Every year Machina Research makes its predictions about what the coming year holds in the world of machine-to-machine and the internet of things.
Here are Machina Research’s predictions for the big developments in 2013.
1. Operator alliances will expand and their roles become clearer.
To support global M2M offerings MNOs are increasingly forming into alliances. The most prominent currently are Vodafone with its Partner markets, and two groupings that emerged during 2012: the Global M2M Association (Deutsche Telekom, Orange and Telia Sonera) and the grouping around the Jasper Wireless platform (including NTT DOCOMO and Telefonica), the “J-7”. During 2013 we expect a lot more operators will join these emerging alliances and that the roles of these organisations will become a lot more apparent, e.g. with joint bidding, IMSI-swapping (see below), and SLAs.
2. Data analytics seizes the M2M agenda.
Relevant to M2M and also to the wider telecoms market is data analytics, or so-called “big data”. During 2012 there were a few tentative moves in this direction such as Telefonica’s Dynamic Insights business unit, but 2013 will see many of the issues crystallise. Machina Research believes that a huge amount of the value of the M2M market lies in the analysis and manipulation of the data generated by diverse sources.
3. Standards…who cares?
In 2012 there were a lot of initiatives around open standards. M2M is a fragmented field with numerous different technologies, industry-specific standards and a diverse range of stakeholders. As such, it is likely that standardisation in 2013 will achieve modest objectives rather than developing an all-encompassing set of M2M standards. Many companies won’t wait for standards.
4. Programmable SIMs/eUICC will start to take off and several operators won’t wait for standardisation.
One area where standards are important and should be finalised in 2013 is eUICC. There is a lot of interest in remote SIM management for M2M and we expect pre-standardisation commercial deployments in 2013. Several issues need to be resolved to see full-scale inter-operator IMSI swapping, not least the Subscription Manager role. During the course of 2013 there will naturally also be a lot of discussion around how the concept of reprogrammable SIMs might affect the wider industry (i.e. handsets and mobile broadband).
5. Modules will become more fit-for-purpose.
Machina Research believes that the cellular M2M module value chain is not delivering devices optimised for M2M. Effectively the industry is getting over-engineered products appropriate for smartphones or high-spec M2M devices. During 2013 we expect to see a lot more fit-for-purpose M2M devices, driven by two factors: greater volumes of devices and an underwriting of device volumes by MNOs. This will help to drive down the costs of deploying cellular M2M. We will also see an increasing number of M2M devices fitted directly with M2M-oriented chipsets, rather than using a dedicated module.
6. Module vendors, under more competitive pressure, start to compete with MNOs.
The M2M module market is becoming more competitive, pushing module OEMs to find new ways to differentiate and compete other than simply cost. During the last year or two we have seen all of the major module vendors (Cinterion/Gemalto, Sierra Wireless and Telit) launch cloud-based device management platforms, with a view to providing end-to-end services for potential users of M2M services. They are in a very good position to provide simple one-stop-shop for devices and connectivity, particularly for smaller contracts. However, it is dangerous for vendors to overstep the mark and start competing directly with their MNO customers.
7. More M&A in M2M.
The last couple of years have seen a flurry of M&A activity in both software and hardware sectors, including a substantial consolidation in the module sector. What has not happened to date is a serious set of M&A in the services space. The one stand-out example from 2012 was the acquisition by Verizon of Hughes Telematics for USD612 million. There have been a number of interesting acquisitions by MNOs of niche companies with particular expertise, such as AT&T’s purchase of Xanboo and Vodafone completing the acquisition of Zellitron. Acquisitions have been the exception rather than the norm in the services sector of M2M: in these straitened times, the focus seems to have been more on partnerships. Machina Research expects many more acquisitions in 2013.
8. More diversity in RAN technology.
During the next 12 months we expect to see more fragmentation of the radio access market in M2M. The dominance of 2G will be broken. During 2012 we saw the beginning of the end for 2G. AT&T and Verizon Wireless both broke cover this year and announced the switch-off of GSM (2017) and CDMA (2021), respectively. The reasoning is clear: other technologies offer a significantly lower cost-per-bit than 2G. Ultimately, all MNOs will look to refarm their 2G spectrum. We expect more announcements in 2013. Perhaps not in terms of complete 2G switch-off, but certainly continuing substantial refarming. Also, other new technologies are also starting to compete with 2G, for example using white space spectrum.
9. More focus on delivery and profitability (and verticals).
During 2012 there was a significant ramp-up in M2M business done by mobile network operators. In some cases there was an approach of ‘win the deal and hang the expense’. In looking to gain scale some MNOs accepted low, or non-existent, margins on new business. The key to M2M success is efficiency and MNOs will shift their approach to drive out that inefficiency implicit in the win-at-all-costs model. During 2013 MNOs will adopt a more mature approach, focusing on winning business that is profitable and ensuring that solutions work properly and are profitable. We will also see MNOs focus more attention on vertical sectors, with more sector-specific solutions.
10. Usage-based insurance will take off, particularly in Europe.
Usage based insurance is a market that has flattered to deceive. It is the perennial ‘next big thing’ of M2M. Machina Research’s view is that all is set for a substantial growth in this sector in 2013. In particular, growth in the EU will be stimulated by the European Court of Justice ruling that insurers will no longer be able to take the sex of the applicant into account when setting premiums. Many MNOs are focusing specific attention on this area. Telefonica, for instance, announced an agreement with Generali Seguros in November 2012 to develop a solution . It is not just in Europe that momentum is growing. In the US Allstate and Liberty Mutual now have UBI products, while Ford and State Farm have recently expanded their Drive Safe & Save UBI model based on connectivity from Ford SYNC.
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