M2M Growth: Reality Check on the Rise of the Machine

K. Weldon

K. Weldon

Summary Bullets:

  • Enterprises deploying M2M solutions do not necessarily look to cellular; WiFi, Bluetooth, and Zigbee may be more cost-effective inside buildings, and wireline connections still make sense for many fixed devices.
  • M2M continues to grow, but the ecosystem has a lot of work to do to reach the huge numbers of predicted devices.

The M2M market is growing; there seems to be no doubt about that.  In fact, in comparison with other technology areas, the growth rates seem pretty healthy, with CAGRs of 25% typically reported by carriers and module manufacturers.  However, while M2M is often tied to the cellular industry, the reality is that only about 30% of the connections that make up today’s worldwide installed base of M2M devices are cellular.  Cellular connection numbers are still small, with an installed base of about 80 million mobile connections today.  In addition, M2M bandwidth requirements remain low, and the vast majority of cellular M2M applications today are comfortably served by 2G networks.

The average revenue per line is much lower for M2M than it is for smartphones and mobile broadband connections, especially for the application that is driving the bulk of connections: utility meter reading.  So, why are the operators so bullish on M2M?  We think there are a number of reasons for the continued enthusiasm: ARPUs may be low, but contracts are long; churn is low and overhead is relatively low, yielding solid profitability potential; and M2M is all about increased productivity and is driving new services (for both the enterprise and the suppliers of technology and connectivity), which in turn drives solid ROIs at a time when investments in other areas of technology are being deferred or cut back.

However, the industry has to do a better job to reach its predicted 20-50 billion devices by 2020.  There is still little standardization in M2M; components cannot talk to each other without extra help from middleware and application platforms.  Customization and integration work is still necessary for the majority of deployments, driving up the costs for the enterprise.  The market is still very fragmented, with too many intermediaries and long certification times for new devices.  Certain verticals such as healthcare have been limited by regional regulatory environments.  In the U.S., the FDA and insurance reimbursement schemes may get in the way of seemingly revolutionary home healthcare devices.

However, M2M allows the imagination free rein: if 50 billion connections are in our future, this implies that every vehicle on the road, every cargo load in transit, every remote sensor and industrial machine, every tank, and possibly every pet and appliance in our home will ultimately be on a network, which will allow for remote programmability and monitoring capabilities that we can only dream about now.  Admittedly, some of these dreams could be a bit nightmarish, as “the rise of the machine” brings up images of “terminators” and automated homes that take control of their inhabitants.  To others, however, the dreams of growth represent significant demand for connectivity, consulting, applications, middleware and platforms, and new modules and devices.  

About Kitty Weldon
As Principal Analyst for Enterprise Mobility at Current Analysis, Kathryn is responsible for analyzing events, companies, products and technologies within the wireless and converged wireline/wireless enterprise services and solutions space.

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