Building an M2M Business: 5 Steps for Success

SAP Guest

by Steve Hilton, Principal Analyst | Analysys Mason

Machine-to-machine (M2M) seeks to be the next high-growth sector in fixed-line and mobile woman using ATM, an example of m2m businessconnectivity, and this presents a significant revenue opportunity for communication service providers (CSPs). Driving the M2M market is the high-growth rate of device connections, which will have compound annual growth rates of 40–50% between now and 2021.

Today, the penetration of M2M connections as a percentage of CSPs’ total mobile connections in developed markets is 5%, but within the next few years, there will be billions of things connected to billions of devices. In fact, M2M connections are predicted to grow to 2.1 billion devices worldwide by 2021 (see Figure 1). Total worldwide connectivity as measured by average revenue per user (ARPU) will be US$6.5 billion in 2012, increasing to US$51 billion by 2021, at a compound annual growth rate (CAGR) of 26% over the forecast period.

The tremendous growth in devices and connected people opens up new doors for CSPs, especially when other areas of connectivity – including mobility in the developed world – show signs of slower growth.

5 key steps for success

As the market accelerates, CSPs will be one of the most influential groups in the M2M value chain, and they can easily position themselves for success in this area. To gain a profitable foothold in the M2M market, there are five operational and go-to-market factors that are recommended best practices for building an M2M business.


With the anticipated rapid growth of the M2M market, CSPs have myriad opportunities, so prioritization based on the potential for profitability is critical. Automotive and transport, energy and utility, security, government, retail, and industrial are leading the way in M2M solutions, so CSPs can start with the industry or industries that most align with their current customer bases. With a wide array of wireless, satellite, and fixed-line opportunities, profitability metrics will vary according to the application, country of operation, and CSP cost characteristics, so finding the right market to focus on is key.

Placement of teams

To achieve a high degree of success, CSPs would be wise to treat their M2M initiative as a start-up business unit, with a dedicated leadership team and functional heads. CSPs should also establish dedicated resources in the areas of sales and marketing, technical support, product marketing, R&D, operations support systems (OSS), business support systems (BSS), platform, and customer support. Each resource area should have key performance indicators (KPIs) tied to the health of the M2M business. If CSPs plan to support various industry sectors, it would be most efficient to have a centralized marketing staff, as well as a consolidated human resources group. Field-based sales teams, however, should be dedicated to the industry sectors in which the CSP expects the highest growth.


There are three distinct routes to market for CSPs offering M2M solutions: co-selling partners’ solutions; selling or reselling their own solutions; and acquiring solutions. One of the most viable options for CSPs will be for them to form partnerships that provide M2M infrastructure hardware such as modems, modules, and equipment. Hardware manufacturing is not a core business for CSPs, and hence it would be more advantageous for them to partner to provide this piece of the value chain to enterprises. A CSP’s core competency lies in knowledge of networks, connectivity, and managed services, so offering connectivity and a platform layer exploits its strengths.

For those CSPs that have their own systems integration businesses, they can incorporate a series of as well. The application layer presents the biggest conundrum in a CSP’s route-to-market strategy. Some providers are capable of offering their own viable, well supported applications for many M2M solutions, while others are not. In almost all cases, CSPs will need to partner with credible application partners that specialize in the development, testing, and management of applications. Those application vendors that have expertise in both on-premise and cloud-based solutions will be most desirable.


No CSP has a toolset sufficient to offer a complete end-to-end M2M solution for the countless number of opportunities in the market, and this speaks to the need for value-added partnerships. When looking for partners, CSPs will want ones with strong, complementary technologies – such as device management, data management, or connectivity in other regions – as well as indirect channels for the marketing of M2M solutions.

In creating a profitable M2M business, it is of paramount importance to pick the best partners rather than the greatest number of partners. CSPs must review the partnership landscape systematically, by geography and application, in order to find those best suited to their needs. It is important to keep in mind that the best partners for providing M2M services to the utility and energy sector may be different from the best partners in offering services to the healthcare sector. To complicate matters further, the best partners can often vary by region of the world or country.


A CSP should establish an identity or image of itself in the M2M market. A CSP can use its existing brand – sometimes a consumer brand, but often an enterprise brand – to build its M2M marketing image. It is important that CSPs understand existing market perceptions of their strengths and weaknesses when attempting to offer M2M solutions, because M2M is one of those technology solutions in which connectivity meets IT. Enterprise IT departments play a very strong role in decision making for, and implementation of, M2M solutions. Sometimes IT departments are less willing to engage a CSP in heavy technology implementations than they are a systems integrator (SI), other IT channel partner, or IT vendor. Remember that many of these M2M solutions hinge on an application – of which many are customized and in their first generation versions.

The risks for IT managers are high and, consequently, decisions often favor incumbents, which in this case are SIs and various IT suppliers. In some instances, it would be best for CSPs to have a “behind the scenes” presence and to allow the partner to front the bid, as is the case with many complex enterprise IT projects.

A foundation for success

Much of the value in operating an M2M business unit will be realized after three to five years, when the number of device connections is three to five times that of today. Up-front investment in these M2M business units is significant and competition for investment capital within CSPs is high, so initially there will be some risk. But with 2.1 billion device connections and US$51 billion of connectivity-related ARPU by 2021,

M2M provides savvy CSPs with the opportunity to create new, profitable, growth-centric businesses. To be successful, however, CSPs must properly scope and scale these new M2M business units, decide where to participate in the supply chain, pick the best partners, and create meaningful branding for these businesses.

Building an M2M business has some unique requirements; however, CSPs have the core assets to help connect people, things, and machines across the world.

Follow @SAP_IoT for more information on what SAP is doing around the Internet of Things.


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MFi Brings Console-Style Controllers to iOS Gaming

controllers to iOS gaming

Apple has positioned its mobile products as serious competitors to the Nintendo DS and Sony PSP ever since the announcement of the first iPhone. And now, thanks to iOS 7′s MFi controller support, Apple may be replacing your at-home gaming consoles, too.

With a MFi (Made For iOS) controller and Apple TV, those games we love to play while riding the bus or fulfilling our senatorial duties can finally come to life on our living room screens. Now that iOS developers have been given this new opportunity, its time to see what they can do with a larger canvas.

Taking control of controllers

The touchscreen and accelerometer may have created an exciting new form of gaming, but many fighting, shooting and racing games still benefit from traditional controls. With Apple introducing their own game controller SDK, game devs no longer have to find third-party sources to add controller functionality to their titles.

This graphic created by TouchArcade reveals two probable controller designs. The first essentially turns your phone into a Nintendo 3DS by wrapping the standard directional, gameplay and shoulder buttons around your iPhone. Just like with Nintendo’s 3DS, this allows developers to utilize both remote and touchscreen controls.

The second design, similar to the Wii Classic controller, is wireless and features two analog joysticks, shoulder triggers, a directional pad and those gameplay buttons your right thumb knows and loves. This latter model works perfectly with iPads and Macs, so developers will need to make sure their games are ready for both formats. And if developers really want to get ahead of the game, they should start thinking beyond computers and mobile devices altogether.

From touchscreens to televisions

What if the iOS platform was just one way to use a MFi game controller? Could Apple TV also serve as a gaming device? iOS architect Conrad Stoll thinks so.

“Apple is certain to make a bigger move into the living room and if they opened up an App Store for the Apple TV, where you could download games and control them with an MFi game controller, I think that would be a powerful force in the living room entertainment space,” says Stoll

With traditional game manufacturers slowly weaning themselves off physical CDs and cartridges, the time is ripe for Apple and its developers to get ahead of the digital gaming tidal wave. As smartphones and tablets have demonstrated, operating systems are king in the new land of video games.

The iPhone, iPad and iPod have already made a serious dent in Sony and Nintendo’s handheld offerings. Could MFi controllers and Apple TV be the power-up Apple needs to dominate the entire video game industry? For that, we’ll have to wait. Until then, gamers will just have to bring Angry Birds to the big screen the old fashioned way, through Apple AirPlay.



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Advice Bytes: Top 3 Tips on Taking Control of Your Career

SAP Talent Marketing

Previously, we shared the top career tips our employees have learned or received throughout their careers on work-life balance, networking, respect, passions and taking risks in our Advice Bytes series. This week, we take a look at what SAP employees are saying about the importance of taking control of your career.

Tip #1: Your career is your responsibility

mountain climber symbolizing control of your careerTaking responsibility by owning your career development and growth is vital for achieving the fulfilling career you want. Many employees shared that the advice of taking responsibility for their career was the best career advice they have ever received. One employee wrote that “If you want to do something new, it’s your responsibility to learn about it and go for it.” While another colleague added that “There are a countless opportunities but no one will come and tell you to do this or to do that. It is completely up to you to drive your career.” Yet another employee advised that you are the only one who can push yourself to the next level. So grab on and steer your career towards your desired destination. Or as one employee best summarized it “Paddle your own canoe.”

Tip #2: Write down your career goals

One great way to take control of your career is to physically write down your career goals. The simple task of writing something down can have an astoundingly positive effect on helping you achieve your desired outcome. One employee advised that you should “write down everything that is important to you from a personal and a business view. Then brainstorm a far-reaching dream that you would be completely happy and proud to accomplish in maybe 20 or even 50 years from now. With this specific goal/dream as your focal point, all career moves should be purposeful actions that enable and prepare you to achieve your dream.” If you know what you want and are able to communicate it, first in writing and then out loud to your managers and co-workers, you will be well on your way to growing and developing your career.

Tip #3: Be loyal to your career

One employee advised that you should “Be loyal to your career, not to your job.” They believe that you will be more productive, creative and can better succeed in your current job if you are convinced that the job will add value to your career aspirations. As one employee put it “never do a job you hate, work for a boss you don’t respect or a company you aren’t proud of.” Don’t sacrifice your career’s integrity for a role or a company you find unsatisfactory. By putting your career first, you will thrive in the roles you choose and that productive momentum will carry you to the great career heights that you desire.

By taking responsibility for career, writing down your career goals, and being loyal to your career can help you to achieve an amazing career.

Make sure to check out our next blog about some of the worst career advice our employees have received and the insights they still managed to learn from it. Also, stay tuned for our fun and interactive infographic that will feature nearly 100 bytes of career advice from our employees.


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Core Banking Replacement Strategies Remain Locked in the Future

Tom Groenfeldt

Core Banking Replacement Strategies: The Time Has Come, Celent, the financial technology analyst firm, announced in 2003.

Actual core replacements at tier one banks can be counted on the fingers of two hands, maybe even one – Commonwealth Bank of Australia and Nationwide Building Society in the UK have moved to SAP core banking, National Australia Bank has selected a new enterprise system from Oracle and BBVA Compass in the US has moved to Accenture’s Alnova.

While Celent said 10 years ago that banks had little choice about replacing legacy systems because they have become extremely inefficient, inflexible, and costly, they apparently underestimated banks’ resistance to change, even pressing change. Technology providers say that banks are wrapping the old legacy cores with new layers, or moving some processes to newer systems – just about anything to avoid an entire core replacement, which can take years and cost hundreds of millions of dollars.

“They have invested to make the legacy systems current, but the architecture isn’t something you would deploy if you started,” said Chandan Sharma, global managing director of Verizon Enterprise Solutions for finance. “They evolved when there weren’t so many channels; they were more product-centric rather than customer-centric.”

Financial services is all about technology; except for the tiny fraction of business conducted in cash, the product in the finance industry is electronic. Banks want to be able to develop new products in days or weeks; roll them out for trials in a branch, geography, or customer segment; and then modify them as needed and expand the offering.

With legacy systems like CSC Hogan, that can be a challenge, although a leading bank such as Wells Fargo seems to do just fine with it.

Hosted services, the service bureaus provided by FIS and Fiserv among others, also have their challenges Sharma added, especially as banks want to enable mobile payments.

“Banks have to provide more and more flexibility and the ability to add more and more products.” He thinks the need to compete on customer experience and agility will force banks to move to new core systems.

Not everyone agrees, though.

Saket Sinha, global core banking leader at IBM, said the challenges banks face in replacing core is money, the lack of a business case, lack of appetite, and the uncertain outcome. The topic is on everybody’s minds, he added, but there are workarounds, and some are successful.

Middleware is hot

“Five years ago we thought everyone had to do this replacement, but that has waned. Middleware is how banks, especially in tier one, are circumventing the problem.” Middleware that interacts with the back office can then support the front office to provide new banking capabilities.

“As these new capabilities are added in middleware, the decision to go and replace the core is getting postponed, although I don’t think they will be postponed indefinitely,” Sinha said. In many big banks like ABN, Barclays, and even JPMorgan Chase, the core is being stripped down to a very small footprint. Then the banks can create new products outside the core. Replacing core systems in a tier one bank is very complex and very expensive – and banks have to run both the new and the old systems in parallel for a period to avoid shutting down the bank.”

Many core replacement projects have failed, and most have taken much longer and cost far more, than the banks anticipated, he added. Even successful ones have left banks with similar functionality to what they had before, leading users to ask what all the money was spent on. He does not think the big projects can improve return on equity.

Instead, IBM is pushing the idea of progressive transformation using enterprise middleware. Mobile, for example, hits the middleware and only if there is a transaction with credit and debit does the mobile contact go through to the back office.

It is different for smaller banks in the Philippines, Africa, and Eastern Europe, he added. When they do a core replacement, they make a fundamental decision to adopt the structures and procedures defined in the vendor’s package with minimal customization.

“I think more and more decisions will be made to move stuff outside the core if you have to stand up and own the outcome.”

Middleware is not enough

Mark Gunning who handles pre-sales and pre-contract consulting globally for Temenos, the banking software company headquartered in Switzerland, thinks that by 2020 all core replacements projects will be cloud-based, although big banks like Citi will run their own cloud. Temenos was the first banking software to run a bank in the cloud, but it had the advantage of working with some lightly regulated micro-finance firms where that was allowed.

More cloud-based banking operations are on the way, though.

The Netherlands banking regulator, De Nederlandsche Bank (DNB), approved the use of Amazon Web Services in “all facets of Dutch financial operations” after several firms sought permission from the country’s banking regulator to take advantage of cloud computing. That means, said Gunning, that Dutch banks can operate anywhere in Europe with cloud-based services. The pressure will now be on other central banks to permit their regulated financial firms to do the same so their banks can be competitive. The first bank to move from an outdated proprietary system to the cloud saved tens of millions, he added.

In his work, Gunning regularly sees resistance to changing core platforms, so he isn’t surprised that Celent’s 2003 predictions haven’t come true, at least not yet.

“One problem is simply the cost and the time it takes to pay back. We see pressure on banks’ margins and projects with 4- to 8-year payback will always be at the bottom of the pile. That is the major problem – replacing the core is such a major activity, and you have to be pretty courageous to do it.”

Temenos remains bullish, he added, because banks can’t simply nibble around the edges of their core systems forever.

“Everyone talks about progressive renovation, but the core is indivisible. Even though you can replace it bit by bit, you have to aim at replacing the whole thing.

Some parts of the world are more willing to do core replacements than others – leaders include Australia, Asia-Pacific, and China.

Temenos had nearly closed a deal with an old, staid European bank that was trying to reduce the costs of complex systems it had acquired through M&A when the bank decided not to go ahead at the last moment.

US should lead in core replacement; it doesn’t

The US should be leading the way in core replacement to continue financial innovation, said Eric Stine, senior vice president general manager for financial services at SAP North America.

Stine thinks the US should be doing core replacements for the flexibility new systems provide. After all, the country has been a leader in financial innovation – the 520 program for college savings, the 30-year mortgage, the 401(k), and Roth IRA.

“This is an industry that is ripe for transformation.” The mass affluent in the 40 to 55 age range are an ideal target for new products and services. With the great real estate they own, banks can provide value added services from child care and adoption to helping baby boomers about to retire, Stine added. Adoption, day care? From a bank?

SAP has sold some components, but not a core system replacement, in North America. Even smaller projects like loan origination at National Bank and FX at TD see a tremendous amount of benefit, Stine said. Apparently not enough for those banks to rip and replace their cores, though.

With new core systems, Stine added, banks can massively simplify their architecture, take complexity out of the business and achieve 8 to 10-figure savings over seven years.

It is time for banking to industrialize, he added.

“What SAP does better than any other company is identify business processes that can be standardized, industrialize them, and syndicate them across the industry.

The legacy systems were built 25 to 30 years ago and since then banks have expanded their business to include wealth management, risk management, support for financial advisors, not to mention ATMs, online banking, mobile banking.

“Banks have done a lot to optimize what they have the core systems were designed to be configurable, they were hard coded but this needs a whole new set of systems based not just on what the market is today – if that were the case you would build a rigid system – but we want agility as far into the future as they can conceive.”

He thinks the heavy regulation of the market has created an aversion to risk, but at some point banks will reach a tipping point, and the super regionals just might get there first.

“A handful of banks in the super-regional are starting to say maybe there is a better way.”


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Why Great Product Ideas Alone Aren’t Enough

Rachel Spasser

example of why supply chain management is essentialLove the recent post on HBR blogs from Gretchen Gavett on Lululemon’s current woes. She refers to a recent study by Beth Kowitt and Colleen Leahy and articulates what may be obvious after the recent see-through pant fiasco…“Lululemon should probably pay more attention to its supply chain.”  More interesting, however, is her next statement, “after all, they (Kowitt and Leahy) point out, strong supply chains are the hallmark of businesses that outlast their founders.”

I think that is a fascinating point and one that supports the notion of the networked company.  Those companies that work collaboratively with their suppliers – and ones that have greater visibility into their supply risk – are the ones that have a competitive advantage. Having great product ideas is not enough. Having the type of relationships that ensure stellar execution on great product ideas is critical. And, having the right level of collaboration with and insights into your supply chain is a key input to that stellar execution.

And, as an aside, I think Lululemon took our past statements about “transparency in the supply chain” a little too literally.


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