M2M growth inevitable, by push and pull : Tough times may slow uptake, despite efficiency promise

Today, at least two companies have incorporated an innovation for M2M that first was aimed at the handset market: FOTA, or, firmware-over-the-air.
Make that DOTA (based on OFDM standards), in Wavecom’s parlance: download-over-the-air. Or, in Red Bend Software’s case, FOTA will do – the product is dubbed vRapidMobile – as long as you identify the company as a “mobile software management vendor” because it works its magic for handsets, laptop cards and M2M modules.
Wavecom’s DOTA, a hosted service, is set to hit the market first in Europe and, by next year, North America. Red Bend’s first customer in the M2M space is Telit Wireless Solutions Inc., which has been followed by Sierra Wireless (itself new to M2M) and others, according to Lori Sylvia, executive VP of marketing at Red Bend.
These efforts are aimed at extending the life of M2M modules to fulfill the segment’s promise of greater efficiency.
Where handsets have a lifecycle of one to two years, M2M modules are designed to last more like five to 10 years. Because the custom software applications that typically run on M2M modules are on a tight cycle of innovation, over-the-air updates make eminent sense.
“The idea is to provide a solution, not just for network upgrades, but also to update our customers’ customized applications,” said Lino Osegueda, director of M2M sales at Wavecom. “Our solution is agnostic to the diversity of our customers’ applications.”
The United States is attractive as companies here “get” M2M’s promise for a laundry list of vertical industries such as asset management, home and commercial security and automated metering, Osegueda said.
Remotely tracking energy demand through M2M modules, for instance, can help supply-constrained utilities meet peak demand and avoid blackouts, analysts and vendors said.
The M2M value proposition addresses today’s headlines heralding the skyrocketing cost of fuel and awareness over carbon footprints, according to Chris Purpura, a senior VP for marketing and customer solutions at Aeris Communications, which runs its own network overlaying the cellular carriers that provide cellular network access. Delivery services, for instance, have used M2M to hone routes and cut millions of dollars in annual fuel costs.
“That’s a great example of how routing applications can save companies money on fuel,” Purpura said.
Marcus Torchia, analyst at Yankee Group, said that beyond M2M’s advantage in saving fuel and labor and reducing carbon emissions, its real attraction lies in offering its users a differentiator: improved customer service. (Imagine the cable guy showing up on time! That would be disruptive.)
But the promise of cost-management efficiencies affects the bottom line, not the top line, where revenue is recorded and, thus, depends heavily on an attractive return-on-investment. ROI is often clear for enterprise, but investments can be hefty and ROI can take a few years.
Analyst Sam Lucero at ABI Research said that while module costs and connectivity costs are coming down, application development costs remain high for the diverse custom applications required by M2M customers.
“How these custom applications behave and how they connect back to the cellular network, then to the back-end I.T. servers and customers’ business processes makes them expensive,” Lucero said. “It is enormously complex.”
Still, anyone who sells efficiency as a value proposition can be stymied by companies made cautious by the economy.
“I’m extremely bullish on this segment,” said Roger Dewey, president and CEO of Telit. “And I’m somewhat frustrated. We’re applying technology to solve economic problems like fuel costs, the credit crunch and carbon emissions.”
Wavecom, too, has seen large M2M projects put on hold in recent quarters as decision-makers fear a large commitment of capital in a downturn.
But M2M’s promise is likely to pay off as economic conditions improve, a suggestion perhaps borne out by presumably smart money. The company formerly known as Siemens Wireless Modules, a market leader along with Wavecom, is morphing into “Cinterion” through a purchase by private-equity investor Granville Baird and Deutsche Telekom’s T-Mobile Venture Fund, which announced the move in March.
Privately held Red Bend just completed a final round of financing in spring to the tune of $10 million. A major impetus for the investment? The company’s move into M2M.