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M2M IS ALREADY A USD10 BILLION SECTOR: SMES AND EMERGING MARKETS ARE THE MAJOR GROWTH OPPORTUNITIES
M2M solutions are currently less affordable to SMEs than to large enterprises and the public sector. However, affordability will improve for SMEs as M2M solutions become less expensive to implement at the application layer, and operators and service providers start offering off-the-shelf solutions.
Machine-to-machine (M2M) is often portrayed as a nascent industry sector. However, operators are already generating strong revenue in this sector, amounting to USD10 billion worldwide in 2013, and increasing to USD88 billion by 2023. Future growth opportunities will be realised in emerging regions as applications are tailored to local markets and the cost of solutions declines.
This article highlights some of the major findings of Analysys Mason’s recent report, M2M device connections and revenue: worldwide forecast 2013–2023. The report presents the annual update of our M2M device connections forecast, which includes detailed ten-year forecasts of connections, revenue and average revenue per connection (ARPC) for eight industry sectors and 24 M2M applications, in eight worldwide regions. Our forecast now also includes a split between small and medium-sized enterprises (SMEs) and large enterprises/public sector for connections and revenue.
The proportion of SME connections will increase significantly during the forecast period
The forecast predicts that SMEs will account for an increasing percentage of total M2M device connections. Excluding connections in the utilities sector,1 the proportion of SME M2M connections will increase from 14.6% of total connections in 2013 to 24.6% in 2023, representing a CAGR of 33%. The utilities sector is dominated by large enterprise purchasers of M2M solutions and a large number of low-revenue connections.
M2M solutions are currently less affordable to SMEs than to large enterprises and the public sector. However, affordability will improve for SMEs as M2M solutions become less expensive to implement at the application layer, and operators and service providers start offering off-the-shelf solutions. The cost of M2M hardware will also fall. Operators have already been successful in selling productised M2M solutions such as fleet management to SME customers. We believe operators will find success in selling security and surveillance, some healthcare solutions and some retail sector M2M solutions to SME buyers.
Figure 1: M2M device connections by size of enterprise, and emerging markets’ share of connections, 2013–2023 [Source: Analysys Mason, 2013]
Operators in emerging markets will become increasingly willing to sell M2M solutions
Another insight of the forecast is that the number of M2M device connections will start to increase in emerging markets by 2015. Developed markets’ share of connections will decline from 68% to 62% during the forecast period as operators in emerging markets seek additional customer connections and the cost of deploying M2M solutions declines. According to the report, operators that have assembled the appropriate teams and resources will be poised for greater success as the market begins to grow. As operators in developed markets have learned, it takes 18 months or more to organise the various aspects of an M2M business.
Emerging market operators are currently focusing on the burgeoning growth in the number of mobile handsets – running an M2M business carries a higher risk than a traditional mobile handset and broadband business. However, we expect that M2M solutions in the utilities, automotive and security sectors will have more-easily understood business models by 2016, and operators will be more willing to sell these M2M solutions.
Other headlines from the report include the following.
Utilities is the fastest-growing M2M sector. It will account for 67% of overall M2M device connections worldwide by 2023.
The automotive and transport sector accounts for 28% of total M2M connectivity revenue in 2013. This share will decline slightly to 24% in 2023, as the utilities sector takes a larger share. Increasing adoption of consumer connected car solutions makes this sector resilient.
The worldwide ARPC rate in 2013 is USD5.54. This will decline to USD3.60 by 2023.