2.9.2003
Ville Salomaa

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 Made by Ville Salomaa at Siemens Oy in Espoo
 Supervisor: Professor Heikki Hämmäinen
 Instructor: Lic. Tech. Janne Kankare
 Professorship: S-38 Telecommunications
Management
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 Introduction
 Definitions
 Market potential
 Technical overview
 Value networks in wireless telematics
 Two case studies
 Conclusions
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 The market of mobile subscribers is becoming saturated in Western Europe
 New potential customers beyond human beings
 wireless machine-to-machine communication
= M2M = wireless telematics
 M2M has huge market potential due to the fact that machines outnumber humans by a ratio of at least four to one
 The M2M market potential can not be utilized by usual means in telecommunications industry
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 Need for cross-business know-how
– Vertical M2M markets, understanding customer
– Telecommunications
– IT, application development
– Business processes and applications
 No single telecommunications company can cover the whole fragmented value network
 Need for partnerships
 Value network fragmented -> brings the complexity back to business logics in telecommunications
 Value Networks basis for business strategy ->
VN must be studied in this new business area
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 Reseach Problem: The largest challenge in wireless telematics business is considered to be the finding and managing of the fragmented value networks.
 Objective: The key objective of the study is to define the structure of value networks in wireless telematics business.
 Scope: Wireless M2M from business point of view
 Reseach Methods: literature analysis, interviews and calculations. Literature mostly studies and articles.
 Reliability: Extensive research material does not exist -> much is based on real-life business
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 Definitions not established
 The Vocabulary of Mobile Communication
(2001) describes telematics as follows.
“Telematics: Sector of information technology which simultaneously combines telecommunications technology and data processing technology”
 Lately also used in the meaning of “automotive telematics”
 M2M is modernly emphasized as wireless machine-to-machine communications
– machine-to-machine,communication between machines
– machine-to-mobile, for example remote monitoring by the user
– mobile -to-machine, for example remote control by the user
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 Huge market estimations
 Nature the same in all of them, but scale varies remarkably
M2M Market Estimates
Estimation
100-160 million terminals over 8 billion terminals
10,9 Mio M2M terminals in W-E and 8,8 Mio in U.S
100 million M2M connections market grows 28 $ billion market grows 30-60%
35-40 million GSM/GPRS/UMTS terminals in Europe
400 million GSM/GPRS/UMTS terminals in Europe
Schedule by 2007
2005 onwards by 2006 by 2005 by 2007
2001-2005 by 2004 by 2009
Estimated by
Gartner
Forrester Research
Strategy Analytics
Nokia
The Wireless Data Research Group
Nokia e-principles e-principles
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Device Population Estimates
700
600
500
400
300
200
100
0
2002 2003 2004 2005 2006
ARC
DLJ
Ericsson
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 Conclusion: M2M market is hard to forecast.
Some studies predict strong growth. But as learned in the near history of mobile telecommunications, all market estimations in this business field have to be dealt with caution.
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 Telemetry

Telematics / in-vehicle applications,
 Public traffic services,
 Industrial applications,

Security and surveillance,
 Sales & payments,

Fleet management
 Telemedicine
 B2B market is estimated to grow first, because consumer market adopts new technologies slower
FY00 FY01 FY02 FY03 FY04 FY05 FY06
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 Fundamentally, existing technologies used
– GSM/GPRS/UMTS are major M2M technologies
– Short range technologies: WLAN, Bluetooth, RFID
(Radio Frequency Identification)
– XML and Corba to hide the underlaying technologies from applications
– Location technologies based on GPS, wireless terminals and networks
 At the moment GPRS enables cost effective IP connectivity in M2M solutions
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Short-range hub
GSM Wireless
Module
Wireless short-range connection
GPRS
Telematics
Telematics
Gateway
M2M
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 Wireless module is essentially a stripped-down version of a mobile phone
 Wireless moduless and terminals highly developed
– fast application developement and integration (java)
– Rugged, operation in temperatures of ( –20) – (+65) C
– weight 10-18 grams
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Siemens MC45 Wireless Module Siemens TC 35 Wireless Terminal
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 There is basically no M2M standardization
-> strongest technologies will develop into de-facto standards
 From technology perspective it is quite clear that no wireless technology can provide such
QoS that life-critical M2M services could be implemented in the near future
 QoS enough for applications where best effort reliability level is enough
– cost reductive applications
– new features to products via mobility
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 Value chain is a chain of interactions which takes place inside or between organizations in order to produce products and services to customers
 The term value chain is used to underline the sequence of actions in value creation.
 VC is a linear mechanistic model of business that is based on the industrial age production line. Developed by M.E. Porter in 1985.
 Such a mechanistic model is simply inadequate to understand the complexities of value in the knowledge economy.
Materials
Manufacturer
Distribution
End User
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 A value network is an enlarged view of value chains as they come together to form complex networks
 A value network is a web of relationships that generates economic value and other benefits through complex dynamic exchanges between two or more individuals, groups or organizations
 The Value network, its different entities and their relationships can be defined in different resolution
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 An example of a value network: value network in mobile services business from a study by Finnish ministry of transportation and communication
Network
Software developer
Technical
Integrator
Device
Manufacturer
Media
Owner
Content
Provider
Service Provider/
Content Integrator /
Mobile Portal
Mobile
Content
Provider
Advertising
Agency /
Advertiser
Operator
, http://www.mintc.fi/www/sivut/dokumentit/julkaisu/julkaisusarja/2001/3_1_22.pdf
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, http://www.vernaallee.com/primary%20pages/Understanding%20Value%20Networks.html
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 Value network can be complex, but basically only one company acts in customer interface
 Gatekeeper
 ”Gatekeeper” owns the customer
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Supply action in the value chain
Supply action in the value chain
Supply action in the value chain
Supply action in the value chain
”Gatekeeper” owns the customer
End user /
Customer
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 Finding successful business models and wellmanaged value chains is probably the most difficult part of M2M business.
– Partnerships and alliances are favoured in order to reach this goal
 Value Networks in wireless telematics business are fragmented
 Who owns the customer?
 A single company can not cover the whole value network
 Too many players in the value network will eat the profit
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End User /
Customer
5.
4. 2.
1.
System
Integrator
&
Application
Provider
3.
Device
Manufacturer
Network Operator
&
Service Provider
1.
User of the M2M system asks the System
Integrator for a solution to a problem.
2.
System Integrator optimizes the telecommunications solution according to the environment and available telecommunications services.
3.
System Integrator builds the applicable devices and controls for the user systems
4.
M2M system is integrated with the systems of the user
5.
User purchases the defined telecommunications services from the Network Operator
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Service
Provider
Integrated
Device
Wireless
Module
Operator
M2M
Platf orm
Applications
Segment A Segment B
…
Segment Z
App
. A1
…
App
. A9
App
. B1
…
App
. B9
App
. Z1
…
App
. Z9
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 Industrial automation seems to be the most interesting market area in M2M business in the short-term because
– industrial companies are fast to adopt new technologies, like wireless telematics,
– wireless automation is a natural continuation for wired automation
– wireless modules are easy to integrate with automation logics
 Major driver for M2M is cost reduction
– remote control and maintenance
– also emerging service business
 Automation companies strong candidates for integrator role in the value network
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Needs connectivity between machines and business systems
Industrial
User
Telecom
Operator
Operator provides network connections according to spesifications made by integrator.
Integrator builds the system for the user
Business
Process
Consultant
Consultants integrate M2M system to business processes
Automation company provides the possible logic updates needed for M2M connectivity
Automation
Provider
System
Integrator
HW & SW
Providers
HW & SW Providers act as subcontractors
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 Machines can be linked wirelessly to business processes and applications (like ERP), and thus the machines and the company can be managed more efficiently.
 Already happening in wired automation.
Wireless connection does not add complexity to the integration from business application point of view 5. Bill
1. State report
Intelligent
Machine
Monitoring
2. Service request
ERP /
Maintenance system
3. Service order
Maintenance
4. Remote maintenance / maintenance visit
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 Wireless telematics brings more machines available for business process integration
 Businesses like vending, can be operated more efficienty when the machines are linked wirelessly to the business processes of the company
 Also tasks in service management can be automized
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Needs connectivity between machines and business systems
Industrial
User
Telecom
Operator
Operator provides network connections according to spesifications made by integrator.
Automation company provides the possible logic updates needed for M2M connectivity
Automation
Provider
System
Integrator &
Business process consultant
Integrator & Business consultant builds the system for the user and integrates to costomers business processes
HW & SW
Providers
HW & SW Providers act as subcontractors
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 An essential conclusion about M2M value networks is the importance of defining and managing them
– value network is the basis for business strategy
 The key finding of this thesis is that the value network in wireless telematics business is dominated by a M2M system integrator.
 Industrial automation seems to be the most interesting application area of wireless telematics in the short run
 Integrating M2M with business processes will be increasingly important in the future
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 There is a need for further research in studying the value network in several different application areas of wireless telematics business.
 M2M application cases from technical point of view
 Product and consulting -based approaches on wireless telematics business and their influence on the M2M value network
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