It's time to learn some new acronyms. Many people at this point are familiar with B2B and B2C, but the new letter of the day is really “M.” That's the one that refers to the Internet of Things, which is increasingly allowing machines to communicate with one another. And those machines will soon not just be handling labor for us, they may well be the basis for entire business models. With incredible market potential. The M2M market stood at just 225 billion US dollars in 2013, but revenues will blossom in the next five years to almost USD 950 billion, predicts consulting firm Deloitte. Or in other words: this market is still in its infancy.
There's no question at this point that “M2M technology is a fixed component of daily operations in both the B2C and B2B fields and that complete networking is an eventual inevitability," says Dr. Jens Böcker, Professor of Economic Science at Bonn-Rhein-Sieg University. The "M2M Adoption Barometer" from telecoms giant Vodafone puts some statistical support behind the statement: 75 percent of the 600 international companies it surveyed report plans to implement an M2M communications strategy in the coming three years.
Yet for all the lure of potential “big business,” it's likely to be a long and stony path to get there. Machine-to-machine communication is not necessarily comparable with older business models. The issue is a major one for the M2M Alliance, a coalition of various companies dedicated to the issue. It sees plenty of opportunity for German industry, yet at the same time laments the fundamental lack of standards: "On the one hand, M2M applications and solutions are currently not standardized enough. On the other hand, there are a rash of existing standards and standardization activities," notes a strategy paper released by the alliance as part of a national IT summit .
In concrete terms: machines are great at talking to each another. They just don't understand much in the process. And this isn't just a question of a lack of standards for a shared language. There's also no real infrastructure for channeling that communication. So while most machines are quite industrious in gathering data, they don’t keep up when it comes to forwarding or interpreting it . This leads to the creation of data silos that in theory are full of potential but de facto offer little value.
Beyond this, there are many external factors influencing electronic data transmission that can disrupt the tenuous balance of industrial production processes. And we're not talking here about the hacker attacks so gleefully reported in the media. A severed network connection can in some cases be enough to bring a production line to a standstill. This is because unlike previous closed systems along the value chain, M2M is constantly drawing in more participants. Deloitte names four key components:
Each of these four areas needs to communicate with the others, as do the different disciplines within the areas. Yet the potential disruptive factors continue to rise in each area as well. A simple example: the existing wireless data conduits that are an essential part of the communication won't be able to cope with the expected data volumes . At the same time, wireless communication is significantly more vulnerable to eavesdropping by unauthorized parties. To minimize this risk, Siemens for example has created a mobile network base station for industry that uses secure protocols to mount a dedicated wireless network .
At the same time, companies need to develop appropriate business models to turn M2M into a decisive competitive advantage. eco, an Internet Business Association, recently polled 50 experts from the mobile sector . It reports that 29 percent of those surveyed evaluated M2M technology as already well researched, but lacking in corresponding business models.
A further 66 percent could see functional business models in place for most companies, but bemoaned massive untapped potential optimization. Only five percent were satisfied that effective solutions were in place.
There's certainly no lack of ideas. The American firm Cumulocity, a spin-off of former cell phone maker Nokia, is offering "VendMe," a system for connecting online payment services like Paypal with vending machines. Customers can use their smartphone to select products, with the purchase process handled via the smartphone. Once Paypal confirms the transaction, an integrated telemetrics module orders the vending machine to deliver the merchandise. Of course, it would be a shame if the cellular network loses its connection after payment but before the chocolate bar is delivered.
The recommendation by the M2M Alliance sounds almost utopian in this regard: "Incentives and regulatory frameworks have to be established to provide (cellular) coverage down the road for not just 100 percent of the population, but also 100 percent of Germany's territory," it writes .
Or in the words of Dr. Jens Böcker from Bonn-Rhein-Sieg University: "M2M is coming, but with a delay — and all the stronger for it."
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