April 26, 2012
M2M Apps Poised To Launch, But Doubts Persist
Machine-to-machine (M2M) communication is poised to change the way critical services are delivered during the next decade, from communications to healthcare to transport to energy. Significant barriers remain however, including overcoming technical complexity and regulatory hurdles that will pave the way for innovative products and services.
Data from a new Economist Intelligence Unit report based on interviews with 18 key players in the M2M industry analyzes the business models behind successful M2M applications across sectors, identifies the factors that will drive further take-up, and offers action points for businesses and governments to address to better overcome barriers to widespread adoption.
"M2M is beginning to fulfill its promise, with several successful applications already in the field," says Jason Sumner, senior editor at the Economist Intelligence Unit. "The next step is to create a platform for innovation by standardizing technologies, forming partnerships within the industry and demonstrating the benefits to consumers."
Some high points of the survey:
>> M2M market forecasts vary, but all predict big growth potential. Forecasts by analysts promise anywhere from 12 billion to 50 billion devices connected by 2020, up from just 1 billion in 2010. One analyst firm predicts revenue of $948 billion by 2020, including hardware and connectivity, a nearly eight-fold increase from $121 billion in 2010. Although such forecasts often prove over-optimistic, they are whetting the appetites of many eager participants.
>> Cheaper technology and smaller devices will drive take-up. Sensors, microprocessors and wireless technologies that once cost hundreds of dollars per unit now are available for as little as the cost of a cup of coffee. Cloud computing and the ubiquity of smartphones will also drive adoption. Regulation is forcing uptake in some sectors like energy and automotive.
>> M2M business models based on proved efficiency and cost savings will see the most growth in the near term. Energy, automotive, healthcare, retail and manufacturing are just some of the major vertical markets actively deploying M2M-based applications today. Greater efficiency and cost-cutting are benefits that attract particular attention during tough times, including automatic fleet tracking or operating driverless forklifts. Yankee Group forecasts that market segments focused on cost-cutting will see the greatest growth – 17 percent per year between 2011 and 2015.
>> Long-term growth and innovation will come from experimentation within individual sectors, but many firms either don’t understand M2M technologies or have doubts about their true business benefits. M2M’s breakthrough potential lies in entrepreneurs and existing companies using the technologies to create wholly new products and services or in adding better quality of service to existing ones. However, a recent poll of businesses by Gartner found many with no plans to adopt M2M, largely owing to lingering doubt over its ability to provide measurable business value.
>> In the coming decade telecom operators will need to standardize platforms, explore new partnerships and advance the sophistication of their offerings, all while making it simpler for end users to compare which packages best fit their needs. Operators and systems integrators must standardize technology platforms and develop open protocols to allow for tighter integration between sensors, devices and other hardware. Partnerships, sometimes with competitors, will be key in achieving this. In addition, operators and their partners will need to overcome such IT challenges as ensuring the new multitude of M2M data flows can be integrated into existing enterprise IT systems.
>> Governments will need to address growing spectrum congestion, help simplify technology standards and consider streamlining regulations in some sectors to foster innovation. Although in some sectors, including energy and automotive, regulations are a driver, in many sectors they are a hindrance to further adoption and innovation. Regarding simplifying technology standards, this ideally should be done in parallel with other countries to help ensure consistency across borders.
>> Customer concerns about privacy and security will determine the viability of many M2M applications. Businesses will need to experiment via pilots and by paying close attention to customer feedback to understand what customers will accept. Just as the emergence of social networking has created a debate about the boundaries of privacy in society, a connected world also will test social limits. So far, customers have proved willing to allow such personal information as present location or driving behavior to be shared on a limited basis in return for savings on car insurance premiums, for example, and assurances that their data are protected.