May 14, 2013

Verizon M2M - revised priorities?

My attention was recently drawn to Verizon’s recruitment activities in the M2M sector. I was intrigued by the profiles and the roughly 130 positions Verizon has been trying to fill notably when these are viewed against the acquisitions it made as part of its M2M strategy. More on this will follow after a recap of Verizon’s initiatives.

Today’s M2M market is the result of several key changes in the approach mobile operators have taken to what was previously a small, niche market. Verizon was instrumental in changing the market with its Open Development Initiative in late 2007. Through this, Verizon set a target of 4-weeks to certify non-handset devices for use on its network, a much shorter period than most other mobile operators at that time. Verizon's initiative also sent a signal to the market about the potential for a much wider class of connected devices.

Verizon’s acquisitions gave it access to new M2M capabilities and markets 

As the market continued to develop, mobile operators started to come to terms with the specific operational support and scale issues associated with M2M applications. Within this context, Verizon acquired a well-known M2M service-enabling platform provider, nPhase, to enhance its ability to support enterprise customers deploying M2M applications.

In mid-2012, Verizon then acquired Hughes Telematics Inc. (HTI), an entity with far more promising growth opportunities in terms of consumer end-user applications. This acquisition captured a great deal of industry attention not least for the $612 million price tag.

At the time of its acquisition, HTI accounted for about 330,000 connections according to its last 2012 financial report. These connections joined Verizon’s existing base of about 7-9 million connected devices of which about 6 million were attributable to the General Motors vehicle telematics offering, OnStar.

HTI added a new dimension to Verizon’s M2M activities because of the range of markets and extended business models that it introduced.

The main elements of the HTI addition are as follows:

  • Direct to OEM vehicle telematics – HTI entered into agreements to support Mercedes Benz’s (mBrace) vehicle telematics initiative in the US and subsequently that of VW of America.

  • Indirect vehicle telematics market offering – HTI developed a consumer vehicle telematics solution (In-Drive) for consumers and partners, such as the insurer State Farm. In-Drive allows driver usage patterns to be captured and used this to offer discounted premiums.

  • Vehicle telematics for China and Russia markets – in late 2011, HTI announced that it had found a partner to work with in the Russia and CIS markets. A few months later, a similar announcement was made with respect to the Chinese market.

  • Fleet management offering branded as Networkfleet – this targets large fleet management companies through direct and reseller sales channels.

  • Mobile health care market – HTI formed a health care communications company – Lifecomm - in collaboration with Qualcomm and American Medical Alert Corporation (AMAC) to develop opportunities in the emerging mobile health care market. An early offering was a Mobile Personal Emergency Response (mPERS) system. This appeared to leverage HTI’s remote monitoring and call center capabilities while laying the foundation for a larger push in the personal care and wellness.

A recurring feature of these segment opportunities is to position Verizon/HTI as an M2M enabler of other businesses that deliver a service to their end-customers. This corresponds to a B2B2B business model in the case of fleet telematics and a B2B2C model for consumer vehicle telematics and mobile health care. The extended business model approach can be effective in markets with a demonstrable track record of end-customer demand and where companies have well established roles and business relationships right across the value chain.

Matters become more challenging in nascent markets where latent demand needs to be crystallized through effective marketing, product and service innovation, for example. There is also scope for blurring of roles and a much greater level of dependency on third parties that are responsible for service delivery and the end-customer relationship. This is especially the case in consumer-oriented markets for vehicle telematics (connected car concepts, in-car infotainment etc.) and mobile health care (user motivated self-monitoring, wellness etc.).

To capitalize on these promising markets, Verizon’s business model would need to include adequate resources and capabilities to support these forms of ‘market making’ initiative.

Few new-product and service announcements in consumer-oriented segments

In light of the growth potential from the promising new markets arising from the HTI acquisition, there does not appear to have been much activity in promising areas for growth. For example, the Lifecomm website has existed for several months as a placeholder for future product and service announcements.

Like other companies, Verizon has been developing a connected home offering combining cameras, sensors and alarms to address consumer home management and security needs. However, these initiatives do not appear to be integrated with Verizon’s other M2M activities to leverage potential synergies as a driver of service innovation. This could be a possibility in respect to an assisted living service, to illustrate one such example.

HTI’s successes with Mercedes Benz, VW and emerging market partners complemented Verizon’s support for OnStar. This held out the potential to leverage economies of scale and drive future innovation in consumer vehicle telematics. In 2013, however, GM announced that it would be working with AT&T to provide OnStar services in its new vehicles. A GM spokesperson explained [1] that this “came down to a shared vision with AT&T for the connected vehicle”, hinting at a lack of flexibility to enable consumer-oriented applications.

Verizon's recent recruiting focus

This is now the point where we return to the topic of Verizon’s recruiting needs in the M2M/Hughes Telematics arena. A snapshot for the first few months of 2013 from its Careers web site reveals some 130 [2] open slots for staff positions across 32 States.

Two of these slots are for product marketing positions with Lifecomm within Verizon Wireless; the rest are classified under Verizon Business & Residential. The recruiting split prompts the question of whether Verizon Wireless has been designated as the responsible entity for consumer offerings (B2C and B2B2C) while Verizon Residential & Business deals with public and private enterprise (B2B and B2B2B) offerings.

Across the entire recruiting pool, three types of sales staff account for about 60% of the slots. These are: account executives; overlay account executives; and, public sector overlay account executives. The profile requirement for the ‘overlay’ roles suggests that Verizon is building out its sales capability across its footprint with a channel model that dovetails M2M/Hughes staff with Verizon’s Enterprise Solutions (VES) staff. The job descriptions also suggest that this combination would then target VES customer relationships in both the private and public sectors, with an emphasis on Networkfleet’s offering.

The reason why this recruiting drive caught my attention is the emphasis on account management, sales and fleet telematics in the largely well-established Networkfleet line of business. There is not the same weight of recruiting for consumer-oriented and digital marketing skills that characterizes the efforts of other operators that are targeting consumer-segment and new-growth-market opportunities.

Post-merger integration impact on growth objectives

Mergers and acquisitions are never easy. For the one in five that succeeds, the historical record shows that swift post-merger integration and shared-incentive governance models are critically important. Verizon’s acquisitions encompass different platform capabilities (nPhase for M2M service enablement, HTI for fleet telematics and consumer automotive) as well as the intent to grow in non-traditional markets (wellness-related vertical segments and emerging market geographies). This diversity of scope in itself implies an inherently high level of execution risk.

A year into its Hughes Telematics strategy, there are plausible grounds to conclude that Verizon’s immediate priority is to consolidate its US M2M business and focus on a traditional (B2B) segment - fleet telematics - within its Enterprise Solutions unit. At some point in the future, it will need to recoup its full investment in HTI. This will require a boost in sales from the consumer telematics and mobile health care segments through its own channels and those of strategic partners. Success in these areas will depend on suitable business-model, marketing and service innovation capabilities.

[1] GM switches to AT&T from Verizon for OnStar wireless service -

[2] This is quite a number of staff to add to an existing operation and indicates a different business model approach to that of a company like Numerex, itself a specialist M2M provider, which has a staff of about 140 and a base of 2m connections, albeit a much lower per-device revenue level compared to HTI, as described in this post on M2M service provider metrics.


  1. 12 July 2015 update

    Verizon quietly moves Home Automation customers to Nexia

    Nexia, the home automation division of Ingersoll Rand, is rarely modest, but for some reason the company has not promoted its recent win with the former Verizon Home Monitoring & Control service.

    After a short run, Verizon discontinued that DIY smart-home offering in 2013, and has quietly shifted former customers to Nexia Home Intelligence at the same $9.99 monthly price that Verizon was charging.

  2. 29 Oct 2015 update

    Latest strategic thinking on Verizon's M2M/IoT strategy shows a move up the value chain to higher revenue-generating opportunities (i.e. beyond connectivity).

  3. 5 August 2016 update

    Useful observations about Verizon's acquisition of Fleetmatics in relation to a) valuation and b) strategy.

    a) Verizon’s bid, expected to close by the end of this year, is thus for seven times projected 2016 revenue.

    b) Verizon appeared to be adopting Orbcomm’s strategy of rolling up smaller niche-market companies, if on a larger scale. Fleetmatics provides connectivity solutions generally to small transport fleets, whereas Orbcomm focuses on the cargo side of its markets. But the companies share a focus on connecting the Internet of Things.

    Full details here -

  4. 17 Feb 2017 update

    Verizon VP Mark Bartolomeo lays out IoT strategy

    The main points:

    i) IoT comes down to once common element - asset management to improve efficiency, utilization and availability

    ii) Enterprise fleets are probably the most expensive asset most companies have

    iii) Cellular device connectivity is comparable to LPWAN competitors; cellular network operators have an advantage in relation to their (extensive) geographic coverage

    iv) Focus areas for 2017 include: security and privacy; data analytics; multi-modal transportation solutions