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Rise of the Machines: Making Money in M2M

Khali HendersonBring your own device (BYOD) has been a double-edge sword for the channel. On the one hand it has presented opportunities to help companies with mobility management from secure network access to expense management. On the other hand BYOD has disintermediated the wireless dealer from device purchasing and activation. Studies show BYOD already is embraced by at least two-thirds of companies a percentage that’s likely to grow. But mobile phones, tablets and laptops are just a one part of the corporate wireless device landscape. There is a plethora of devices that are unmanned, monitoring assets in a machine-to-machine (M2M) communications environment. This presents a growing opportunity for channel partners to continue to provide wireless service and devices directly to businesses.

The so-called M2M opportunity is not a new one telematics in the logistics and transportation markets dates back some 20 years but it is gaining momentum and interest from all quarters. It has been swept up in the fervor over the “Internet of Things,” (IoT) an umbrella term for connected devices that has been cited by Gartner as a Top 10 technology trend for 2013 and by Cisco CEO John Chambers as the networking giant’s next big opportunity.

By 2020, Gartner estimates there will be more than 30 billion “things” with more than 200 billion connections, up from 15 billion with 50 billion connections in 2011. Other projections are even more bullish. IMS Research, for example, forecasts an increase from 107 million connections globally in 2011 to 326 million in 2016; Berg Insight similarly predicts growth from 108 million connections in 2011 to 359 million in 2016.

Long-term, the IoT vision is  “connecting the limitless array of unintelligent objects and products that comprise the physical world,” explain researchers from VDC Research in a January 2013 report. An example might be pet food that automatically reorders when supplies are low. Near-term, however, VDC said the M2M is connecting one technology to another, enabling new features and benefits.

Indeed, a September 2012 study conducted for Oracle by Beecham Research also found the primary driver for M2M solutions is now enabling new services rather than just improving operational efficiencies and cost savings. “It is all about creating market differentiation for [business-to-business] adopters to deliver new competitive edge,” the research firm said. In practice, that means creating new services like remote patient monitoring in health care. It also means using the data collected from M2M communications for strategic analysis and decision making by tying them into CRM, ERP and business analytics solutions.

“The M2M market is undergoing a massive shift” from a carrier-centric market involving low ARPU telematics applications connecting dumb devices to cloud-based M2M platforms connecting smart devices and fast analytics engines, said VDC analyst David Krebs, vice president of Enterprise Mobility and Connected Devices, in an interview with Channel Partners.

As a result of this changing priority, the global M2M market is expected to grow significantly at a compound annual rate of more than 26 percent from $21.52 billion in 2011 to  $85.96 billion in 2017, according to a September 2012 report by MarketsandMarkets.  Another report, “The M2M Bible,” published in February 2013 by research firm Signals and System Telecom, said  it will grow at a 23 percent compound annual rate to $136 billion by 2018, up from $48 billion in 2013.

The rapid growth trajectory of M2M is due to a confluence of market conditions some coincidental and some intentional, including the:

  • Lower cost of modules and connectivity. M2M is the beneficiary of growing economies of scale and resulting lower costs for components and wireless services, according to IMS Research.
  • Emergence of cloud computing. M2M also has benefited from cloud computing platforms, particularly in reducing the time and cost to deploy M2M solutions and the ability to scale them, explained Bill Lesieur, cloud analyst for research firm Maravedis-Rethink in a July 2012 report. Both infrastructure and software, including M2M management and business analytics applications, can be delivered from the cloud. “Large enterprise M2M projects historically have taken two to three years to complete and often at least $25 million in IT infrastructure investment. Cloud can slash that to a third or less,” Lesieur said. This, in turn, can lead to faster ROI and lower total cost of ownership.
  • Increased attention of mobile operators. Mobile operators are intently focused on developing and expending their activities in the cellular M2M market as a key growth opportunity in the face of increasing saturation and maturity of the core mobile voice and data services market, according to analysts at IMS Research, who said carriers are establishing M2M business units, deploying connection management platforms and “taking a leading role in coordinating the cellular M2M value chain at multiple levels.”
  • Efforts to defragment the supply chain. “At present the M2M value chain is highly fragmented with module OEMs, hardware solution providers, application platform providers, device platform providers, and mobile network operators and aggregators/MVNOs all investing across multiple segments of the value chain,” said researchers at Signals and Systems Telecom. But that is beginning to change as these various stakeholders form partnerships to bring bundled solutions to market. MarketsandMarkets analysts said, “the concept of partnerships amongst embedded device manufacturers, solution providers and M2M network operators has emerged as a global ecosystem in the M2M market. This, in turn, is expected to leverage their sales and marketing channels.”

Channel Opportunity in M2M

The country’s top three carriers all have partner programs focused on the M2M opportunity.

Sprint, for example, has a long-standing channel for M2M solutions for partners it calls Integrated Solutions Providers. “They take some of the piece parts hardware, software, analytics and applications and bundle it themselves,” said Wayne Ward, vice president of  M2M for Sprint, explaining that ISPs build on Sprint’s capabilities with their own intellectual properties. That’s a highly customized business and not easily scalable, so now Sprint is looking at ways to enable its traditional wireless dealer channels, both business-to-business VARs and retail stores for M2M sales. Ward said he expects to launch M2M through those channels sometime this year. “I think the landscape will change in the next 12-18 months because a lot of these products have come way down market, the prices have dropped, they are plug-and-play, they are simple and easy to understand and sell, they can be shrink-wrapped and put on a store shelf or [sold] through a B2B sales organization,” Ward said.

Verizon established a Solutions Provider program more than two years ago to help partners address M2M. Janet Schijns, vice president of medium business and channels for Verizon Enterprise Solutions, said the program has seen tremendous growth. “With the recent launch of the Verizon Partner Program, we are now offering better tools, such as Verizon’s M2M Management Center and Partner Relationship Management,” she said. “”In addition, VPP members receive training from Verizon on M2M and wireless technologies as well as network and platform capabilities.”

AT&T also has an organization dedicated to M2M. It provides partners with a SIM acquisition and management portal the AT&T Control Center powered by Jasper specifically designed for the needs of M2M devices. AT&T also has a team of technical and solutions sales professionals with a deep knowledge of the M2M solution ecosystem to help partners.

While efforts at the top of the supply chain promise to make M2M easier to sell and implement, there remains considerable opportunity for partners to provide that bundle along with the professional and managed services required for an typical M2M implementation.

Natasha Royer Coons, managing director TeraNova Consulting Group Inc., has been an M2M VAR for six years and said the big difference today is more of the components are built for M2M environments and there’s not as much troubleshooting required, but she said partners still need to set up their supply chains, procure, configure, test and manage the devices and make sure the data networks are secure a service that her company now provides for other VARs.

“Our most successful channel partners have learned to combine all of the services into one bundle for their customers,” said Tony Puopolo, vice president of sales international and strategic accounts for CradlePoint Inc., a leading manufacturer of wireless routers used in M2M solutions. “The easier a partner makes it for a customer to deploy and maintain their network, the more the customers are willing to pay and lock in with a partner.”

Specifically, the opportunity for channel partners in M2M includes, but is not limited to, revenue from:

  1. fees for solution design
  2. margin on the device/sensor sales
  3. commission usually one-time on the carrier activation
  4. fees for installation of the devices/sensors
  5. fees for maintenance and management of the devices/sensors
  6. margin on the data collection/analysis application
  7. margin on the application sale
  8. fees for customization or integration of the application
  9. follow-up on sales of infrastructure, storage, security, etc.

“All of these value-added services can be leveraged by savvy solutions provider to create comprehensive solutions for customers,” said Bruce Thompson, senior product manager for M2M Solutions for AT&T. “Many small business do not have the time or expertise to fully implement and manage a M2M solution, nor the money to hire full-time employees to do so. Solution providers can fill this gap. … The money customers save in staffing and associated administrative costs can be reinvested into a partner-provided solution.”

Partners must be able to articulate the transformational impact of M2M on business processes by quantifying benefits with ROI models. The challenge, however, will be articulating viable use cases for M2M, which due to its relative immaturity, lacks historical performance benchmarks, said VDC analyst Krebs.

An understanding of the customer’s business process is paramount. “There is a real emphasis on business process refinement with M2M,” said analyst  Steve Hilton, lead analyst for enterprise and SMB strategies research at Analysys Mason. “It forces channel partners to engage with customers in new ways.”

Partners of all backgrounds, including wireless dealers, telecom agents and IT VARs, have an opportunity to play in the M2M space. In many cases, their existing skill sets translate well, but they may have to fill in the gaps by hiring, outsourcing or partnering. A telecom agent with experience selling devices and connectivity may not have the installation or software development chops required to complete the job, for example.

Distributors and master agents are stepping into the void to provide those services or connect partners with those that can. In one example, Tech Data’s TDMobility business unit, has partnered with Wyless, an M2M MVNO and MSP, that provides not only connectivity from 15 global carriers but also pre-sales consulting equipment, staging and configuration, and solutions engineering on a bundled on unbundled basis. The companies planned to announce their partnership in mid-May at CTIA2013, a mobility industry trade show.

IT distributor Synnex Corp. in April announced the launch of MOBILITYSolv that will enable partners to take advantage of the M2M opportunity by facilitating equipment and application sales as well as wireless network activations. Adnon Dow, vice president of Synnex’s Global Mobility Solutions Business unit, said the company is evangelizing the M2M opportunity among channel partners with road shows that pair the device makers, software providers and carriers. It also provides training and marketing assistance to help them work opportunities.

Master agency Communication Management Services  has a mobility division with an M2M specialization that can provide partners with not only the carrier and vendor relationships but the solutions consulting and backend deployment, said President Mike Saxby. He noted that the volume of M2M deals is increasing and some of them are coming from partners that have never worked in the space before. Additionally, he said he is seeing deals spring out of partnerships between telecom agents and IT VARs, with each handling their connectivity and integration specialties, respectively.

Tem Wu, director of wireless for master agency WTG, said his company has partnered with agents and VARs, allowing each to manage the process that is in their core competency. “Connectivity is where the agent partner will fit because of the simple fact that it requires no inventory or billing requirements; the partner can activate devices sold from the carrier or from a third party,” he said. “A VAR partner, on the other hand, will have the ability to sell connectivity but also the hardware.”

Being able to combine both competencies is an advantage in M2M. ProVision Communications, an IT solutions provider with a carrier practice, targeted M2M two years ago and now it’s the fastest growing segment of its business, according to Michael Greer, director of mobility solutions.


HOT M2M SOLUTIONS

The applications for M2M communications are virtually limitless. However, industry experts like Charles Kriete, executive vice president for TDMobility, said there is low-hanging fruit for channel partners in opportunities for Internet primary and backup as well as point-of-sale transaction processing solutions that apply to a broad swath of customers and are largely plug-and-play so they don’t require a lot of training to sell or deploy. In addition, sources identified several areas that are popular vertical and horizontal specializations for M2M solutions, including:

  • Internet for primary, temporary and backup applications
  • Point-of-sale solutions for venue-less businesses or remote locations
  • Digital signage on highways or in stores
  • Fleet management for vehicle tracking and usage
  • Health monitoring for patients
  • Smart meters for energy and utility usage
  • Security/surveillance cameras in remote locations
  • Banking ATMs in remote, unmanned locations
  • Asset tracking for equipment in buildings or in transit

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