M2M Scale: An Open Value Chain Debate
March/April 2011


There will be 50 billion intelligent connected devices by the year 2020.

Idealistically this number should be attainable. However, given the manner in which connected devices are being developed today—mostly custom or proprietary—the stark reality is it will take a radical change in thinking before the market can approach such lofty expectations.

When Ericsson postulated such a number last year, many chalked it up to being just another number projected on the emerging embedded space. But some took it as more of a challenge: A challenge to reinvent the process of bringing connected devices to market and meeting the heightened expectations of an evolving market.

It can be easy at times to get caught up in a numbers game when you consider all the connected devices hitting the market. The current rate of innovation continues to churn out wireless glucose monitors, smart meters, personal trackers, ereaders, and navigation devices, to name a few, at unprecedented rates.

But taking a step back to disseminate the challenges associated with the M2M value chain today reveals a clear need for adjustment. Without such, the rate of innovation we are currently experiencing could come to a streaking halt.

Much has been made about the role ‘open platforms’ could play in overcoming such challenges. There is validity to this argument, as today’s innovators spend far too much time reinventing the wheel, if you will, each time they have a good idea.

In other words, let’s say someone wants to bring a new connected healthcare product to market. Immediately they should expect to work on each step in the phase, from A to Z, when bringing such a product to life. Conversely, an open platform environment, where different parts of the value chain are open and interoperable, takes a lot of the heavy lifting out of the equation upfront. This enables developers to concentrate on, say T to Z, where most of their innovation exists.

Open platforms are clearly a new level of thinking that would cause radical changes across the M2M value chain as we know it. But as product innovators and developers, you should be demanding such an environment, as it will not only help you bring products to market quicker, but show others what is possible with the power of M2M. The old saying, “all boats rise in high tide” certainly applies here.

Much lip service has been given to the topic of open platforms in M2M throughout the years. Only recently have we heard such conviction for making this a reality from some of the more prominent players in the market.

“What we want to do in the embedded market is to take the points of complexity out of the equation (in the value chain) and make them standard and open so the real value that needs to be created can indeed be created above the platform,” says Kevin Johnson, Intel’s director, embedded connected devices, embedded and communications group.

The Santa Clara, Calif.-based chipmaker is taking a stand in the push for open platforms in the connected devices space. As such, its goal is to reinvigorate the embedded space in the same manner it did in such areas as the PC and server markets.

But before we derive the value of open platforms we must first define what it means to be open. Marie Austenaa is the vice president of strategy and products with Norway-based mobile operator Telenor. Austenaa believes open takes a layered approach where each of these layers in an M2M solution is exchangeable. As it relates to the key elements of the M2M value chain, this includes the device layer, the connectivity layer, the service-enablement layer, and the applications layer.

“When I say open, at the first stage it is about allowing each of these elements to be interchanged so that it can be connectivity agnostic and allow any device to communicate with any application. It can use whatever device you want or whatever provider of service enablement you wish; the service enablement APIs are also open, which means you know what you are getting,” she says. “Then there is another advanced form of openness that allows other participants in the market to increase the value of the overall offerings. Each participant in the value chain can also focus on their core business—whether this is manufacturing devices or creating M2M applications.”

Now any application can communicate with any device regardless of whether they own it or not. This means you are getting a business model for sharing devices, and the information being generated by them with others and you is also getting an authentication means to do this in a secure way.

The real question then becomes, what does such openness mean between the layers of the value chain and for
customers? “For the end customer, this means the ability to choose whatever device they want with whatever application at a much lower cost, reducing risk, and allowing very efficient competitive tendering of each element,” adds Austenaa.

For developers, it creates a whole new ballgame. Things like the cloud have enabled a new set of application developers and service developers. But has this created confusion in the vast complexity? Solving this is the aim of open platforms.

“There is significant complexity around how to get that type of device with that type of capability up and going so that I can do any protocol of connectivity and any type of service,” says Johnson. “Regardless of the vast complexity, fixing it to simplicity and fixing to open platforms is the answer that creates scale. And scale equates to new services revenue and profit growth; volume connectivity revenue and profit growth; and volume device revenue and profit growth.”

Another one of Intel’s partners on the path to open platforms is Ericsson. The telecommunications provider believes the development of open platforms is necessary in order to continue the pace of innovation going forward.

“Customers expect to have open platforms because it will make it easier to connect devices and increase competition,” says Mats Norin, Ericsson’s vice president, head of mobile broadband modules. “And increased competition will drive innovation and development in the whole industry and in the products themselves.”

Norin believes the challenges associated with achieving open platforms are more business related than they are technology related. Having an easier and more efficient way of bringing products to market spurs innovation across multiple industries, says Norin, showing others the power of M2M.

“Combine the success of products in different industries with the capabilities of open platforms and more (companies) realize what is possible with their applications,” adds Norin. “There are a number of applications coming up, so it is hard to say what are the killer apps, but I would say connectivity is the killer app. Connectivity is very powerful and allows you to do so many different things.”

Intel has done a fair share of market scope and discovery related to open platforms. From this process, according to Johnson, the company has identified four elements needed of every next-generation device: Operating system choice that can handle the varied application or service; connectivity; a device that is generally standardized; and autonomous manageability.

How does this all impact the M2M value chain as it is comprised today? To Johnson, it will force a reorganization of sorts, as well as the need to introduce some parts to the value chain. To put it bluntly, some of the current value chain players will definitely lose out. But in the end, it will produce many more winners, namely innovators and their customers.

“There is a new set of value chain drivers that gets created,” says Johnson. “Those value drivers will be in and around what more you can do with secure devices, managed devices … more connected devic



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RandyHortonchi March 17, 2011

What’s always fun to watch is how the big players in a market particularly try to blur the line between open and closed standards/platforms to their own advantage. PDF was a proprietary format that’s now open to others creating the files. The iTunes app ecosystem was the first major “open” platform to build mobile apps and connect app makers directly with consumers, bypassing the carrier. But how many people complain about how “closed and proprietary” Apple is?

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