Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.
It’s intriguing to consider a world where copy machines contact the supplier when the machine’s ink supply is low, patients at risk for heart attacks are remotely monitored in their homes and careful drivers are rewarded with cheaper coverage because their insurance companies know they regularly obey the speed limit.
Machine-to-machine (M2M) networking, where security systems, remote or smart meters, health care systems, cars, household appliances and a host of other devices “talk” to each other, is the underlying technology for these applications. The automotive industry already offers on-board telematics as a standard option. Other industries – entertainment and health care, to name two – are poised to network their products in a big way over the next decade, and some mobile providers created new organizations to standardize the development and delivery of M2M products and services.
Before M2M networking can be widespread, businesses, innovators and network operators must address questions regarding appropriate business models, branding and pricing, how best to innovate and the role that mobile network operators can and should play.
Innovating in unfamiliar territory
Although many companies believe M2M networking is strategic to their future, they disagree on the best way to bring new networked products to market. For many, networking is not a core competency and they lack a strong, in-house software development staff skilled in M2M applications.
To get the technical and marketing know-how they need, some firms recruit their own M2M experts in software architecture and design. Others hire consultants, contract the networking piece to off-shore developers, or partner with software companies, Internet companies, chip makers and PC manufacturers. One appliance maker worked with a PC manufacturer to develop a Wi-Fi-equipped device that links to the home PC and Internet. The Ford Motor Company collaborated with a major software firm to develop its in-car entertainment and communications system. Where innovation is concerned, many approaches will coexist and smart players will keep their options open.
The benefit of a common platform
Interoperability – networking across different devices and services – is another challenge in the M2M arena. Most Internet-ready TVs and automotive entertainment systems use a common platform that enables networking. Many business leaders expect multiple platform approaches to flourish in both vertical and horizontal markets. Over time, it’s expected that a value chain will evolve that sets standards and facilitates interoperability across currently incompatible platforms. Many commercial platforms already embrace industry standards such as Bluetooth, Wi-Fi, ZigBee and GSM, and common operating systems, such as Linux and Java.
With a common platform, a car within a certain radius of a home could tell the air conditioner to start, the garage doors to open and the stereo to turn on. However, most companies that are building networking technology into their products believe interoperability is years away from the market, and they focus on getting their own systems to work, regardless of how their devices fit into the larger ecosystem of connected devices. The result? Many of the networked devices currently available are “end-to-end” solutions, with the entire value chain managed by one company.
As the market matures, value chains should allow individual companies to focus on what they do best: participate in an ecosystem where developers and consumers manage functions across many devices and services, with smaller companies performing as expert, niche players.
Meanwhile, consumers want simplicity and interoperability. Accenture research shows that consumers with multiple Internet-enabled devices want a single supplier or source for everything, rather than a different supplier for each device. Depending on where they live, consumers said software companies, television services providers, or their landline telephone companies could be single suppliers, creating an opportunity for these companies to be squarely in the emerging M2M value chain.
Pricing, branding are considerations
The rise of networked devices also creates choices in billing, pricing and distribution. Accenture research also reveals that consumers prefer a connectivity charge built into the price of the device, rather than a separate, monthly bill. Their second choice is consolidated, monthly billing for all networked devices.
Pricing is also complex. A subscription model becomes problematic as networked devices and services proliferate, and, according to Accenture research, consumers don’t want to be billed a monthly fee for each device or service.
Micro-transactions – used by the video game industry – is another pricing model. Here, a core product is sold at a relatively low price, followed by high-margin, add-on products. Bundling networking into the price of the device is another option. One company installed smart meters for utility companies, with five years of operation built into the device’s price. Using advertising to subsidize device and network cost is another pricing scenario, but some companies worry advertising would cheapen their products, erode their brands and annoy customers. The key in pricing is flexibility and ensuring that models translate across the global market.
Concerning branding, one exercise equipment manufacturer added networking to its products, enabling users to track and record workout sessions, with results shown on users’ iPod mobile device, enhancing its brand by associating with a well-known company, Apple.
System uptime, security, and network operators
In M2M networking, system uptime and network connectivity is key, and customers need to know their devices will work consistently in all conditions and convey data accurately. Otherwise, new opportunities may be jeopardized.
Security is also paramount, and must be incorporated at the requirements and design stage to protect the data – imagine a trucking company whose competitiveness depends on using M2M networking to route its trucks. The physical devices also need protection, since stolen SIM chips can potentially be used to drive up enormous telephone bills.
Some M2M players regard working with mobile network operators as a challenge rather than an opportunity. To address this, mobile network operators can:
–Consider relationships with non-traditional companies to sets of offerings that address special needs.
–Encourage and support innovation by small companies, offering test kits, flexible pricing, streamlined certification and full testing support.
–Provide remote diagnostics that sends an alert to M2M players when a device needs repair before customers notice a problem.
–Remotely deploy firmware updates to enhance device security and performance, as PC companies upgrade their operating systems and applications.
–Provide a store of content – such as entertainment or useful applications – that could be used on any compatible device, such as news and weather uploaded to an LCD screen on a refrigerator door.
–Improve customer support capabilities to determine if a problem is device or network-related.
Considering the surge of companies embedding networking technology in their products, mobile operators can increase their revenue streams if they could extract an average $1 per year, per device, of the billions of networked devices predicted in the next few years.
Some final thoughts
Today, systems integrators may be among the best equipped parties to address questions on platforms, pricing, managing communications protocols among M2M players, and more – and to properly integrate the necessary components, software and services from a range of vendors. These integrators have the right mix of technology span and business reach to help bring M2M solutions to market.
One thing is for certain: there is plenty of excitement in M2M networking to come, as long as all parties involved recognize that many approaches will coexist, and flexibility is the key to potential success.
