M2M World Congress, held on 28–29 April 2015 in London, attracted many platform and network vendors, as well as mobile network operators (MNOs), which outlined their successes and innovation in the M2M and Internet of Things (IoT) markets. Partnerships continue to be a core focus for MNOs, and although the value that these partnerships bring to the IoT is not in dispute, there was significant discussion on the role of the operator within this partnership and how central its position should be. This comment discusses some of the highlights from the conference.
Partnerships provide a key value addition to IoT connectivity services
Presentations were made by major operators including TeliaSonera and Vodafone. TeliaSonera demonstrated its 'M2M in a Box' cloud-based solution, which lowers the complexity and barriers to entry for enterprises deploying M2M. Vodafone presented its recently rebranded telematics service – Vodafone Automotive (formerly called Cobra). Many operators shared their success stories, as well as some interesting data points. For example, Deutsche Telekom quoted a GfK survey in which 72% of respondents claimed never to have heard of the smart home concept, although 98% expressed an interest in it after it was explained.
However, the principal theme that emerged from the majority of operators' presentations was the importance of solution partnerships. In particular, the operators emphasised the critical role that these partnerships play in providing a service beyond just connectivity. For example, operators still have the option to provide connectivity services to their end users, but these services can potentially be packaged with other 'smart' services, such as device management and platform services. This represents a mainly horizontal approach; it deploys existing in-house expertise and platforms. Partnerships also enable operators to address vertical markets by adding other components from the value chain. For example, operators can partner with hardware providers for devices to provide end to end solutions. Operators outlined the following go-to-market strategies (both horizontal and vertical), and discussed the role of partnerships.
- Etisalat has developed M2M services with its partners in developed markets (such as the UAE) and emerging markets (such as Nigeria). These services have been adapted to local market requirements and comply with local regulation. Selected services have been developed as end-to-end services (including fleet management), and therefore demonstrate a vertical approach to M2M service provision.
- Deutsche Telekom has developed the QIVICON platform, which is dependent on partnerships with hardware providers to bring connected home applications to the consumer. The company has adopted a horizontal approach to partnerships for this service by exploiting its role as a platform provider to underpin various hardware devices (including thermostats, heating and lighting controls), as well as simplifying the connectivity and ensuring an optimised user experience.
- Sprint has developed Command Center 2.0 – a device management platform that provides enterprises with the tools to manage their M2M devices across markets. Its go-to-market strategy for M2M consists of a pure connectivity offering, as well as packaged and customised solutions. This positions the operator at the centre of IoT partnerships in order to build the packaged and custom solutions.
Rami Avidan, Director M2M for Tele2, introduced some controversy in his discussion about 'connectivity-only' compared with 'end-to-end service. He explained that while many operators aspire to move up the value chain to provide vertical services, Tele2 is positioning itself in the M2M value chain as a connectivity provider – albeit an intelligent one – providing, platform support and systems integration in some cases. Avidan considers the vertical approach to be "a short-term strategy to generate greater revenue", but significantly, he believes that this approach cannibalises the partner's revenue. This generated considerable debate in the ensuing panel session.
Mo Nassar, Sprint's Senior Director for M2M Product, Platforms and Marketing, noted that the company provides connectivity services for some solutions, but chooses to partner in other situations – for example, it has partnered with Geotab to provide fleet management solutions. Geotab is well known for going to the market using resellers, and the operators are another reseller partner. Partnering with operators forms part of Geotab's strategy and cannibalisation is not an issue.
Deutsche Telekom's Holger Knoepke, Vice President Connected Home, reiterated that connectivity is a commodity and therefore, operators need to differentiate on quality in both horizontal and vertical strategies.
The panel recognised that operators' strategies were also dependent on their position in the market. For example, Avidan defended Tele2's role as a provider of intelligent bit pipe in the context of its home market, as well as its position as the "2 in M2M". He also provided some interesting case studies of Tele2's M2M services, such as partnering with ESAB to develop a service model for welding machines.
Horizontal and vertical strategies are not mutually exclusive
Analysys Mason has analysed both the horizontal and vertical strategies that operators adopt to provide M2M services and we believe that both approaches have their merits. The vertical approach has attracted more attention – possibly because of the high-profile partnerships in certain sectors, such as fleet management. This sector, in particular, presents more of a win-win situation for both partners. The fleet management market is fragmented because of the significant number of small providers – some of which will view operators as an important channel to market. In other sectors, the case for partnerships and the provision of end-to-end services is less clear and therefore the horizontal approach may prove to be a stronger strategy for operators. Connectivity services remain a revenue opportunity, but operators should aim to utilise their other assets to add value. These include customer support, retail channels, billing and other platforms. We have highlighted these strategies in our recent article Operators' strengths in M2M and IoT may lie beyond ownership of network or spectrum assets. No single strategy emerges as the best method for addressing the growing IoT opportunity, and we recommend that operators and their potential partners adopt a flexible approach to their go-to-market strategies.