The costs of fuel, vehicle damages and insurance are escalating and many companies are struggling to contain this.
This is where the CIO can step in, says Steve Towe, European MD of mobile resource management specialist Masternaut.
Masternaut helps companies use machine-to-machine (M2M) technology to manage their mobile workforce costs, which are typically growing at 15 per cent a year.
As CIOs and organisations seek increased efficiency and growth, technologies like M2M will enter CIOs’ strategic discussions and plans.
M2M essentially describes any situation where networked devices communicate with each other to share, deliver and act upon real-time business information.
Typical applications include utility meters, vending machines and medical equipment.
One mobile example is a black box on the dashboard of fleet vehicles which accumulates information about how the driver uses the car.
“This can tell you who speeds the most, who has to hit the brakes suddenly and who are the safest drivers,” says Towe.
Some companies use this information to name and shame the bad drivers while others seek to reward those who obtain the best mileage.
This approach helps companies cut fuel consumption and make savings on insurance costs and accident repairs.
“It’s all about optimisation of the assets,” explains Towe. “In one company we they cut speeding tickets by 60 per cent and accidents by 30 per cent.”
Networking machines, whether a fleet of vehicles or factory floor robots and giving them some intelligence to make decisions. This should speed up business processes.
The impact on the CIO will be massive, says analyst Jeffrey Peel, managing director at Quadriga Consulting, as M2M will feed a whole new generation of smart, sensor-based IT and applications.
“CIOs will be able to develop much richer, revenue-generating and customer-enhancing solutions off the back of better technology and real-time feeds,” says Peel.
M2M systems will deliver a new generation of mobile cloud mash-ups that take advantage of mixed real-time data sources and pervasive mobile devices to access them.
“All types of internal and external apps will become augmented,” says Peel.
The market mobilises
M2M adoption will soon spread beyond transport and utilities, creating a market the mobile operators are set to dominate, analysts say.
US telcos Sprint, AT&T and Verizon, and European counterparts Vodafone, Telenor, KPN and Everything Everywhere are the leaders, for whom success hinges on two things: creating a differentiated role and market position, and developing a sustainable and cost-effective business model.
This is where it gets complicated for the CIO, as the need for differentiation makes the competing service offerings difficult to understand, when often they are much the same.
One of your most important guiding principles should be to keep it simple, says Marc Overton, VP of wholesale at Everything Everywhere.
“Many M2M contracts involve you having boxes with up to 15 SIM cards in them,” he warns. “It’s much more manageable if you have one SIM, one SLA and one contract.”
Communications service providers don’t manufacture or integrate devices, so they need partners and so must become solution enablers.
This casts them in the unfamiliar role of bundling services like billing, end-user care, distribution and even professional and consulting services, which is unfamiliar ground.
Contracts will be another challenge for M2M as operational support requirements for provisioning, charging, billing and post-sales support are significantly different.
An M2M contract generates low average revenue per embedded device for the communications provider, so they need to have a high lifetime contract value. Which means CIOs will typically sign off a 10-year commitment.
In the last two years M2M applications have evolved from their simple origins, so it’s no longer simply about one machine updating another on small amounts of information about water levels in a reservoir. A third-generation M2M application will carry out complex analysis of information and act on it.
“There are many emerging applications that can be created for companies,” says Maxine Hewitt, director of M2M supplier Alpha Micro Components, which helps companies develop whatever apps they require.
Some companies have rather scary imaginations, Hewitt says.
For example, as someone enters a shopping centre, a camera might capture their image and pass it on to a computer which then makes another M2M interaction with an advertising server.
As the shopper walks around the mall, an advert for a retailer will pop up on every plasma screen they look at, its choice based on the initial visual demographic.
Today’s third-generation platforms automate management and decision-making for business and operational processes.
The carriers involved in creating M2M need to be carefully watched by CIOs, analysts say.
The cost of maintaining multiple wireless networks while transforming processes to support new services limits their financial performance and investment flexibility.
Aside from creating cost savings and service differentiation, M2M can help the CIO make improvements in corporate governance and customer service, says Towe at Masternaut.
The guiding principle you should use to judge M2M is that whatever you can measure can be managed, argues Towe. That means all kinds of cost and governance boxes can be ticked.
Carbon emissions, be they from the datacentre or a vehicle fleet, can be measured, so any CIO can devise projects to cut CO2 fairly easily to comply with laws or save money.
M2M can present governance problems to CIOs.
A potential pitfall is that the management of too many partners creates more vendor governance and management issues when it comes to meeting service level agreement commitments.
The complexity of M2M contracts can create governance aggravation.
CIOs should examine the track record of the communications service providers at network management.
Any communications service provider with a record of internal fractious disagreements, funding and long-term commitment issues, performance issues, management turnover, and a multitude of other technology deployment issues is best avoided.
As ever, scale increases the challenge; if there are millions of connected devices and large processing volumes then the mettle of service providers will be tested.
Ask suppliers how they intend to address anticipated higher volumes of more complex second- and third-generation M2M solutions.
These processes will likely need to be re-tooled and re-engineered, and not all communications service providers have a good track record for making timely investments in critical business support systems/operations support systems.
When an M2M contract is global, there will be a complication arising from the patchwork of mobile broadband coverage.
Antony Rix, who leads connected devices projects at product development consultancy TTP, says there is a significant concern whether GSM and 3G networks will be switched off or the frequencies reused for other services, something that is already happening in some countries.
“4G is too expensive for most M2M applications, but the cost is likely to fall rapidly in the next three years,” says Rix.
Communications organisation ETSI and others are still working on international M2M standardisation, but teething problems like roaming charges, especially in the transport and distribution industries, could eat into those savings.
CIOs adopting M2M could discover the age-old problem of a skills shortage with fast growing IT markets.
The bad news is that anyone with M2M know-how will come at a very high premium.
The good news? That applies to M2M-savvy CIOs too.