- Opportunities abound in the complex M2M communications market
- Communication service providers’ infrastructure assets help address M2M market challenges
- Communication service providers can deploy an M2M cloud service platform to offer a number of valuable services to M2M application providers
Capitalizing on billions of connections
Transforming machine-to-machine (M2M) communications from a wholesale bit business to a value-added services business is driving application, service and solution innovation.
M2M communications infers that things — especially everyday objects — are readable, recognizable, locatable, addressable and controllable through the Internet. M2M communications can use a variety of means, including Radio Frequency Identification (RFID), wireless LAN (WLAN) and WAN. And they can come from different connected devices, including sensors, identification tags, handsets, machines and meters.
Traditionally, communication service providers (CSPs) have not been particularly active in M2M communications. Their involvement has been limited to selling wholesale bandwidth to value-added resellers and mobile virtual network operators (MVNOs) who specialize in M2M communications.
Now, with the forecasted growth in connected devices predicted to exceed 15 billion by 20151↩ CSPs are looking to capitalize on the revenue potential associated with that growth. They are:
- Investing in new business groups, centers of excellence, joint ventures and developer programs
- Expanding existing business-to-business (B2B) service groups
- Creating in-house M2M service platforms, including partial cloud implementation
- Offering enterprise customers with data center solutions for cloud-based M2M applications
Expertise in device management, billing, provisioning, data storage, security and other related services will enable CSPs to expand their relevance and address M2M needs. Providing additional services will allow CSPs to attract more enterprise M2M customers with long-term contracts. It will also help enhance revenue opportunities through increased loyalty and reduced churn.
Making M2M communications a reality
Making machine-to-machine communications a reality will mean addressing a number of market demands to deliver:
- Application-specific quality of service
- High reliability
- Simplified application development and operations
- Device management
Application-specific quality of service (QoS)
Application-specific QoS will be necessary for market uptake. The Alcatel-Lucent High Leverage Network™ (HLN) can provide the basic transport for all M2M applications. It can also ensure that each application is delivered with the appropriate QoS. For example, business-critical video surveillance or healthcare monitoring may require higher priority than other applications. Network elements within the HLN can also prioritize packet forwarding to ensure QoS for specific data.
High reliability is another fundamental area that will need to be addressed. Deploying geo-redundant data centers and other infrastructure can help ensure high reliability. Network monitoring tools can also be deployed to measure key performance indicators (KPIs). Monitoring KPIs can provide insights about performance before issues arise, and it can help achieve service level agreements (SLAs).
Simplified development and operations
Exposing select network enablers can simplify application development and operations. Securely exposing these capabilities to a community of developers through easy-to-use Application Programming Interfaces (APIs) will appeal to both large enterprises and to small M2M application providers.
Providing this functionality creates the core of the M2M service delivery and application enablement components. It also helps protect the network because the application enablement platform can enforce policies for network usage. Specifically, an application-aware proxy or gateway between the applications and the network can be deployed. This allows for traffic management, more efficient use of the network and improved scalability.
The API exposure framework – including features such as on-boarding and API usage monitoring, API service bundles, service composition and API normalization - can be cost-effectively implemented in a cloud environment.
Device management services for enterprise M2M devices can also be deployed in the cloud. Device management includes configuration, monitoring and diagnostics as well as software and firmware upgrades.
Network diagnostics tools can provide M2M customers with visibility into the operational behavior of the devices. Application providers can use CSP infrastructure through APIs to manage the device. Contact centers can also help to serve the customers’ customers.
Communication service providers can choose to implement device management capabilities either through a cloud environment, or via a hosted solution from vendors such as Alcatel-Lucent.
Cloud-based M2M implementation can also include the M2M application provider portal through which application providers can order subscriber identification modules (SIM), provision and activate new devices, manage SLAs, and obtain general reporting information such as network usage by devices.
The communication service provider opportunity
To deliver M2M communications CSPs will need to participate in a new value chain, adopt new business models and understand the network requirements.
By leveraging their network, cloud data centers, applications enablement, and experience with customers, CSPs can address the challenges and deliver innovative M2M solutions.
A complex and fragmented value chain
The M2M value chain is complex and fragmented. No single company can provide all components of a complete solution. It involves many players, each specializing in various niche applications, devices, modules, vertical markets and services. The value chain includes product providers, system providers, content providers and solution integrators. Sorting out who plays what role will require some work. Developing partnerships can help deliver expertise, improve the CSP’s role in the value chain and increase their competitive differentiation.
Introducing standards can also help reduce complexity and address interoperability issues. The good news is that standards bodies, such as the European Telecommunications Standards Institute (ETSI), are working with Alcatel-Lucent and others to help resolve these issues.
Business model considerations
Finding the right business models is important. The M2M market is comprised of multiple vertical markets, such as transportation, utilities, healthcare, public safety and retail. To become a part of these business models CSPs will need to consider:
- Should they create separate organizations and network infrastructure silos for each vertical market?
- Can they create meaningful horizontal platforms that satisfy multiple vertical markets?
- To what extent should they try to provide specific vertical market services to consumers themselves versus leaving that to third-party providers?
Given the market complexity and CSPs’ unique needs, there is no simple answer or one-size-fits-all approach. Understanding how to address different vertical markets, each with a unique ecosystem and specific requirements, will be key for CSPs.
As M2M takes off and the network is used by many third-party application providers, CSPs will face network challenges such as:
- Availability: Many M2M applications will require connectivity in locations not considered in current network designs.
- Reliability: The network will need to be as reliable as any other critical equipment.
- Scalability: Traffic management will be needed to ensure that communications requirements and SLAs are met.
- Flexibility: With the varied needs of M2M applications, enterprises will demand flexible pricing schemes that match their network utilization needs.
- Security: Securing the network layer so individuals and enterprises don’t have to act as their own security administrators.
- Response time: Service providers need the ability to prioritize traffic to allow real-time responses when necessary.
Application provider considerations
M2M application providers are faced with a number of considerations in order to successfully deploy an M2M service:
- Device certification: Applications and devices must be certified before being deployed into a network to ensure that it is not disrupted.
- Device distribution, installation, provisioning and activation: Distributing devices and installing them in the appropriate physical locations is a logistical challenge.
- Device management: Technology must be used to remotely and automatically configure, diagnose, deactivate or suspend and upgrade firmware in devices.
- Communication management: The application software collects and processes all of the data so it must be able to securely communicate and scale to support a large number of devices.
- Billing and customer care: M2M application providers must deploy billing and customer care solutions for their customers. These capabilities may be outside of their current expertise.
Winning in verticals
Machine-to-machine communications is a growing market that CSPs can exploit. This growth is propelled by:
- Near-universal wireless network availability and adoption
- Reduced communications costs
- IP networks and cloud-based applications that simplify solution development
- Industry regulations that demand automated remote monitoring
Communication service providers are in the optimal position to take advantage of the M2M opportunity by leveraging their network, cloud assets and expertise. By deploying platforms that support vertical market solutions created by third-party application providers and their own teams, service providers can improve their position in the M2M value chain. A cloud-based M2M strategy can also be an agile and efficient solution for CSPs seeking to pursue a more active role in M2M communications.
Additional Contributors: Jane Anderson and Louis Witters
To contact the authors or request additional information, please send email to email@example.com.
-  IDC White Paper sponsored by Intel, Rise of the Embedded Internet, January 2009