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Management World Americas 2011

Wednesday November 9, 2011

Service Providers Find Success by Considering the 5-Ps of M2M

By Steve Hilton, Principal Analyst, Analysys Mason

In order to optimize their chances for machine-to-machine (M2M) success, communication service providers (CSPs) must address 5 strategic characteristics. These 5 characteristics, which Analysys Mason calls the 5-Ps of M2M, summarize our key learnings from our forecasting of the M2M opportunity as well as our recently published report, “M2M Scorecard for CSPs: 2011”. Let’s look a little more closely at the 5-Ps.

1. Prioritization – CSPs must prioritize their opportunities in M2M, because only careful prioritization of these opportunities will yield healthy, profitable M2M businesses. Unfortunately M2M revenue and profitability do not go hand-in-hand and while opportunities abound in sectors including automotive/transport, energy/utility, security, government, retail and industrial, we’ve found that the cost side of the M2M equation – both capital and operating costs – can turn good into bad business fairly quickly.

There are profitable opportunities for wireless, satellite and fixed-line CSPs, but profitability metrics vary based on M2M application, country of operation and the cost characteristics of each service provider. Don’t be fooled -- M2M is not the sole domain of wireless operators. Up to 50 percent of many CSPs’ current M2M connections are over fixed-line, not mobile connectivity. And in the case of CSPs that only own fixed-line networks, that percentage is much higher.

To learn more about our M2M forecasting, see our M2M device connections: worldwide forecast 2010–2020.

2. Placement of teams – To centralize or not to centralize the placement of teams, that’s the first question. But more importantly, CSPs must answer questions including which specific M2M teams should be centralized and what is the relative size of each M2M functional area. No doubt certain resources should be centralized including R&D, partnership management and OSS/BSS support. However, there are nuances associated with organizational design that are unique to M2M. For example, where should technical pre- and post-sales resources be placed? And what should be the relative size or head-count of each M2M functional area?

To complete our M2M Scorecard for CSPs: 2011 we created a detailed survey for CSPs including AT&T, Deutsche Telekom, Everything Everywhere, KPN, Sprint, Telekom Austria Group, Telefónica, Telenor Connexion, TeliaSonera, Telstra, Verizon Wireless and Vodafone. These 12 providers answered our 33-question survey covering their M2M strategy, size of business, R&D commitment, partnerships, platform insights and network insights. This scorecard provides insights into placement of teams, but also presents rankings of these service providers’ M2M businesses.

3. Participation – CSPs have three ways to participate in the M2M supply chain. These routes to market include co-selling partners’ solutions; selling/reselling a CSP’s own solutions; or acquiring solutions. Based on our research, CSPs should partner to provide M2M hardware (modems/modules and equipment) and they should sell or resell their own connectivity, platform and integration services.

The biggest question-mark surrounds a CSPs’ involvement in the M2M applications layer. We recommend a nuanced approach to CSPs offering applications recognizing that CSPs needn’t offer every applications, but might pick-and-choose those applications or industry sectors where they can effectively compete with applications. Some providers are capable of offering their own viable, well-supported applications layer for some M2M applications. Other providers aren’t. Successful service providers will conduct a thorough analysis of their application capabilities before determining their best route-to-market for this challenging aspect of the supply chain.

4. Partnerships – No service provider has all the tools to offer an end-to-end M2M solution for the countless number of M2M opportunities in the market: partners are necessary for every CSP. Picking the best partners, not the greatest number of partners, is paramount in creating a profitable M2M CSP business. CSPs must systematically review the partner landscape by geography and M2M application or sector to find those partners best suited to their needs. Our research looks particularly heavy at the application vendor landscape to find suitable partners. For example, our recently completed research on application vendors in the UK’s energy/utility sector provides a list of appropriate CSP partners that aren’t limited to the United Kingdom.

5. Persona – Every CSP needs a persona – a personality that expresses the CSP’s M2M raison d’etre. CSPs can leverage their existing brands and awareness in their markets to build an M2M marketing image. While we recommend that service providers look inward to help formulate the meaning of their M2M brand to potential buyers and partners, we also recommend service providers engage in market research to determine perceptions of their M2M or other enterprise technology capabilities. These perceptions help provide the foundation for creating an M2M persona.

Service providers that address the 5-P’s of M2M will better align their growing M2M business units with the demands in the market. To learn more about Analysys Mason’s M2M work, contact Steve Hilton.

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