IDC Examines How Telcos Can Benefit from and Drive Growth of the M2M/IoT Industry

25 Aug 2015

Prague, August 25, 2015 – Given the tremendous industry growth, machine-to-Machine (M2M)/ Internet of Things (IoT) has become one of top business drivers for leading telecom operators across the globe, and the market in Central and Eastern Europe (CEE) is no exception. IDC forecasts the global installed base of IoT to hit 28.1 billion devices in 2020, generating revenue of $7.1 trillion, with cellular M2M being a subset. Though mobile connectivity provision has historically represented telecom service providers' core proposition in M2M, their strategies are evolving to embrace other parts of the value chain, particularly those with higher margins.

"With the telecommunications services revenues from core voice and messaging services declining, telcos are on the lookout for new growth opportunities. M2M is certainly one of them," says IDC analyst Ina Malatinska. "Connectivity represents only about 10-15% of the total M2M revenue pie. It has become a commodity and we expect connectivity ARPUs to continue falling dramatically.”

Leading telcos understand they have to expand beyond selling SIM cards to capitalize on the M2M opportunity – they are offering comprehensive end-to-end solutions (such as fleet management), including related services with higher margins, enabling M2M application development (providing platforms), and bringing consulting and integration capabilities to M2M projects.

Some telecom operators are even acquiring companies to gain a strong position on selected markets. One example is Vodafone's acquisition of Cobra, which was intended to help the operator become a full service provider for the automotive industry. Others are putting a strong emphasis on in-house R&D to drive innovation, such as Deutsche Telekom with T-Labs and T-Systems Innovation Center and Orange with Orange Labs. “In a nutshell, telecom operators want to be key players in the M2M/IoT game. Whenever you see high-end cars streaming entertainment content on the road or a remote patient monitoring solution, you can be sure that a telecom operator is involved,” notes Malatinska.

Innovative services built on collected M2M/IoT data will transform industries

Gradually, telcos will put more emphasis on developing critical data analytics capabilities. As market demand is shifting from simple remote monitoring and control to business processes optimization and identification of new business models, data analytics will become essential to success. Data will represent the most important enterprise asset, and companies will need a tool to extract relevant information from large volumes. This is where data analytics comes in: enabling enterprises to deliver innovative services, get closer to their customers, and explore new revenue streams, among other benefits.

Telcos in the CEE region have multiple ways to differentiate themselves competitively in the M2M area. Local telcos that are part of an international group (such as Deutsche Telekom, Vodafone, and Orange) can greatly benefit from a technology and know-how transfer, as well as broad geographical coverage, which is relevant especially in industries such as manufacturing. That said, local market specifics including access to corporate customers, marketing and product strategy, partnership with local vendors and systems integrators, and go-to-market strategy are still of key importance.

IDC believes that telecom operators will continue to play a principal role in building the M2M/IoT market. Beyond strengthening their own proposition, demonstrating a clear business case for M2M/IoT solutions across verticals, building strong partnerships, enabling application development, developing new services and analytics capabilities, and more — telcos should act as hubs for innovation and keep educating the market about the benefits of M2M solutions. This is most essential in markets that are still in the early stages of maturity, such as those in the CEE region.

About the research - IDC is publishing a series of studies analyzing telecom service providers' M2M/IoT strategies. These vendor profiles provide: customer value proposition, geographic coverage, staff, software development, target markets and customers, partnerships, and go-to-market strategy, which is accompanied by a SWOT analysis.

Additional information - At this time, we have published two such studies:

Deutsche Telekom's M2M Strategy (IDC #CEMA22855, Jun 2015)

Vodafone's M2M Strategy (IDC #CEMA21375, Jul 2014)

Planned for Q3 2015: Orange's M2M Strategy

If you are interested in purchasing any of these reports, please contact ** Jaromir Valenta at: [email protected]

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