There's nothing that analysts like more than debating the merits of a new technology, product, or service. And when it comes to a subject as rich in promise as the Internet of Things, debates get pretty heated.
At Ovum we are fortunate to have analysts covering the breadth of the TMT sector. Some of us focus on service providers and their technology suppliers while others are experts on enterprise IT. They sit squarely between enterprise and technology vendors. At the start of this year we launched a new service covering IoT (called the Internet of Things). But we continue to use the term M2M specifically for tracking contracts and operator revenues.
Those of us who have a background in telecoms tend not to make a clear distinction between the two terms, although there is a general acceptance that M2M sits within the larger IoT category (I have heard the CEO of one large technology vendor use the term IoT to refer to digital transformation more broadly). We have observed the evolution of M2M for the last 10 to 20 years. We have seen its transition from a niche market with dedicated service providers buying connectivity from telecoms operators into a far larger market, as well as the entry of large IT firms and systems integrators.
Within enterprise and IT circles there is a much clearer distinction between IoT and M2M. For M2M, read "connectivity." And for connectivity, read "telecoms operator." The term M2M specifically refers to the connectivity element of an IoT solution. And telecoms operators are not really viewed as players in IoT beyond the provision of the connectivity layer.
Even telecoms operators themselves seem to be unsure of how far they should be attempting to extend their competence beyond connectivity. Speaking at an event in London earlier this month, Vodafone CEO Vittorio Colao said that for the time being Vodafone's aspirations in the broader ICT services market were limited to connectivity and extensions of connectivity. However, he added that Vodafone was moving into IoT IT services. Tellingly, Colao said that he expected systems integrators to continue to compete aggressively and that Vodafone would seek to partner with players such as IBM and Accenture to define solutions.
Ovum is forecasting that mobile operators will generate $13.8bn from M2M services in 2015 (equivalent to 1.5% of total mobile operator revenues). Most of this revenue stems either from connectivity (the sale of SIM cards for M2M) or managed connectivity. The connectivity share of total M2M service revenues is small and declining as a result of the falling cost of cellular data. Furthermore, new low-cost alternatives to cellular connectivity are emerging. This week Orange announced the rollout of a national IoT network using low-power LoRa technology. Within the home, Wi-Fi will predominantly provide connectivity.
Ovum has settled on definitions for M2M and IoT that make a distinction between connections using licensed- or operator-managed spectrum and connections using unlicensed spectrum. We have defined M2M as connected devices that are of sufficient individual value to justify the embedding of discretely paid-for, point-to-point, subscription-based connectivity. These devices will either be high-value end-point assets, such as items of industrial equipment, or points of concentration where data from numerous LAN-attached devices is aggregated for backhaul. The smartphone could also act as one such point of concentration.
Surrounding the M2M center and constituting the bulk of all IoT end-points is a nebulous cloud of LAN-attached devices. These LAN devices may be little more than sensors, with the hardware and data collected by them being insufficiently valuable for paid-for point-to-point connectivity to be economical. Unlike M2M connections, these devices utilize unlicensed spectrum.
The connected car is a good illustration of how to apply this definition. The car itself is the concentrator, connected to a cellular network, but the whole IoT solution contains a number of different services and applications such as diagnostics, entertainment, and insurance telematics.
This definition does not necessarily provide the clear distinction between M2M and IoT that many people outside the telecoms sector would like to see. And we retain the option of revising it should, for example, the cost of licensed-managed or operator-managed connectivity fall to such a low level that it accounts for the majority of connections.
Over time it is inevitable that the term M2M will fall by the wayside as volumes of connected devices grow and M2M businesses rebrand themselves as IoT companies. Whether telecoms operators expand their role beyond connectivity is the bigger question – one which analysts will continue to debate.
