By Fergus O’Reilly, Chief Solution Expert SAP Consume to Cash Solutions SAP
Given the ever-shrinking margins in telecom, it is a mystery to me why service providers have yet to fully utilize their expertise and experience in M2M technology to enable business model transformation for other industries by opening up and offering their services as a platform, or even better yet, by pairing up with utility companies who could clearly benefit from the telecom expertise in remote monitoring, tracking, billing & analytics.
When will communications carriers begin to offer energy management services as part of their service package and leverage this prime opportunity in earnest?
It is without doubt that one of the most important areas for business model innovation over the coming few years will be end-to-end energy management, including more effective use of capacity and reduced peak load through remote monitoring processes, time of day charging & sustainability credit programs. In addition to the fact that business and consumers are increasing demands for improved transparency and direct controls over their energy consumption habits, we simply cannot continue to consume without regard as we have been for the past few decades. The solution however, goes beyond monitoring usage; it is also about controlling demand.
As utility service providers consider the enormous challenges associated with launching a service-based business model that would facilitate these controls, including relationship pricing with customers and partners and modifying billing systems to support pricing models for new services, it becomes quickly obvious the magnitude of change that will inevitably be required.
In many areas, telecom and utility providers already have existing relationships – behind the scenes anyway – with many carriers providing backhaul networks for grid communications. But telecoms operators can offer much more.
Why would a utilities operator turn to a telecom operator for the kind support needed to achieve this level of business transformation?
For starters, large telecoms companies run some of the biggest datacenters in the world. They are also experts in providing network connectivity to millions of disparate end-point devices: the phones, tablets, TVs and consumer electronics that we all have in our homes, workplaces and pockets. Operators know how to mass provision services to those devices. They also know how to diagnose and fix faults across their services and networks, and how to remotely manage and update the endpoint devices connected to their network.
Finally, operators know how to track the location, status and usage patterns on those devices, reliably bringing that information all together in their billing systems to aggregate billions of micro-transactions to generate revenue.
These business processes are very close to what utility companies will soon have to deal with on their own smart grid networks. The usage patterns utility companies need to meter and analyze are not telco calls and content downloads but rather energy loads per household or business. And these patterns need to be drilled down and optimized on the level of each individual energy-using device.
Telecom systems, process and networks are therefore a close good match to what utility companies need. This puts the telcos one step ahead and in a prime position to help facilitate the level of business transformation that utilities operators are scratching their heads over how to achieve.
To further maximize the M2M opportunity, CSP’s need to take their internally-focused capabilities, and turn them into open platform services that developers at other companies, including utilities operators, can easily use to build their own M2M businesses. This is not an easy transition and running the combined businesses of many M2M customers on a single, shared platform means scaling that platform by one or two orders of magnitude from where it is today.
Other players such as cloud computing providers like Amazon, Google and the major IT and SI companies could move rapidly into providing such turnkey M2M platforms. These players do not today have the same capabilities as telcos when it comes to such things as communications networks, remote management of smart devices and operation of efficient micro-transaction billing systems and high-volume analytics. But they could all take steps to acquire these for themselves.
If no one moves fast enough to become a complete and global M2M service provider then those looking to build new M2M businesses like companies in the utilities but also manufacturing and high-tech industries will develop everything themselves: building their own datacentres, buying network capacity, figuring out how to mass provision and manage remote smart devices and how to analyze and monetize transactions across those hyperconnected devices to generate revenue and share it with partners. Smart companies who build this will then inevitably realize that they can become M2M service providers themselves, using the platform they built not just to run their own business but selling its capabilities to others with similar needs. The question remains whether telcos, who are currently leading in the race, will ultimately end up winning.