By Erin Harrison
The burgeoning of machine-to-machine (M2M) applications in our increasingly connected world — partly characterized as consisting of an “Internet of Things” — has made telecommunication companies look to diversify their M2M offerings beyond what can easily become ones based primarily on commoditized connectivity.
A recent Alcatel-Lucent Enriching Communications article, “The 5-Ps of M2M Key to Service Provider Success,” describes the five “P’s” as:
- Prioritize opportunities
- Properly place their teams
- Participate knowledgeably in the supply chain
- Partner effectively
- Establish a credible persona
They are based on findings of research firm Analysys Mason’s recently published, “M2M Communication Service Provider Scorecard: 2011.”
The potential for the success of M2M for service providers is evidenced also in work done by Frost & Sullivan. They say M2M connectivity revenue in Europe, which was 3 percent in 2010 and 4.2 percent in 2011 of M2M revenues, will grow significantly to more than 20 percent by 2017 as the monetization of M2M data drives the aggressive growth in the forecast.
Careful prioritization of these opportunities will yield healthy, profitable businesses, according to Analysys Mason. The emphasis is on the word careful because some of the highest revenue-generating M2M applications can generate low profitability for service providers. Hence, prioritizing which sectors to move into based on profitability is critical. This is particularly true given that by 2020 there will be 2.1 billion network-aware devices with 90 percent connected via wireless networks. However, prioritizing which sectors to get involved in and measuring profitability will not be an easy task.
The most successful service providers have overall M2M organizations of 50-100 employees with centralized staff for R&D, partnership management and product marketing, according to Analysys Mason. Certain resources will need to be centralized including R&D, partnership management and OSS/BSS support, but variances among organizations means they need to consider, for example, where the technical pre- and post-sales resources should be placed and what the size or headcount of each M2M functional areas should be.
Based on the Scorecard, there are three ways for service providers to participate in the M2M supply chain, which include: co-selling a partner’s solutions; selling/reselling a service provider’s own solutions; and acquiring solutions
Alcatel-Lucent believe service providers should partner to provide M2M hardware (modems/modules and equipment) and they should sell or resell their own connectivity, platform and integration services.
Due to the enormous number of opportunities in the market, no one single service provider has all of the resources and tools to offer an end-to-end M2M service. Therefore, partners are necessary as service providers develop their M2M market approach, according to Alcatel-Lucent.
Carefully selecting the right partners – rather than having the biggest number of partners – is critical in developing a profitable M2M business. To select the ideal partners, service providers need to consider their options to include geography, market sector and M2M application.
The fifth “P,” persona, could be the most important consideration for service providers looking to implement a successful M2M product for their business. Associating your company as an M2M provider is critical to market success.
Analysys Mason recommends a two-pronged approach to developing a service provider’s persona. Service providers first need to develop a strategy to determine where they will participate in the M2M value chain, which will help them create their M2M persona and build brand awareness with potential buyers and partners.
Knowing who you are – understanding perceptions and realities
In addition, service providers need to engage in market research to understand existing market perceptions of their M2M persona. As Alcatel-Lucent points out, “service providers that do not create a strong M2M persona may be overlooked in favor of a systems integrator (SI), other IT channel partner or an IT vendor.”