Telefonica announces the “Smart M2M Solution”
Telefonica announced its new “Smart M2M Solution”, a connection management platform that enables Telefonica to provide optimized connectivity services for M2M applications.
On 21 January 2013, Spanish mobile network operator (MNO) Telefonica announced its new “Smart M2M Solution”, a connection management platform (CMP) that enables Telefonica to provide optimized connectivity services for M2M applications. The announcement underscores the debate in the industry between MNOs that build their own CMP and MNOs that acquire a CMP from a third-party vendor, like Jasper Wireless or Ericsson. Telefonica is an interesting case study in this regard because it has opted for both approaches: it had previously built another CMP in-house (managed by Ericsson on an out-source basis), and had also partnered with Jasper Wireless to use the Jasper Wireless Control Center CMP. Telefonica’s “Telefonica Digital” unit – tasked with growing the MNO’s business in the machine-to-machine (M2M) market globally – positions the new platform as taking the key lessons learned from the previous Telefonica self-built CMP and increasing the capabilities for localization and customization to specific customer needs.
As with other CMP, the Smart M2M Solution provides a feature set around automated remote bulk provisioning of devices directly by the customer, remote trouble-shooting, management of the connection directly by the customer (e.g. connection turn-on, turn-off, suspension, etc.), and integration of the CMP’s functionality into the customer’s existing enterprise management systems via application programming interfaces (APIs). Such features benefit the MNOs by enabling automation (and thereby lowering the costs) of many functions related to the management of M2M connections. Likewise, these features benefit customers by giving them greater control over the connections to their fleet of remotely deployed devices. Although M2M services have been deployed using traditional telecom systems, IHS believes it is unlikely that such services could become a mainstream MNO offering without M2M-tailored CMP.
As IHS noted in its recently-published report on the cellular M2M connectivity services market, “Cellular M2M Connectivity Services – World – 2012 Edition”, the key arguments in favor of utilizing self-built, rather the purchased, CMP centers on:
- Control: the ability for the MNO to decide for itself precisely what features will be developed in a highly granular fashion, including specific features developed per customer request.
- Differentiation: the ability to develop features and functionality that may not be available from other MNOs.
- Functionality: the ability to develop features, such as management of fixed-line M2M connections, which may not be available from merchant-market CMPs.
- Cost: once CMP development costs have been amortized over some period the platform is essentially “free”. Additionally, large MNOs make the point that any development costs can be amortized over a large base of connections, often numbering into the millions.
- Brand: several MNOs with self-built platforms claim their customers require the MNO to have their own in-house platform to ensure quality.
In contrast, MNOs that have acquired third-party CMPs focus on:
- Time to market: for an MNO that hasn’t already developed a CMP in-house, a merchant-market option provides a fast route to market.
- Cost: for smaller MNOs, in particular, the ability of third-party CMP providers to amortize the costs of CMP development over the larger scale of connections of multiple operators can mean comparatively lower costs to individual operators. Also, merchant market CMP costs are variable expenses, rather than fixed capital expenditures, and if a particular customer deal is not won, CMP connectivity costs are not paid on those connections.
- Commoditization: some MNOs, such as Telenor Connexion, which originally developed its CMP in-house before selling it to Ericsson and then licensing it back as a managed service, argue that core CMP functionality is becoming increasingly commoditized and therefore it is not necessary to maintain the CMP in-house.
- Partnerships: MNOs that use the same CMP should have an easier time of partnering to offer multinational customers a unified global footprint with one bill and one platform interface. For example, the Jasper Wireless CMP is the basis for a seven-member operator alliance that will be discussed in more detail below.
- Experience: Jasper Wireless has an eight-year track record of developing its CMP, including five years of working directly with end-customers. It updates its platform on average every three weeks. And, it has substantial experience and formal processes for helping MNOs to quickly establish and deploy M2M market offers, which is valued by MNOs that are new to the M2M market.
IHS expects that most MNOs will choose third-party CMP solutions going forward, particularly given time-to-market and up-front cost considerations with self-built solutions. Telefonica’s Smart M2M Solution in a sense is the exception that proves the rule: it is unusual for an MNO to choose both an in-house solution and a third-party solution, and even more unusual for the MNO to keep iterating the self-built platform. In fact, Telefonica is the only case IHS is aware of where this is happening: in the few other cases (e.g. AT&T, NTT DoCoMo) where the MNO has both a self-built and third-party CMP in place, the MNO is moving decidedly to emphasize the third-party solution (in both cases Jasper Wireless) increasingly over time. Although Telefonica chose to iterate its self-built platform for some specific capabilities, IHS does not believe self-built CMPs will represent the normative situation for MNOs over time.