M2M: sell the service, not the machine

10 October 2011 by Steve Blum
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Verizon’s approach to the machine-to-machine business is to stop selling hardware and just sell the service. Duncan Sensenich, from their M2M unit, was one of several mobile executives who spoke at Ovum’s M2M seminar at the CTIA Enterprise and Applications conference in San Diego today.

In this case, low expectations might have been the breeding ground for a lower cost, potentially higher profit way of doing business. The M2M segment was traditionally buried in Verizon’s financial reporting and its management structure. As the segment has grown, the company is starting to report M2M numbers, but the service-only business model is already set.

AT&T’s Abhi Ingle pointed out one of the weaknesses of that approach: a device maker could invest a lot of time and capital into developing something that doesn’t make the grade for carrier certification. The responsibility falls on developers to work with carriers earlier in the development process.

Still, meeting a carrier’s technical specifications and passing objective tests is a lot easier than trying to sell it a new line of business.

The hot M2M markets discussed included utilities – millions of smart meters have already been deployed with growth accelerating – and health care. Mobile networks are ideal for delivering real-time data from wearable (or implantable) medical devices.

The cost of the devices and associated service could eventually become low enough to use for preventative monitoring. The biggest barriers aren’t technical or financial, though. The greatest difficulty is in managing the regulatory restrictions on medical information and overcoming the bureaucratic inertia of insurance companies and regulators.