M2M/Pervasive Internet Market Forecast Now Published (Currents #77)

Harbor Research is pleased to announce the publication of our 2006 forecast report for the M2M-Pervasive Internet market. At nearly 250 pages, this report is the first to cover all major Wireless and Wireline technologies used for M2M-PI applications. By doing so across 8 key Venues (or Vertical Market Sectors) - Buildings, Consumer/Professional, Energy, Healthcare/Life Science, Industrial, Retail, Security/Public Safety and Transportation - and monitoring over 300 different device types, we have aimed to capture the major activity across the highly diverse M2M market.

Wireless technologies – including Wireless WAN (Cellular GSM, CDMA and others), Wireless LAN and Wireless PAN (Bluetooth, ZigBee and other 802.15.4) – are all covered in depth at the device, network and service levels for each region worldwide. The report contains over 80 forecast tables.

The forecast shows that modules for both Wireless and Wireline technologies will continue to grow substantially to 2011, with a combined annualized growth of over 64% including WPAN devices. Excluding these, unit shipments are still expected to grow at an average rate of 32% per annum. While this highlights the expected explosive growth of WPAN, it is also clear that device unit shipment growth for Wireline, Wireless WAN and Wireless LAN technologies is also expected to be robust.

With the focus in the M2M-PI market now shifting more towards higher level services, a major part of the report covers the rapidly growing network and managed service opportunities. Harbor assesses each of these by breaking them down further into key elements within each Venue. Network Services, for example, breaks down to three elements – Configuration/Provisioning, Network Service Charge and Support Services. On the other hand, Managed Services is comprised of System Applications (mainly middleware related) and Value Added Services, each of which breaks down further into several elements. The purpose of these elements is to aid the planning and justification for remote services in all Venues.

Although overall Enablement revenue (comprising modules and their associated costs) is expected to grow at an annualized rate of over 26% during the period, Network Services and Managed Services revenues are expected to grow considerably faster. As a result, the share of Managed Services as part of total M2M-PI business revenue is expected to rise from 67% of the total to over 74% in the period. In revenue terms this represents an annualized growth rate of over 45% - a stunning opportunity. Network Services Revenue is also expected to rise sharply over the period, demonstrating the huge opportunities for network operators and virtual network operators in the M2M-PI space over the forecast period.

In addition to this, Harbor has identified a series of stages through which M2M-PI service offerings tend to evolve. The forecasts for service growth have taken the early stages of this trend as the basis for our forecasting, so there is a considerable upside potential for later years depending how quickly businesses can address the implementation issues at the higher service levels.

At the Venue (Vertical Market Sector) level, one of the most dramatic changes compared with previous forecasts has been the Energy venue. This is perhaps not surprising given the increasing political focus on energy conservation, alternative forms of energy and environmental concerns. Harbor Research tracks a total of over 30 device categories in this Venue, within the 3 segments of Electricity Supply Side, Demand Side and Gas/Oil & Natural Resources. Of these, perhaps the most well known are utility meters on the Demand Side for both Commercial and Residential premises. This area has seen a substantial shift in sentiment and now represents a considerable opportunity over the next few years. Less well known are the opportunities on the Supply Side, where there is now also a marked interest in remote services.

Taken overall, M2M-PI service revenue in the Energy venue alone is now expected to grow at an annualized rate of 49% over the period, a very significant increase on our forecasts of just 2 years ago.

It is clear from these forecasts that the M2M-PI market is now reaching a degree of maturity – there is substantially greater recognition of the technology capabilities and the potential benefits of connecting devices to the Internet. Coupled with this, though, much of the “low hanging fruit” of simple applications have now been discovered. The market must move forward into more complex applications where the need for innovation is much more evident. We believe that such innovation will be rewarded with considerably higher sales revenue.

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