Looking for Wood Among the M2M Trees
November 25, 2015 Leave a comment
- For CIOs, the hype around M2M is irrelevant to the value they can get from it.
- If they can cost-justify a use case now, they should just do it; telcos need volume to drive prices even lower.
IoT has struggled to become pervasive because there is a mismatch between the longevity and cost of the communicating device and the application it serves, and the value they create. Since silicon can last forever, the secret is to increase the number of chips and applications in service. So when they talk to their telco suppliers about M2M applications, CIOs need to bear in mind the cost/volume/profit (CVP) relationship, and seek to maximize the value they can create.
Farmers and mining companies have little difficulty justifying expensive GPS connections to monitor multi-million dollar assets like combine harvesters and ore carriers to do preventative maintenance because their unscheduled downtime is so costly. It’s also costly to chip and connect a cow or a chicken, but if the retailer refuses to buy the animal because its life history is undocumented and inaccessible, the farmer risks losing his entire investment in the animal. Similarly with maintaining the cool chain for foods and drugs, where time spent above a certain temperature means rejected goods.
Generally speaking, telcos have not found a way to price their services according to customer value. Indeed, under universal service and net neutrality obligations, their freedom to do so may be highly restricted. The switch to IP transport gave some relief, but that was quickly eroded by start-up VoIP and OTT firms. Telcos generally choose to run subordinate to the cost/volume/profit relationship, so their aim has been to fill their new vast pipes at prices set to attract lots of customers. Video has been their content of choice, so they have had to meet and beat the cable companies on price.
Many believe that the IoT market is overhyped, and the latest Ericsson mobility report shows by how much. It reports that machine to machine traffic represents less than one per cent of total data traffic. “Live” non-cellular M2M devices are forecast to rise from 2.6 billion in 2015 to 10.7 billion by 2021, slightly more than the number of phones that currently make up most of the M2M market. Cellular industrial and consumer M2M devices should grow from 0.4 billion devices to 1.6 billion.
Profitability is not the customers’ concern; the cheaper the better, they think. Indeed, as most telcos offer both fixed and wireless network access, customers want fitness for purpose to be the rule.
With competition for consumers driving down prices for IP transport, businesses can exploit the curve to enable greater use of machine to machine communications. They can generally afford to ignore the debate over NB-IoT or LoRa, or whatever technical dispute engages the experts from time to time. They can instead focus on what’s meaningful to them, which boils down to location, time, reliability, and value. They can leave the communications solution to the telcos, and govern by service level agreements.
Telcos can choose whether they want to co-create value, or to continue to play the CVP game. Outsourcing removes some of customers’ fixed cost risk, and some telcos are already saying “Play for free on our platform – if it works, let’s make money together.” Let there be more.