The second and most important reason for building a separate “silo” for the M2M business is related to costs. In USA the ARPU from traditional telecom services is about 50 USD, while the costs of network management, customer management and acquisition are at about 20-30 USD. When we compare it to M2M we have respectively an ARPU of 3 USD and costs at about 1.4-1.6 USD. This means that systems supporting M2M must be very cheap in maintenance and operations. That includes the number of people needed to maintain them, the costs of licenses and the general complexity of all processes.
This is why the majority of operators decide to run the M2M business on a separate silo. Their existing systems are probably capable of supporting the new business line but the return on investment may pose a big challenge.
How to choose the best M2M platform delivery model?
When looking at the process of developing the software stack for controlling an M2M business, a lot of operators (in Europe) started form platforms developed in-house. This ensured low start-up costs and high flexibility, at least at the beginning. After a while they started facing problems related to the high costs of software development and lack of scale effect.
So they moved on to the next step and started looking for more advanced M2M software. And a new question arose: what is the best delivery model for an M2M platform — outsourcing, partnership approach or a licensed platform? The decision must be made based on two things: the strategy of approaching the M2M market and the amount of independence for the operator in running the M2M business. “Independence” means the freedom of the operator to execute its own vision and strategy, as opposite to operators who depend on what a potential vendor or partner is able to provide or is interested to do.
Partnership approach or outsourcing means using platforms delivered by vendors in the Software as a Service (SaaS) model. It can also mean using a platform of other operators, within advanced partnership programs, where the M2M platform is part of a bigger cooperation program, related to international roaming and accessing M2M applications for particular verticals.
