in association with Ovum, a preferred knowledge partner

7 A number of things have changed over the past year or so that together make M2M look a promising technology for business: Falling costs: As more and more M2M implementations take place and projects get bigger, there is a scale effect driving down the cost of M2M components. Regulation: This is providing a stimulus to M2M, particularly in some verticals such as utilities (smart grid) and automotive (smart cars). The consumer market: Consumer electronics companies expect their products to be always connected, and this is providing new opportunities in M2M. Cloud services: New delivery and commercial models are emerging which make M2M services simpler for operators to build and faster to launch, as well as less risky for potential customers. Device management: This has become mainstream. Managing devices was previously seen as a major challenge within M2M, but it is no longer seen as a huge barrier. The size of the market: No one wants to miss out on a potentially huge market opportunity that promises massive business impact. Telcos in the region like du are recognising that there is huge potential value to be delivered to customers using M2M. The company is positioned as a partner for businesses in the transport, logistics and manufacturing sectors wanting to exploit the M2M opportunity. du s M2M solutions can be configured to wirelessly track, monitor, and enable transportation fleet, monitor vehicle locations, arrivals, and departures and provide real-time access to critical operational data over fast, secure, reliable wireless transfer of data over GPRS / EDGE / 3G network. Manufacturing companies requiring secure and efficient transmission of data from remote sites back to their headquarters to improve performance can turn to use of a mobile telemetry solution over a secure VPN connection, which offers an effective and economical channel for M2M communication. In either case, du offers mobile data lines as costeffective SIM cards for data access only, making it safe and economical for use in equipment or machines. The mobile data lines are simply inserted into a business machine (a modem might be needed in some cases) and the connection is established.

8 In order for machines to transmit and receive data and information, it is possible to choose from mobile data bundles designed to suit telemetry requirements. A mobile data bundle can be coupled to every mobile data line. Alternatively, businesses can choose from a range of mobile data pools optimally designed for mobile telemetry requirements. A mobile data pool can be associated to a group of mobile data lines, providing flexibility in the way data is shared among the mobile data lines for telemetry requirements. All M2M applications require good coverage, and may also demand that a telco partner has well-established international roaming agreements in place. M2M projects are complex and call for a service provider that is willing to become more integrated into the customer s business processes. The advent of specialist platforms and platform providers helps here, as these connect and manage M2M modules automatically, meaning businesses can more easily leverage the power of the telco network from an enterprise platform that has all the functionality needed to design, deploy, and manage their connected devices on the telco network. A complete platform should provide such functionality as provisioning, policy management, device configuration, service management, some degree of customer self-service, and diagnostics and reporting tools. The ability to support a variety of flexible and configurable tariffs is also becoming essential, as operators need to be able to provide customers with the capability to charge and invoice their onward M2M customer in new ways. For now though, one of the biggest barrier to wholesale market take-off is the absence of an agreed architectural framework for M2M. This is the approach which has made the Internet, and web services, so successful. It would make it possible for specific application components (for example, a sensor or switch control software element) to be developed once and used many times, irrespective of the specific industry or hardware context. There is some limited progress towards this, though it will be some years before it takes shape. This is the sixth in a regular series of Leadership Perspectives White Papers, produced by du enterprise marketing in association with Ovum, a preferred knowledge partner. For more information, please or visit Produced by du enterprise marketing in association with Ovum, a preferred knowledge partner

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