Feb 14, 2013

M2M Platform Permutations

Ericsson’s 5 February announcement to supply its M2M Device Connection Platform (DCP) in support of XL Axiata in Indonesia has prompted this update to an earlier article on the competitive dynamics of international alliances and M2M platforms.

The DCP deal is something of a coup, providing Ericsson with a meaningful customer reference in the highest population country in South East Asia. The news announcement actually formalizes a business relationship that dates back to early 2012. In October 2012, both companies highlighted an achievement of 89,000 M2M connections. The pace of growth seems to have accelerated with XL Axiata’s M2M base reaching a total of 125,000 in the intervening months. The latest announcement provides some timely marketing collateral for Ericsson to use with mobile operators that cannot justify an investment in their own M2M platforms and the delegations of mobile-operator executives who will shortly be congregating at Mobile World Congress.

The move by XL Axiata is not unique in the market. Other mobile operators have partnered for M2M platform capabilities to handle large scale application opportunities using processes that are geared specifically to M2M operational needs and economics. AT&T was an early partner of Jasper Wireless, for example, while Everything Everywhere in the UK has been working with another platform provider, Transatel.

These developments and the changing competitive dynamics for M2M platforms will have far-reaching implications for all device vendors, service providers and users in the M2M eco-system.

Competition is Intensifying in the M2M Platforms Sector

Ericsson’s multiple customer wins with other mobile operators builds on the platform capabilities it acquired from Telenor. These achievements appear to be raising the level of competition in the M2M platform and platform-services market. For example, in early January Jasper Wireless, a long time front runner in this market, announced the launch of its Catalyst Program. This offering specifically targets new operator partners by helping to accelerate the launch of their M2M sales and operational capabilities.

The Ericsson and Jasper Wireless announcements contrast with the strategy adopted by Telefónica Digital. It has recently been promoting an internally developed platform with Brazil and Spain as its initial target countries. It is worth recalling that Telefónica has a long standing relationship with Jasper Wireless in Spain and also via its Telefónica UK and Ireland ‘O2’ properties.  And, Telefónica is not the only operator to support a home-grown as well as a partner platform.

By choosing not to extend the Jasper Wireless arrangement to its Spain and Brazil properties, Telefónica raises the question of whether it will eventually consolidate its wider customer base onto its own platform. This may be justified for corporate strategy, profitability, big-data analytics and/or operational consistency reasons. Of course, there is an interesting calculation to compare the costs of migration against the cost of simply acquiring and integrating the partner platform provider.

Consolidation of the device base is a very real issue in light of the fact that a perennial cost inhibitor of the M2M market has been the reliance on case-by-case, custom design solutions. The mobile industry began to address this at the modules level through industry guidelines which encouraged standardization as a path to generating better economies of scale.  Will platforms be the next area to be tackled or are there other factors at play?

Separate Platforms for Different Market Segments?

Now, it may well be the case that an overriding factor in M2M service enabling platform economics is geographic segmentation. Perhaps the quantity and value of M2M connections in individual countries such as the UK and Ireland, for example, can justify their own platform approach because of the needs of local market customers.

Or, it may be the case that manufacturers of connected devices in a specific market prefer to work with a local provider. This type of customer segmentation appears to have motivated NTT DoCoMo’s initiative to offer a platform for international deployments, with Jasper Wireless integral to the offering. NTT DoCoMo appears to see a distinct segment in the market from Japan-based device suppliers looking for a local provider to support their international expansion goals.

Platform Permutations

Returning to the competitive landscape for M2M connectivity platforms, it remains to be seen how other businesses in the eco-system will respond. Gemalto, for example, has its own M2M Service Delivery Platform (SDP) via the acquisition of Sensor Logic in 2011. At the time of writing, Gemalto has also announced a business agreement to link its Subscription Management Platform to Ericsson’s Device Connection Platform for applications involving embedded Universal Integrated Circuit Cards (eUICCs). This permits certain device parameters that are capable of being varied to be managed remotely. The Ericsson/Gemalto business arrangement may be rationalized on the basis that the customers for Gemalto’s SDP and Ericsson’s enhanced DCP are quite distinct.

In contrast, Sierra Wireless has been more visible in the mainstream M2M platforms market with its AirVantage offering. This was positioned as an operator platform, some years ago, with the Dutch operator KPN (which also happens to be a Jasper Wireless partner). AirVantage has also been promoted as an ‘open’ platform in the sense that it interfaces equally well with Sierra Wireless’ modules as well as those of other suppliers.

Beyond M2M service enabling platforms, there is also a thriving market for application enabling platforms; an application in this context is the element of an M2M solution that delivers the end-user service e.g. tracking of a vehicle as distinct from the connectivity-application that is responsible for wide-area connectivity to the vehicle. Sierra Wireless has been involved in founding an Industry Working Group, with IBM, Eurotech and the Eclipse Foundation, to define an open standard platform for the software development tools used in developing M2M communications applications.

These types of progression up the value chain raise interesting strategic challenges for module vendors from China. Where should they position themselves with respect to capturing value? Should they focus on a low-complexity volume strategy, maximizing their share of the growing market, or should they pursue their own platform initiatives?

Also, how do some of the specialist M2M service providers (e.g. Kore, Wyless etc.) that were forerunners in the traditional M2M market (fleet telematics, industrial, retail, security etc.) adapt to this changing market?

The business choices facing eco-system participants - mobile operators, specialist M2M service providers, M2M platform providers and module vendors - are best analyzed in the context of end-customer requirements.

Anticipating End-Customer Requirements

Companies that are looking to add connectivity to their devices across multiple geographies need to consider how they achieve a common and consistent experience that is also economically viable to deliver.
  • The first perspective that has to be considered is that of their customers who are relying on an effective M2M-enabled service, irrespective of location and supporting network. 

  • The second perspective is that of the internal operational teams which are responsible for service assurance and device management functions.
Customers and operational support staff are looking for low-complexity, seamless solutions. In this regard, cross-operator alliances and a reliance on in-house and partner platforms poses a potential risk if solutions are designed and implemented poorly.
A longer-term issue arises in connection with new service concepts. A common assumption in today’s M2M world is that all connected devices and sensors for a particular application are hosted on a single platform and serviced by a single mobile operator (or a single operator representing an alliance of partner operators). As M2M evolves to an IoT future, connected applications will become more complex. Consider the case of a smart car rental service offered by a private firm that is designed to cooperate with a city-administered zonal parking scheme. This would allow a driver to deposit a rental car in a parking zone and rely on an IoT service to self-report which space has been occupied while also compensating the city-manager of the parking zone.

This example is conceptually illustrated below. Here, an IoT service that relies on connected devices which operate on two separate platforms in ‘Region 1’. 'Platform A' is managed by ‘Network A’ and the other ‘Platform B’ is part of a multi-county operator alliance involving network operators ‘X’ and ‘Y’. 


Many (but not all) IoT services will involve cooperating systems of devices and sensors that are hosted on multiple platforms and networks. This means that providers of enabling technologies (devices, networks, and platforms) will need to factor interoperability capabilities in their business strategy and product road-maps.
In conclusion, Ericsson’s announcement with XL Axiata represents the tip of an emerging segment in the market as more and more operators focus on M2M opportunities. It also raises a very interesting set of business and strategy issues for different eco-system participants:
  • mobile operators with in-house platforms - how to remain competitive with large, specialist platform providers that are able to deploy greater innovation and development resources?

  • mobile operators with in-house and partner platforms - how are these platforms positioned with customers and are the economics of continuous, dual-track development and operations manageable?

  • mobile operators that have yet to commit to the M2M market - what are the relative merits of a home-grown approach and what criteria should be applied if an external platform provider approach is preferred?

  • specialist M2M service providers - do addressable market constraints still leave sufficient market to serve niche customer needs profitably? 

  • M2M-enabler platform providers - how best to build on existing customer wins and foster alliance-building market opportunities?
In all cases, interoperability is necessarily on the strategic agenda due to the long term implications arising from cross-network IoT services.
 

No comments:

Post a Comment