Jahangir Mohammed is the founder and CEO of Jasper Wireless a developer of Web-based self-service platform for enterprises deploying M2M services. Prior Jasper Wireless, Mr Mohammed founded and served as the CEO of Kineto Wireless. Previously, Jahangir worked at AT&T Bell laboratories and Lucent. Jahangir Mohammed is a regular speaker at industry events, including Mobile World Congress, Mobile Asia Congress and the Open Mobile Summit. Jasper Wireless won the 2009 World Communications Award for its M2M (machine-to-machine) platform, which enables mobile operators to connect and support a variety of emerging consumer electronic and business devices on their networks.
Machine-to-machine - giving machines enough ‘intelligence’ and connections to communicate with one another - is relatively new, but growing fast; billions of such devices will be in use in the coming years. Most will use mobile networks, so M2M will bring significant revenues to mobile operators. Although average revenues per device will be low, most cost generating functions can be automated and the low churn, long-term relationships and limited promotional costs can make this a highly profitable business for mobile operators.
M2M is an enabling technology found across a range of vertical applications. One very common use of this connected technology is the tracking of cargo and packages. Ever wonder how FedEx knows exactly where your package is at all times? This is one example, but there are many devices in your everyday life that either are connected or will be quite soon. The electricity meter in your house may be connected to provide real-time insight into energy consumption. Your office copier may be connected for faster response time to technical problems. The credit card terminal you used to pay for last night’s dinner was probably connected via the mobile network. Traditionally, machines were devices made to support and assist humans performing work. Today, smart machines are the norm and represent an entirely new approach to everyday tasks. Machines are constantly evolving to deal with tasks more efficiently and enhance human interaction. Developers have made machinery more efficient by embedding ‘intelligence’ into a range of devices that lets them communicate with one another thereby improving device management and Quality of Service (QoS). As a result there are enormous opportunities in emerging machine- to- machine (M2M) markets for mobile operators to enhance revenues. Specialists expect that billions of devices will become network enabled over the next decade. M2M communications is essential to bring intelligence to these machines that will be embedded in everything from your car to your washing machine, or your central heating. The GSM Association (GSMA) predicts that the number of global M2M connections will be 180 million by 2012 whilst research firm Analysys Mason has predicted that there will be 2.1 billion connected devices by 2020. Regardless of the variations in the predictions, the M2M market is growing at an exponential rate. For mobile operators, the emerging M2M services sector presents vast opportunities to create new revenue streams and expand the customer base. Demand and supply The demand for different applications from diverse sectors varies across the globe: the UK and US markets see growth in consumer electronics and mHealth applications; Asia shows a sharp uptake of smart grids technology; Australia sees an influx of vending solutions; and Latin America favours asset tracking and point of sale (POS) systems. However, these days, the next generation of connected devices is not coming from traditional handset manufacturers. The automotive, construction, machinery, consumer electronics and energy industries, among others, are now building wireless devices, but without the mobile expertise of handset manufacturers, companies in these areas can struggle to get wireless connections right. According to research we have conducted, over 60 per cent of connected devices launches are delayed due to application redesign needs and up to 80 per cent of device applications are ‘aggressive’ or ‘abusive’ when connected to the mobile network. Devices exhibit aggressive behaviour, for example, by constantly trying to connect to the mobile network, fragmenting service and deteriorating the quality of end user service. Mobile operators and ecosystem vendors must ensure they offer the technology and support necessary to power the development of these devices. Imagine a plug and play module, ready to connect out of the box. It’s certainly not an easy task, but it can be done using the right platforms. The Asian story The Asian market has witnessed rapid demand and penetration of M2M services across its industrial and utilities industries. However, there is further potential for it to be extended into new markets. M2M may have begun in the region as an area for practical devices, but it is also quickly emerging as a lucrative consumer opportunity. Japan and China have witnessed strong growth in traditional industrial and financial M2M devices. By September 2009, KDDI (Japan) had sold two million M2M communication modules, with vehicle management accounting for half of its total M2M business volume. To date, China Mobile has provided over three million M2M terminals to the electricity, transportation and finance industries. In India, the rapidly growing wireless market has lead to a surge of devices in the rural market, with Reliance Communications focusing on high impact M2M applications to aid automation, surveillance, remote monitoring, and data gathering. These figures show the demand and accessible technology for M2M devices across Asia’s developed and developing markets. There is further opportunity for operators to expand their M2M ecosystem and tap into the consumer electronic market. The industrial M2M market is only one arena in which operators can expand revenue. The emerging M2M consumer market offers an attractive option for operators looking to capitalise on end user demand for intuitive, connected devices from digital photo frames to connected heaters. The embedded mobile market expands the traditional industrial M2M opportunity by introducing service and device innovation akin to consumer needs, industry value chains, government needs and broader sectors (healthcare, consumer electronics, transport and energy). As chipsets have continued to get smaller and cheaper, an array of commercial and consumer devices has emerged in the developed markets. Asian operators are beginning to recognise the tremendous growth opportunity of this market. Consumer demand for these devices is evident in the increasing sales of personal navigation, e-readers, mobile Internet devices, gaming, digital photo frames, and residential energy management. For operators, the dynamics and applications necessary for servicing this market are entirely different to those of the traditional handset market. As much as they have the network and infrastructure capabilities to connect the devices, many lack sufficient automated, real time, provisioning, activation, and scalable management processes that are capable of supporting millions of varied connected devices whilst creating significant new revenue sources. Connecting devices for the first time requires specific intelligence and provisioning, and high entry costs, creating grey areas for operators that prevent or delay them from entering this market. Connecting consumer electronic devices requires, for example, additional agility and flexibility skills to cope with a permanently changing environment, fast pace product development cycle and changing customer expectations. Getting the platform is one step, maintaining its innovative and competitive advantage is another one. Monetising M2M For mobile operators, much has been said about M2M being a low ARPU business. That is certainly true. In most markets, M2M ARPU is about ten per cent or less than that of traditional handset subscriber. On the basis of ARPU alone, M2M does not look like a viable market. However, when combined with churn and acquisition cost, M2M can in fact be an excellent market. The key metric operators should consider is margin. Of course, the key to high margin in a low ARPU business is eliminating costs. The M2M / Connected Devices Platform used by the operator should look to automate to eliminate much of the costs to serve this market. For enterprises looking to build a connected device business, the economics come down to the business model. Many industries look at embedded connectivity as purely a cost. Finding a flexible business model that takes into account the unique usage profile of the device, across all demographics can help to optimise costs. The same is true for intelligent rate plan management and sophisticated exception reporting. For some industries, such as consumer electronics, embedded connectivity provides an additional revenue stream. Using a connected devices platform to employ advanced up-sell and cross-sell techniques can yield significant revenue opportunities. For module and chipset manufacturers, economics really comes down to scale. Eliminating many of the cost and complexity barriers above will help fuel the market. Organic mass-market adoption drives volume. Of course, finding opportunities to accelerate market adoption can go a long way. By addressing each of the market factors above, the vision of 50 billion connected devices will surely become a reality. Each company in the ecosystem plays an important role. Through partnerships - such as those between operators and connected device platform providers witnessed around the world - this new ecosystem can come together and provide the technology and support necessary to power successful M2M services. 4G impact 4G technology is an enabler - the higher the bandwidth, the more valuable and innovative the applications. Without broadband we wouldn’t have YouTube, Facebook or even cloud computing - and we cannot have an Internet of Things. Innovation prospers and applications rise to fill the available bandwidth. However, this takes time and several other factors must also fall in line to take full advantage of 4G. The cost of the radio, the application development effort, the data costs - these must also be ‘right-sized’ to enable mass-market adoption. However, even with today’s 2G and 3G networks, we’re already seeing exciting uses in consumer electronics, automotive and health care. Amazon has proved what’s possible in consumer electronics with the connected Kindle eReader. Cars will soon be moving mobile network hotspots streaming entertainment and real-time traffic updates to the dashboard. Machines are changing the way humans interact and will continue to enable a range of technologies across a range of vertical applications from transport and logistics to consumer devices.