M2M Winners and Losers: It's a Supply-Chain Game

By  By Steve Hilton — March 23, 2009

When you think of M2M communications, which one company comes to mind?

If you asked 20 people, you'd get at least 20 different answers.

After more than 10 years, M2M is still functioning like a scrappy start-up industry not sure of its future. Now it is time to make some changes -- changes which will drive M2M to market share consolidation, increased awareness, deep channels and simplicity of delivery.

Who will be the ultimate M2M winners? Technology equipment vendors, not carriers, have the most to gain in the M2M ecosystem if they take heed of IT (not wireless) industry experiences.

Like the IT industry, M2M will ultimately have rich, broad channels controlled by a dominant technology equipment vendor, ease-of-purchase and supply-chain consolidation.
Technology solution sales need to be painless for enterprise buyers, but M2M isn't there yet. According to a recent Yankee Group M2M survey, Collaboration and Council Cinch SMB Market Share for Cisco (January 15, 2009), it takes four to six vendors and partners to effectuate one M2M enterprise solution. This creates cost and schedule over-runs, and plenty of finger-pointing when things go wrong.

With the current M2M supply chain, we hear plenty of enterprise dissatisfaction around the complexity of project implementation and the inability to articulate a straightforward ROI story.

So that's the current state of M2M.

Now what do the technology equipment vendors need to do to win?

Supply-Chain Consolidation & Realignment

Twenty to 30 years ago, Cisco and Microsoft began building and acquiring pieces of technology to help enterprises, small businesses and consumers. The solutions they put together consolidated the market -- creating a Cisco way of networking and a Microsoft way of desktop-based computing.

We anticipate the following M2M supply-chain realignment over the next two to three  years:

  • Technology vendors and chip manufacturers like Qualcomm, IBM and others will acquire the modem manufacturers.
  • Technology vendors will acquire platform vendors and ASPs like Wyless, KORE, Vianet and others to complete their solutions with horizontal and vertical solutions, and create the future, empowered channel.
  • Communications carriers will assume a tangential channels/solution role to the technology vendors. But the carriers will also provide the needed connectivity links to make M2M networking succeed.
Channel Empowerment
According to the same Yankee Group M2M survey, only 30% of the M2M ecosystem believes their most important revenue generating partnership over the next 12 months will be channels-related.

Years ago, IT vendors' channel tactics-for-success were instrumental in changing the game: we need similar recognition on the part of M2M participants. Let's mention three required M2M channel moves.
  • Cisco used its product house and publishing divisions to equip and educate the channel in the "Cisco way" of networking. These publications educated an entire generation of networking engineers, making the Cisco way of networking the de facto way of networking. Has anyone in the M2M ecosystem written the book on M2M networking?
  • IT vendors like Microsoft encouraged channels to use free demo equipment and applications in the earlier days of IT. That openness fostered strong channel and solution development, because partners experiment and co-develop solutions.
  • Both Microsoft and Cisco created rich, deep certification programs that financially rewarded partners for advanced levels of certification. This approach incentivized partners to deeply train on a particular vendor's solutions.
Want to hear more about winners and losers in the M2M ecosystem? Catch Steve Hilton's keynote speech on April 2, 2009, at the M2M Zone at CTIA in Las Vegas. 

Steve Hilton is Enterprise Research VP with Yankee Group.


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