Analysys Mason M2M Insights MNOs Mar2013 RDME0

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© Analysys Mason Limited 2013 March 2013

M2M insights for mobile network operators

March 2013

Steve Hilton

Executive summary

Mobile network operators (MNOs) have an opportunity to seize upon the burgeoning growth in the machine-to-

machine (M2M) ecosystem. The number of wireless M2M device connections around the world looks set to

grow strongly from 102 million in 2012 to 2.0 billion in 2021. Total worldwide M2M connectivity revenue will

increase from USD6.5 billion to USD51 billion during the same period.

This Viewpoint provides five recommendations to help MNOs foster growth in their M2M businesses.

Invest in a dedicated M2M team and infrastructure.

Focus on a communications-rich offering with value-added services.

Establish credible partnerships.

Ensure network security with robust, scalable device certification processes.

Implement a solution-based business model.

These recommendations (see Figure 1) are based on Analysys Mason’s research and discussions with MNOs

around the world.

Figure 1: Elements of a successful M2M business [Source: Analysys Mason, 2013]

Dedicated M2M team and

infrastructure

Communications-rich offering with

value-added services

Credible partnerships

Secure network with device certification processes

Solution-based business model

M2M insights for mobile network operators | 2


This Viewpoint presents insights into the latest developments and challenges facing MNOs, and looks at the

principal requirements of enterprise M2M buyers. It then presents the results of proprietary research into the net

present value (NPV) of device connectivity management platforms; this research has shown that M2M service

platforms supplied by vendors can create a NPV that is more than double that of those deployed under other

models such as internal development or using legacy platform infrastructure.

Recommendations for operators

MNOs offering an M2M solution can benefit from following these five recommendations.

Dedicate a team and technical infrastructure specifically to M2M business. The MNOs that have the

most successful M2M businesses have teams that are dedicated to M2M business activities including

marketing communications, product marketing, sales support, platform support and partnership

management. These MNOs have the human resources to best address the unique needs of the M2M

ecosystem, which include long sales cycles, intensive presales effort and a solutions-based sales approach.

MNOs that dedicate M2M infrastructure – primarily at the platform layer, but also key pieces of network

hardware such as core elements – will also be able to bring solutions to market more quickly, provide a

more customised M2M solution to enterprises, and offer better service-level agreements (SLAs) to help

improve customers’ critical business processes. A dedicated team and infrastructure are required for any

MNO wanting to enter the M2M market, irrespective of its long-term growth strategy.

Focus on communications plus a series of value-added services. MNOs should offer M2M solutions that

focus on communications, plus a clearly defined set of value-added services including billing and rating,

billing on behalf of enterprise customers, customer support as a service, network connectivity, consultancy

services and other systems integration that has an impact on networks and communications. MNOs should

also develop a robust set of SLAs around their network and ancillary services to help differentiate their

M2M offerings and provide enterprise-grade quality of service (QoS). We generally do not recommend that

MNOs offer a large number of M2M applications. Applications development, testing, implementation and

management are competencies often better done by other players in the M2M ecosystem. MNOs may have

the resources and skills to compete develop some M2M applications, but identifying and selecting these

applications requires careful business and technology planning.

Seek well-known, credible partners for key infrastructure and connectivity platform enablement.

Picking well-known M2M partners that offer unique M2M solutions and integrated offerings is critical for a

well-run M2M business. A partner’s technology offering is important, but equally important are those

partners that bring enterprise customers to an M2M business. We highly recommend finding partners that

have experience with enterprise customers in key M2M sectors, including energy/utility, automotive,

healthcare and industrial/heavy manufacturing. Partners should have extensive R&D capabilities and the

ability to support an MNO’s business needs at an international level. Those partners that have a deep

understanding of core networks can provide ancillary support and ensure optimal integrations between

established and new infrastructure. It is also important to choose partners that can support multiple MNOs

and facilitate the creation of worldwide M2M footprints. Enterprises seek simplicity in the provisioning and

management of devices, so having multiple MNOs using the same platforms adds value to an enterprise’s

M2M deployment.

Protect businesses and infrastructure with appropriately designed certification processes and

support. M2M certification processes are critical to protect business and network assets. M2M certification

processes also need to be specifically tailored to the unique needs of M2M suppliers rather than traditional

smartphone suppliers. Partners can offer outsourced certification support for M2M businesses. Certification



also helps device manufacturers to reduce support and usage costs and time to market, thereby lowering the

total cost of an M2M solution for enterprises.

Follow a solutions-based sales approach that addresses the changing nature of M2M business models.

M2M pricing must be uniquely created to support enterprises’ changing business models. MNOs must

consider various M2M pricing strategies, including subscription sales, pay-per-use and prepaid approaches

in B2B, B2C and B2B2C models. These strategies help link an MNO’s success to the business models of

enterprise customers.

Forecast

The market for M2M services is one of the fastest-growing areas within the communications sector. The

worldwide market for mobile M2M device connections will increase from 102 million devices in 2012 to

2.0 billion connections in 2021 (see Figure 2). The fastest-growing sectors will be utilities, healthcare, security

and automotive/transport, growing at respective compound annual growth rates of 51%, 44%, 36% and 27%.

The largest sectors by number of connections by 2021 will be utilities, with 1.3 billion, followed by automotive

and transport with 451 million, and security with 279 million.

Figure 2: Mobile M2M device connections and developed markets’ share of connections, worldwide, 2011–2021

[Source: Analysys Mason, 2013]

Total revenue from worldwide M2M connectivity is forecast to increase from USD6.5 billion in 2012 to

USD51 billion by 2021, at a CAGR of 26% over the forecast period. Mobile operators’ share of worldwide

revenue will increase from 74% to 84% during the same period, because most new M2M deployments will be

over mobile networks. Mobile networks generally provide enterprises with a more affordable connectivity

solution for most of the device connections in our forecasts. MNOs and their partners are also creating solutions

to increase the speed of deployments and management of solutions, thereby making mobile networks more

desirable relative to other M2M connectivity options.

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We expect that MNOs in developed countries will continue to focus their efforts on building scalable, multi-

regional M2M business during the next 2–3 years, in order to capture the anticipated revenue growth. We expect

these operators to focus on the M2M deployments with the highest ARPU and most readily understood business

models, namely M2M solutions in the automotive and transport, utility and security sectors (see Figure 3).

Figure 3: M2M connectivity revenue by industry sector and total connectivity ARPU, worldwide, 2011–2021

[Source: Analysys Mason, 2013]

The financial services, government, and automotive and transport sectors will have the highest ARPU rates

throughout the forecast period. The financial services sector generally demands high levels of security and SLAs

associated with its connectivity. This allows operators to charge a premium compared with lower-quality

connections. Government-sector applications involve video-based solutions requiring higher ARPU-generating

fixed-line connectivity. Automotive sector solutions, particularly fleet management, continue to provide healthy

ARPU, because enterprises find strong returns on investment in reducing fuel consumption and labour-related

expenses associated with fleet operations.

Key challenges for MNOs offering M2M services

This section examines three key challenges for MNOs as they consider offering M2M services (see Figure 4).

We present some of the overall strategic insights and recommendations for MNOs, which highlight some of the

pressing concerns and opportunities faced by MNOs in developed and emerging regions. These insights also

include key recommendations for building successful MNO M2M businesses. We then discuss some common

current and future M2M requirements of enterprises. These requirements drive strategic and tactical plans for

MNOs and the partners supporting them. Finally, we look at the value of M2M partnerships with particular

emphasis on the platform layer. M2M partnerships that provide both technology and sales channel enablement

are poised for optimal success in the market.

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Figure 4: Key challenges for MNOs offering M2M services [Source: Analysys Mason, 2013]

Strategic insights and recommendations for MNOs

Opportunity prioritisation – key industry sectors

MNOs are focusing on a small number of key industry sectors in order to attain the highest levels of M2M

growth. These sectors, according to MNOs, will yield the highest cash flow during the next few years.

According to data collected from seven large MNOs and recently published in Analysys Mason’s M2M

scorecard for communications service providers: 2012,1 MNOs are focused most keenly on the automotive,

energy and security/surveillance sectors. Figure 5 presents the average rankings for industry sectors that MNOs

gave in the M2M scorecard.

Figure 5: Top M2M industry sectors for MNOs [Source: Analysys Mason, 2013]

Industry sector Ranking of importance

(1 = most important; 10 = least important)

Automotive 1.1

Energy 3.7

Security/surveillance 4.9

Consumer electronics 5.3

Asset tracking 5.7

Industrial/manufacturing 6.1

Retail 6.4

Healthcare 6.9

Financial services 8.2

Smart cities 8.5

Given the myriad opportunities in the evolving M2M ecosystem, MNOs must identify their target industry

sectors. Success is likely to depend on operators’ ability to target a small number of sectors with the greatest

potential. However, niche opportunities are also available for all MNOs, either because of unique geographical

coverage or established enterprise relationships. Niche opportunities may arise in the heavy equipment or

construction sectors, in mining and agricultural sectors, or in the government or public safety sectors.

1 Available at www.analysysmason.com/Research/Content/Reports/M2M-CSPs-scorecard-Jan2013-RDME0/.

• Opportunity prioritisation

• Dedicated business unit considerations

• Network security and device certifications

• Solutions-based business model

Strategic insights and recommendations

• Communications-centric offerings

• Service level agreements (SLAs)

• Value-added services

• Simplicity in geographic roll-out

Enterprise requirements

• Economies of scale

• Time-to-market considerations

• TCO comparisons for platform deployment models

Partnerships and platform



Dedicated business units

MNOs need dedicated M2M business units. Large and small MNOs benefit from centralised M2M teams that

are responsible for M2M product development, platform support and marketing. Sales organisations can be both

centralised and local. According to our M2M scorecard, small MNOs need organisations of around 50

employees, whereas larger CSPs need 150 or more employees for an M2M business unit. MNOs in the process

of forming M2M business units should create a structure similar to the one put in place by TeliaSonera.

“TeliaSonera Global M2M Services is a dedicated unit within the TeliaSonera group with a full global M2M

business responsibility.”

– Hans Dahlberg, TeliaSonera (Head of Global M2M Services)

The TeliaSonera Global M2M Services unit is set up with the following functions, reporting to a global head of

TeliaSonera M2M.

Product management: Global ownership of the M2M product portfolio and offerings.

Special sales: Driving M2M sales activities across all regions. Supports local sales teams with local

dedicated special sales resources and drives individual M2M opportunities.

Partner and marketing: Responsible for partner programmes and ecosystem creation, providing the full

value-chain of joint customer solutions. The programme also heads up global M2M marketing and public

relations.

Network security and device certifications

Maintaining mobile network security is important for any MNO and an M2M business needs to consider the

impact it makes on overall network security. One of the key considerations for maintaining network security is

creating acceptable device certification processes for an M2M business.

Several years ago, the standard mobile device certification processes used by MNOs were onerous when applied

to the M2M world. MNOs generally expected their M2M suppliers to follow the same device certification

processes as suppliers of smartphones and feature phones, which led to extremely long and expensive M2M

device certification processes. However, MNOs now have device certification processes tailored to the needs of

the M2M ecosystem.

As MNOs increase the scale of their businesses, we believe they should revisit their M2M device certification

processes and in some cases consider outsourcing these processes to third parties like Ericsson. Communications

equipment vendors can supply device certification programs that scale with MNOs’ M2M businesses. These

programs, when coupled with other pieces of an M2M portfolio, can allow an MNO to focus on the pieces of the

M2M supply chain of greatest value.

“Ericsson’s global market leadership makes it a true one-stop-shop for device and application verification”

– Glenn Lurie, AT&T (President of Emerging Devices, Resale and Partnership)



Solutions-based business model

Discussions with enterprises about pricing should be solution-based rather than focused on a price per megabyte

per device or connection. MNOs must price M2M solutions to highlight the value of the connectivity plus

ancillary services. Tariffs that mimic consumer mobile broadband service are not necessarily the best option for

enterprises or MNOs. Enterprises require unique M2M pricing to match the alternative M2M business models.

These business models – B2B, B2B2C and B2C – require MNOs to consider subscription-based pricing, pay-

per-use and prepaid M2M rate plans.

Telenor Connexion has a useful approach to pricing M2M connectivity solutions. Telenor Connexion uses a

solution sales approach, not a simple SIM sales approach that is used in the consumer mobile broadband sector.

It prices its products and services according to the enterprise’s requirements in terms of:

level of service

types of information being collected off the network

desire for its managed services offerings

need for integration support

expectations around enterprise-grade security.

“Our solution-based selling approach is essential in understanding and delivering on our customers’ key

requirements. Our solutions and processes are integrated into our customers’ solutions so a traditional SIM-

based sales approach is simply not applicable. We seek to empower our customers’ businesses and make them

more competitive.”

– Robert Brunbäck, Telenor Connexion (Chief Marketing Officer)

Telenor Connexion does not simply price each M2M SIM at a flat or capped rate. Those consumer-style

business models minimise the overall value of the enterprise connectivity solution, deliver a sub-optimal

solution to the enterprise customer and therefore can result in negative end-user experiences associated with the

complete M2M solution.

Enterprise M2M requirements

Enterprise M2M buyers have varying requirements for solutions and ongoing support. However, enterprise

buyers have some common expectations when they engage with MNOs.

Communications-centric offerings

The core of an MNO’s offering should be focused on communications and the value communications bring to

an M2M solution. When large enterprises purchase any technology solution, they generally seek best-of-breed

suppliers. Enterprises purchase M2M solutions from MNOs because MNOs are specialists in communication

services. The entirety of an MNO’s M2M solution should hinge on the communications-related value of the

offering. Hitachi Construction Machinery’s General Manager, IT Promotion Office Corporate Management

Division, Fujio Matsuda states this concisely when speaking of his relationship with Telenor Connexion: “Our

relationship with Telenor Connexion allows us to take advantage of their global scale and footprint, including

their strong track record of M2M managed connectivity solutions and mission-critical experience managing

large-scale roll-outs.”

Some MNOs are focusing on the overall M2M customer experience. The customer experience extends from the

early-stage awareness of an MNO’s offering, through the sales process and implementation. MNOs that excel in



providing a holistic customer experience can reduce churn, increase customer share-of-wallet and increase the

probability of solution upselling.

According to Dr Arkav Juliandri, General Manager of Cloud and Machine-to-Machine at XL Axiata, “Rather

than being trapped in the M2M price wars, XL believes that the industry must provide a better customer

experience to its M2M enterprise customers. Especially for a new business like M2M, better customer

experience is mandatory to support our expected exponential growth.” As illustrated by Hitachi Construction

Machinery, Telenor Connexion and XL Axiata, M2M offerings from MNOs must not be perceived as a low-

quality, easily substitutable connectivity solution. Differentiation between MNOs often relates to the actual or

perceived differences in the quality of the communications network and ancillary services, such as customer

support, accompanying the underlying communications.

Service-level agreements (SLAs)

Enterprises expect high-quality M2M offerings from MNOs. Therefore, MNOs must position their solutions

similarly to other enterprise-grade communications solutions and offer a relevant and supportable set of service-

level agreements (SLAs) that reduce business and technology risks for the enterprise buyers. These SLAs allow

MNOs to differentiate their offerings from other MNOs and convince enterprises of the quality of the solution.

According to Analysys Mason’s M2M scorecard, the best MNOs are able to provide SLAs associated with their

network, platform, SIM-related logistics, customer support, trouble escalation, certification processes, and

various other ancillary services that are meaningful for M2M customers. Not all enterprise buyers require SLAs,

but MNOs that can offer solution assurances are more likely to convince enterprise buyers of the uniqueness and

high quality of their offerings, compared with MNOs unable to offer SLA assurances.

Offering SLAs is only one way that MNOs can convince enterprise buyers of the quality and reliability of their

M2M services. Many MNOs dedicate infrastructure for M2M services; these dedicated infrastructure

components assure a reliable and uniquely tailored M2M solution for enterprise buyers. The most commonly

dedicated infrastructure includes the device connectivity management platform (often incorporating relevant

billing and rating tools), HLR and GGSN.

According to TeliaSonera, “There are many different elements that need to be dedicated to M2M. At the

network layer, we believe the core network nodes should be dedicated, including the GGSN, HLR and SMSC.

At the platform layer we have dedicated M2M rating, billing and a device connectivity platform. In addition, we

believe it is important to have a dedicated web interface for enterprise customers’ self-service, and specific,

dedicated APIs for various integrations.”

Value-added services

Many enterprise buyers are looking for an MNO to simplify the communications portion of an M2M purchase.

Many enterprises are willing to purchase additional value-added services from an MNO, particularly if those

value-added services are related to the communications portion of an M2M solution. Depending on an MNO’s

expertise and familiarity, these value-added services could include: SIM logistics support; billing and other

operational systems support; portal design, development and testing; helpdesk support; packages of network

consultancy services; and fixed-line, enterprise communications for secure, dedicated access.

Many MNOs and some MVNOs bundle these types of value-added services into their offerings. An example

would again be Telenor Connexion’s engagement with HCM is an example. Telenor Connexion offers HCM

four M2M solution components, including M2M connectivity, an operational services platform, a series of

consultancy-related activities to drive continuous process improvement and a quality-of-experience package

comprising rich SLAs and a service/helpdesk. By offering a solution with connectivity plus value-added



services, Telenor Connexion creates a higher level of satisfaction, revenue and profit for its customer while

differentiating its M2M connectivity offering from those of other operators (see Figure 6).

Figure 6: Aspects of the Telenor Connexion M2M solution for Hitachi Construction Machinery [Source: Analysys

Mason, 2013]

Data aggregation and analysis and the actual enterprise applications are important aspects of an M2M solution

for an enterprise buyer, but we believe that this layer of the solution is usually better provided by service

providers other than MNOs. Independent software vendors, OSS vendors, systems integrators and specialty

application consultancies have the resources, experience and cost structure to offer enterprise application, data

aggregation and analysis solutions.

Some MNOs have more experience in offering applications than others, but we recommend that MNOs

carefully consider the financial and resource commitment required to successfully offer M2M applications and

data aggregation and analysis. Communications operators have dabbled in offering applications in the past and

some are partnering with, or in some cases, acquiring services companies, that create, test, implement and

manage M2M applications. However, an MNO must make trade-offs in choosing its M2M focus areas. MNOs

can possibly offer applications or data aggregation and analysis for particular M2M solutions, but in these cases

the MNO must carefully weigh the overall value of the solution to the business and the opportunity costs

involved.

Geographic requirements – M2M alliances

Enterprise buyers who are procuring multinational or worldwide M2M services expect their MNO partners to

provide a solution matching their geographic needs. These requirements sometimes necessitate a virtually

worldwide footprint, at other times the geographic requirement is limited to a single country.

These geographic requirements can prove difficult for many MNOs. Multinational roaming agreements are

common in the mobile ecosystem, but the needs of enterprise buyers often extend beyond simple roaming

requirements that impose stringent business model limitations. Enterprise buyers require common portals for

provisioning, billing, trouble ticketing and other pieces of systems management.

Operational services platform

Continuous process

improvement

Quality of experience

Carrier M2M connectivity

• Single provider

• 110-country deployment

• Complex billing and invoice

splitting

• Custom reporting

requirements

• Customised pricing plans

• Joint technical workshops

• Technology and operations

roadmap development

• Future service design

• Network availability SLAs

• Service object SLAs

• Logistics enablement SLAs

• Service desk availability



In order to start meeting these enterprise needs, MNOs have been forming operator alliances generally built

around underlying MNO device connectivity management platforms. We believe these alliances provide more

clarity around inter-carrier agreements for M2M roaming and eventually common platforms used by the carriers

to facilitate simpler, cost-effective provisioning and management of SIMs. This would allow enterprises to have

a common interface between enterprise resource planning applications or inventory management systems and

multiple MNOs’ device connectivity management platforms.

According to Orange Business Services, “Orange strongly believes that the Global M2M Association (GMA)

together with Deutsche Telekom and TeliaSonera is a great performance lever for M2M solutions

implementation and management. Through this partnership, Orange commits to delivering best-in-class and

seamless M2M services to customers across an extended European footprint, while sharing beneficial

knowledge and processes with the GMA members and partners. Today in Europe, the GMA covers 28 countries

representing 450 million people.”

We believe these MNO alliances will also address some of the more complex, inter-operator systems

management challenges that enterprises face. The goal of these alliances is to increase QoS for M2M solutions

both on-net and off-net. Being able to offer multi-country, multi-regional or worldwide SLAs to customers

depends partially on an MNO’s ability to provide consistent QoS when an M2M device is off-net. This requires

inter-operator co-ordination of systems; a key mandate for these MNO alliances. On the technology side,

platform vendors and SIM vendors have started to integrate deeply in order to support new requirements

imposed by these MNO partnerships.

There are several M2M alliances.

Global M2M Alliance –formed by Deutsche Telekom, Orange and TeliaSonera. In 2012, these operators

agreed to work on roaming-related issues, systems management and other aspects of providing an

enterprise-grade M2M solution.

Multi-operator M2M Alliance –formed by Etisalat, KPN, NTT DOCOMO, Rogers Communications,

SingTel, Telefónica, Telstra and VimpelCom. These operators all use some version of the Jasper Wireless

M2M device connectivity platform.

Vodafone Alliance – formed by Vodafone and several other operators, including Belgacom, which all use

the Vodafone M2M device connection management platform.

AT&T – AT&T’s ambition is to play a worldwide role in the M2M ecosystem. AT&T uses its AT&T

Control Center Powered by Jasper Wireless or its custom-built Enterprise on Demand platform for device

connectivity management.

Partnerships and the value of the M2M platform

Partnerships between MNOs and technology vendors are critically important in the M2M ecosystem. No single

MNO is able to offer an enterprise a complete M2M solution, including chipset manufacturing, module

manufacturing, equipment design, worldwide connectivity, platform enablement, portal development,

application development, application management and systems integration. Partnerships are required to make

the enterprise purchasing, implementation and ongoing management process feasible.

One of the most important partnerships is that between the MNO and the provider of its M2M device

connectivity platform. The device connectivity platform provides an MNO with three key benefits.



Faster time-to-market – Implementing a vendor’s device connectivity management solution allows an

MNO to launch M2M solutions more quickly than if the MNO had to build its own solution. Solutions can

be implemented and launched within weeks, whereas it could take an MNO more than a year to custom-

build its own device connectivity management solution.

Continuous platform improvement – Implementing a vendor’s device connectivity management solution

benefits an MNO as the vendor makes ongoing product improvements to the platform. Vendors provide

these platform improvements – funded by substantial R&D – in subsequent product releases and allow the

MNO to offer new services to its customers. The best vendors also allow their products to be customised for

specific MNO needs, affording MNOs added flexibility.

Economies of scale – When an MNO launches its M2M business it needs a way to provision affordably

and manage non-traditional devices in a financially sustainable way. The ARPU associated with M2M can

be 10% or less than that of traditional smartphone and feature phone ARPU. Therefore, the costs of

developing and running the operational support systems must match the expected revenue of the M2M

business. Providers of device connectivity management platforms offer their solutions on a pay-as-you-go

model. This reduces risks for the MNOs that adopt the solution and provides an affordable way to scale the

system. If an MNO were to custom-build its own solution, it could incur large software and systems

development costs, plus sizeable fixed costs of maintaining the system, irrespective of the number of M2M

device connections.

The device connectivity platform market is led by two major players – Ericsson and Jasper Wireless – which are

capable of delivering these three key benefits. Each has a strong MNO user base and developed solution

portfolio. They have also formed strong synergistic partnerships with SIM vendors Gemalto and Giesecke &

Devrient (G&D), respectively, to manage dynamic SIM provisioning. Given the market positions of these

device connectivity platform vendors, we do not anticipate others successfully entering this market in a

substantial way.

Analysys Mason recently completed an in-depth study looking at the operating cash flow impact of MNOs’

choice of one of the three implementation approaches for M2M device connectivity platforms.

No M2M platform: The MNO elects to have no specialised device connectivity platform and chooses to

use its legacy management platform, which is most commonly used for management of smartphone, mobile

broadband and embedded laptop SIMs. The primary costs associated with this approach would be the

incremental costs of using the legacy management platform.

In-house platform: The MNO elects to build, test and implement its own device connectivity platform

using either its own IT staff or systems integrator staff. The primary costs associated with this approach

would be the incremental development costs of a new device connectivity platform.

Vendor-supplied platform: The MNO elects to use a vendor-supplied M2M platform like the Ericsson

Device Connection Platform, a cloud-based device connectivity platform. The primary costs associated with

this approach would be pay-as-you-go usage fees to the vendor, based on the revenue generated from M2M

sales to an MNO’s customers.

“Over the five-year model horizon, the vendor-supplied M2M device connectivity management platform can

create a net present value that is over 100% more than either of the other two M2M management system

deployment options.”

– Analysys Mason, analysis of NPV of device connection platform.



At a relatively low volume of 1 million device connections, the vendor-supplied M2M connectivity management

platform allows an MNO to create 14% more net present value (NPV) than an in-house developed solution, and

71% more NPV than using legacy platform infrastructure (that is, no unique M2M solution) in a five-year

period. The higher NPV from the vendor-supplied solution derives both from costs savings from deployment

and integration, and revenue generation from faster time-to-market and enhanced features (see Figure 7).

Figure 7: Five-year net present value of three M2M device connectivity management platforms with 1 million

device connections [Source: Analysys Mason, 2013]

At 3 million device connections, the vendor-supplied M2M platform also provides a higher NPV than both

alternative deployment options. At 3 million connections, the vendor-supplied M2M platform yields a NPV that

is 137% higher than the option where an MNO has no specialised M2M device connectivity platform. The NPV

from the vendor-supplied M2M platform is also 13% higher than the next-best alternative, the in-house built

M2M solution (see Figure 8).

However, none of these NPV calculations takes account of the significant risks of building an in-house solution.

These risks include potential development and integration delays; misspecification of system requirements; and

changes in M2M market dynamics during the implementation process. These risks, if factored into the model,

would increase the NPV of the vendor-supplied M2M platform, making it an even more desirable approach than

the two other deployment options.

The vendor-supplied M2M connectivity management platform solution with its cloud-based, pay-as-you-go

pricing model, allows an MNO to share the risk of an M2M implementation with its vendor partner, by reducing

total cashflow outlays significantly during the five-year model horizon. During the five-year model horizon, the

vendor-supplied solution could create a NPV that is more than 100% higher than either of the other device

connectivity system deployment options.

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Figure 8: Five-year net present value of three M2M device connectivity management platforms with 3 million

device connections [Source: Analysys Mason, 2013]

Conclusion

MNOs that seize the opportunity to build vibrant, communications-centric M2M businesses have a chance to

capture their fair share of a USD51 billion connectivity revenue business by 2021, plus billions more dollars’

worth from value-added services including managed services, network systems integration and consultancy

services. Offering M2M services to industry sectors including energy/utilities, automotive/transport, healthcare,

public safety, security/surveillance, consumer electronics and others gives MNOs the ability to supplement their

established enterprise lines of businesses with a series of new offerings.

Enterprise buyers require high-quality, reliable M2M solutions from MNOs. The best MNOs are establishing

dedicated business units and infrastructure to take advantage of the opportunities. They are carefully weighing

the various M2M opportunities presented and selecting partners that can provide both world-class technology

and channel-to-market support. These MNOs will be rewarded with national and international M2M business

opportunities during the next decade and beyond.

0

50

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200

250

300

350

400

450

No platform In-house platform Vendor-supplied platform

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About Analysys Mason | 14

About Analysys Mason

Knowing what’s going on is one thing. Understanding how to take advantage of events is quite

another. Our ability to understand the complex workings of telecoms, media and technology (TMT)

industries and draw practical conclusions, based on the specialist knowledge of our people, is what

sets Analysys Mason apart. We deliver our key services via two channels: consulting and research.

Consulting

Our focus is exclusively on TMT.

We support multi-billion dollar

investments, advise clients on

regulatory matters, provide

spectrum valuation and auction

support, and advise on operational

performance, business planning and

strategy.

We have developed rigorous

methodologies that deliver tangible

results for clients around the world.

For more information, please visit

www.analysysmason.com/consulting.

Research

We analyse, track and forecast the different services accessed by consumers and enterprises, as

well as the software, infrastructure and technology delivering those services.

Research clients benefit from regular and timely intelligence in addition to direct access to our

team of expert analysts.

Our dedicated Custom Research team undertakes specialised and bespoke projects for clients.

For more information, please visit www.analysysmason.com/research.2

2

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Figures and projections contained in this report are based on publicly available information only and are produced by the Research Division of Analysys Mason

Limited independently of any client-specific work within Analysys Mason Limited. The opinions expressed are those of the stated authors only.

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Analysys Mason M2M Insights MNOs Mar2013 RDME0

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