Phil Skipper, Head of M2M Business Development, Vodafone Group explains how machine-to-machine (M2M) technology, a component of the ‘internet of things’, can help smaller companies to compete
M2M beyond the enterprise: the rise of the connected SME
Machine to Machine (M2M) technology, long touted as the next big thing in the communications revolution, is well and truly here. M2M provides the means to connect all sorts of devices to the internet, anything from vending machines to defibrillators to cars, helping to create the “internet of things” (IoT). This has the potential to change the way people live and the way companies operate. From smart metering to smart cities to smart cars, we are about to witness a quantum change in connectivity with connected devices set to grow from 4.4 million today to 10.3 billion by 2018, according to the latest figures from Machina Research. However, up until now M2M has largely been the preserve of large corporations, but this is all about to change, as nimble, entrepreneurial small to medium enterprises (SME) look set to get in on the act.
According to the latest annual Vodafone M2M Adoption Barometer, M2M adoption continues to accelerate, with the number of companies implementing M2M increasing by more than 80 per cent in the past year alone. While SMEs have been slow starters with only 18 per cent currently having an M2M solution in place, penetration is expected to leap to 45 per cent next year and overtake large organisations to reach 58 per cent by 2016, compared to 54 per cent for enterprises, as SMEs see the potential M2M has to help them innovate and stand out from their competitors.
While larger enterprises have been early adopters of M2M technology as they had most to gain from automating existing complex internal processes, the combination of falling costs and the increasing deployment of external customer-facing applications has created the perfect conditions for M2M communications to enter the mainstream with a company’s size becoming less of a determining factor .
Early adopters of “internal” M2M projects mainly focused on hidden processes and infrastructure that are rarely if ever seen by customers. These included using the technology to remotely monitor and identify faults in factory equipment, manage the safety of employees in hazardous environments, keeping an inventory on stock levels and cutting down the energy use across offices and stores.
’Suddenly the technology begins to evolve from purely driving cost savings to creating opportunities for customer innovation
But the distinction between “internal” purposes and “external” facing M2M projects has become increasingly blurred. For instance, a logistics company remotely tracking its fleet or a manufacturer remotely managing its inventory may appear to be intent on internally focussed cost reduction. But if the same technology is used to give customers an accurate, real-time view of when their delivery driver will turn up, or how much stock is in their local store, M2M takes on a more consumer-facing role.
Suddenly the technology begins to evolve from purely driving cost savings to creating opportunities for customer innovation and it is this desire to innovate which is sparking the interest of SMEs in M2M technology with 47 per cent of those companies surveyed in the 2014 Vodafone M2M Adoption Barometer citing this as a key trigger for adoption.
Customer facing deployments are becoming more widespread, and creating new revenue streams. These range from ‘smart’ home and office services such as intelligent heating and connected security, through to e-health applications to monitor patients’ vital signs from home and even pet tracking.
The recognition that M2M does not just deliver backroom savings, but also new business models and products is catching the imagination of the SME market. Smaller businesses waited and watched as enterprises took their first steps into M2M. But with more businesses embracing M2M and more IoT applications being developed, the technology is becoming more widely available. As a result the costs are coming down and M2M technology is becoming a very interesting proposition for smaller businesses.
Falling costs are already supporting adoption within the enterprise. Almost a third of respondents said the declining cost of M2M was a determining factor in adoption, while 45% said lower costs had actually prompted M2M investment in the consumer electronics market.
Early adopters are already reporting benefits including greater competitive advantage (52 per cent), as well as increased productivity and improved customer service (both 45 per cent).
Compelling reasons for adoption
Combine declining costs and tangible benefits with the news that 98 per cent of businesses who have already adopted M2M reporting a clear ROI and the argument for SME adoption appears clear cut.
Perhaps it is no wonder that by 2016 SMEs are expected to edge ahead of enterprises. Even today we can see this trend taking hold with the number of SMEs implementing M2M growing by six per cent between 2013 and 2014 – already three per cent more than the number of new enterprise implementations.
But there are still barriers to adoption, largely based on a lack of understanding of the benefits and a conservative attitude towards the time taken to see returns. This may also explain why lack of senior-leadership buy-in is also cited as a barrier to adoption and highlights a need for the timeframes, benefits and results of M2M to be better understood to make the business case for adoption more compelling.
The story is much better than decision makers think – for instance while only 55 per cent of companies expect M2M to generate ROI within a year, 66 per cent have actually generated ROI within this timeframe.
The rise of the connected SME
Many companies, large and small, are only at the beginning of M2M adoption. Much like cloud computing, it will take time, understanding and familiarity before the technology is embedded in the business processes and the full extent of internal and customer-facing innovations are realised. For now, declining costs, tangible returns and clear benefits are creating a powerful opportunity for SMEs to enter the M2M race.
Small businesses that approach M2M in the right way, proactively seeking the advice of experts and are ready to integrate M2M into their business strategies and processes, could soon be punching well above their weight against the enterprise in the M2M space.