Land of sweeping change: Powering Australian business towards a connected future
Published in: Technology
Land of sweeping change: Powering Australian business towards a connected future from Economist Intelligence Unit
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- 1. LAND OF SWEEPING CHANGE: POWERING AUSTRALIAN BUSINESS TOWARDS A CONNECTED FUTURE A research report uncovering the gaps between supply and demand for machine-to-machine (M2M) communications in Australia © Copyright 2015,Telstra Corporation Limited, ABN 33 051 775 556. The spectrum device and ™ are trade marks and ® are registered trade marks of Telstra Corporation Limited, ABN 33 051 775 556.
- 2. Foreword 02 About the Report 03 01.Executive Summary 05 02.Introduction 06 03.Rushing for Unclaimed Territory: The View from Telecommunications Companies 08 04.No Rush:Gaps in Supply and Demand 11 05.Conclusion 14 About the Authors 15 About Telstra Corporation 16 About The Economist Intelligence Unit 17 THE TITLE “LAND OF SWEEPING CHANGE” IS A PLAY ON WORDS OF A FAMOUS LINE WITHIN THE POEM “MY COUNTRY” WRITTEN BY AUSTRALIAN POETESS, DOROTHEA MACKELLAR OB. “I LOVE A SUNBURNT COUNTRY, A LAND OF SWEEPING PLAINS, OF RAGGED MOUNTAIN RANGES, OF DROUGHTS AND FLOODING RAINS…”
- 3. 02 Land of Sweeping Change:Powering Australian business towards a connected future Land of Sweeping Change:Powering Australian business towards a connected future 03 FOREWORD ABOUT THE REPORT In Australia,Telstra currently has more than 1.38m connected machines over our mobile network,with service numbers growing at around 30% CAGR. A serious push from telecommunications providers across product development and innovation,network investment and sales and marketing will be required to grasp the benefits offered by M2M in Australia. Telstra offers a range of M2M solutions: • Core Enablement Solutions,which include M2M platforms,connectivity services and VPNs; • Partner Solutions via partners such as Navman,Securatrack,and Sendum Wireless;and • Integrated Solutions,which enable bespoke M2M solution development by leveraging our broad range of partnerships with hardware providers, systems integrators and platform providers for customers. Through our dedicated M2M sales organisation,Telstra has worked with customers such as Coca Cola Amatil (CCA) to connect 30,000 vending machines to help automate and streamline the process for managing stock levels and operations and maintenance,as well as the City of Perth,which invested in M2M technology to automate the monitoring of the performance of parking meters and to offer new cashless payment systems. We know that M2M wireless solutions are a smarter way to manage multiple business assets in the field,enable organisations to enhance the customer experience and service to end customers, and drive new revenue business models. We also know that using real-time data on assets,places or entire production processes can help businesses improve efficiency and make better decisions. Yet,in Australia,as in the rest of the world,it is the early adopters who are benefiting most from the technology. We wanted to know more about why other industry sectors are slower to adopt M2M,and what the telecommunications supply side can do in order to improve adoption across all industries that may benefit from it. This report seeks to highlight the opportunities for M2M by surveying 300 senior executives,capturing data and insights from the telecommunications, manufacturing,transport,logistics and distribution,agriculture and agribusiness sectors.It delves into how M2M is currently understood and highlights the perceived opportunities and challenges of its implementation. As the report looks at both the supply and demand sides of M2M,we can explore the differences in understanding in order to better serve the needs of businesses, and improve the way we create and communicate about our M2M offerings. A key lesson as we continue our journey as an M2M service provider is that we need to retain our core offerings while developing a greater number of industry specific solutions to service customers’ pain points.In doing so,we also need to provide key enabling capabilities and platforms to M2M service providers and systems integrators.These solutions need to contain clear methods for businesses to establish return on investment (ROI), and to also establish a range of security frameworks to suit different needs.We also take away the need to consider a wholesale offer of M2M services with the added benefit of integrated value adding vendor partners. Land of Sweeping Change:Powering Australian Business towards a Connected Future provides some fascinating insights from leading businesses already engaging with M2M and from those considering its implementation.It explores the question: what needs to be in place for businesses to take advantage of future opportunities from M2M communications? And we believe the answers to this question will inform and empower decision making in this growing area of opportunity. The report draws on a survey of 300 Australian executives: 100 in telecommunications and 50 each in agriculture and agribusiness;logistics and distribution;manufacturing; and transport.The survey findings were supplemented by wide-ranging desk research and interviews with executives to uncover gaps in the supply and demand for machine-to-machine communication (M2M) in Australia.The Economist Intelligence Unit bears sole responsibility for the editorial content of this report.The findings do not necessarily reflect the views of the sponsor. Our thanks are due to the following people for their time and insights (listed alphabetically by last name): • Simon Berman,vice president of product marketing,Jasper • Haydn Bowbyes,managing director,IVCS Australasia • Eric Harvey,managing director,Gilgai Farms • Morgan Hurwitz,President for Supply Chain Solutions CIO,Linfox • Iynky Maheswaran,head of mobility,Macquarie Telecom • Phillip Rollason,IT manager,Alsco • Ken Sheridan,chief financial officer,NetComm Wireless. Land of Sweeping Change:Powering Australian Business towards a Connected Future is a report fromThe Economist Intelligence Unit (EIU),commissioned byTelstra.Kim Andreasson was the author and Charles Ross was the editor. Stuart Lee Group Executive,Telstra Wholesale We are in a period of rapid change as the volume of devices connected to the Internet promises to create new ways to engage customers,enable new levels of business efficiency and spur new innovation across all industry sectors. Businesses in Australia are benefitting from machine-to-machine communications (M2M),but while M2M connectivity is growing rapidly, it is far from ubiquitous.This presents a multitude of opportunities for both the supply and the demand side of M2M communications. John Chambers Executive Director – Mobiles,Telstra Stuart Lee John Chambers
- 4. 04 Land of Sweeping Change:Powering Australian business towards a connected future Land of Sweeping Change:Powering Australian business towards a connected future 05 Connecting devices to a digital network can enhance productivity and reduce costs through greater efficiencies and innovations.Sensors and cameras can automatically transmit information to a computer system from which they can be accessed remotely. 01. EXECUTIVE SUMMARY GPS devices can track movements and help analyse patterns.Mobile applications (apps) allow information to be used on- the-go.In industry speak,such machine- to-machine communications (M2M) hold great promise for organisations of all sizes to enhance efficiency.M2M is often distinguished from the Internet of Things (IoT),which often includes the element of big data analytics,although the two terms are sometimes used interchangeably. Globally,it is estimated that 4.9bn“things” will be connected in 2015,and that this number will rise to 25bn by 20251 . Telecommunications companies are eager to help other companies with their digital transformation in an effort to boost their own fortunes.Due to fierce competition and falling technology costs, network providers look to supplement their core offering through innovation. As a result,telecommunications companies are keen to capture a slice of the M2M market by bundling their networks with hardware and software solutions that can enable digital transformation and in the process help recipients become more profitable too. Despite the push from telecommunications companies,and widespread agreement among industry observers that M2M will grow in importance,there remains a lack of uptake.To find out why,this report assesses the landscape for M2M in Australia,in particular existing“gaps” between the view of suppliers of services and their potential customers. Based on a survey of 300 senior Australian executives and supplemented with qualitative interviews and desk research,the key findings are as follows: • Australia is set to see the benefits of M2M As is the case globally,local industry forecasts predict rapid uptake of M2M over the next few years.The Australian operating environment is deemed as an enabler rather than an inhibitor, according to survey respondents in terms of the quality of networks and the opportunity presented by the roll-out of the National Broadband Network (NBN). Network quality is particularly relevant as almost two-thirds of Australian executives say mobility is important to realising M2M for their organisation. However,a majority of survey takers also view the NBN favourably,indicating that it can complement wireless efforts in urban areas while improving reach in rural areas. • Telecommunications companies are rushing for digital gold To supplement revenues from core network services,telecommunications companies in Australia are creating partnerships with hardware and software vendors to create integrated business solutions.Telecommunications companies interviewed for this report illustrate emerging solutions by offering packages of data plans and added-value services such as customised apps.This illustrates the capability to transform themselves from their traditional role as carriers into integrated service providers.However, this shift has not yet been fully grasped by their customers. • Internal challenges are creating speed bumps Although telecommunications companies are transforming themselves, two factors limit the speed with which they can reach customers;legacy sales teams that are used to selling data plans instead of integrated M2M solutions and the difficulty of trying to be everything to everyone. • Signs of success Uptake for M2M services to date, although growing rapidly,has been largely limited to“first movers”who are often experiencing both the challenges and benefits thereof.Anecdotal experience and survey results both show a huge demand for integrated services – the very same role that telecommunications companies aim to supply. • Customers remain unconvinced Slow uptake among industry can also be attributed to a lack of demonstrated return on investment (ROI) and a lack of targeted solutions to fit detailed requirements that vary between industries and within them.Increasing take-up of M2M solutions is difficult without clear case studies and customised products. • Next steps To improve M2M adoption in Australia more broadly,telecommunications companies must bridge three key gaps moving forward.These include the need for better communication between the demand and supply sides,focus on integrated solutions that meet specific needs,and better demonstration of business benefits. 1.http://www.gartner.com/newsroom/id/2905717
- 5. 06 Land of Sweeping Change:Powering Australian business towards a connected future Land of Sweeping Change:Powering Australian business towards a connected future 07 “Real-time access to data at any time and from anywhere will improve productivity and reduce costs.Additionally, in an M2M context,it is really the access to underlying data that resides in various silos within organisations,extracting it and presenting it in a meaningful way to transact to create both efficiency and revenue creation through connectivity is paramount,”agrees Iynky Maheswaran, head of mobility at Macquarie Telecom, an Australian telecommunications provider.But to capture the potential benefits objects must be connected in the first instance. Gartner,an IT market research company, forecasts that 4.9bn“things”will be connected in 2015,and that 25bn will be connected globally by 20252 . Predictions on the value of this process have been staggering.In 2014,Cisco,an American network equipment company, forecasted that the value of the Internet of Things (IoT) – a term to describe the digitalisation of everyday objects, typically by connecting them to the Internet – would be about US$19trn over the coming decade3 . In Australia,IoT spending in 2013 was estimated at A$176m and expected to reach A$1,382m by 2017,according to Frost Sullivan,an IT market research company4 . The fastest growing segment within IoT is M2M,defined in this report as the devices and sensors that are connected to the Internet and can thereby interact with each other or with humans (see box 1).In Australia, the M2M market was worth A$124m in 2013 and expected to reach A$398.5m by 2018,according to Frost Sullivan. The logistics and transportation sectors often lead the way in M2M adoption given the obvious benefits of using software apps to track real-time movements of goods that can also lead to route optimisation and thus reduce costs while enhancing productivity.For example,UPS,the global shipping company,is using mobile devices and apps that can track more than 15m deliveries a day in more than 220 countries. By doing this,the company estimates it saves 59m sheets of paper every year5 . Powering Australian businesses towards a connected future The global promise of M2M has manifested itself in Australia,helped by a good operating environment (see box 2).In the survey of 300 Australian executives conducted for this report,one-third (36%) say M2M will be“very important”for revenue growth in their industry three years from now with another one-half (50%) say it will be“somewhat important”(see figure 1).Three-quarters (76%) of executives also agree that M2M is likely to spur a new wave of innovation in their industry. In Australia,as elsewhere,the transport and logistics sector often leads the way in M2M adoption.Linfox,the country’s largest privately owned transport and logistics company with 5,000 trucks and 23,000 people in 10 countries,has a dedicated Supply Chain Solutions (SCS) team that specialises in logistics,warehouse design, and freight planning and management.For example,in one warehouse Linfox uses M2M to lower operating costs and provide more efficient management through automated storage and retrieval systems. “It’s all about lowering costs for customers, return on investment and looking for ways to be more competitive,”says Morgan Hurwitz,President for Supply Chain Solutions and CIO,Linfox.Automation drives that competitive edge,although it requires large upfront investment and therefore long-term commitment. But there are quick wins.Linfox also uses M2M to monitor its fleet of trucks. From state-of-the-art control rooms in Melbourne,Western Australia,Malaysia, andThailand,it can analyse driver behaviour to improve visibility throughout supply chains and improve efficiency. The key,says Mr Hurwitz,lies in integrating the information to make better real-time decisions.If a driver is going from Sydney to Brisbane,and another in the opposite direction,the system can enable them to swap trucks in the middle,saving the need for overnight hotel accommodation and allowing drivers to be more with their families.“It’s a win-win,”says Mr Hurwitz. Connecting objects to a digital network can bring new opportunities through automation and digitisation. 02. INTRODUCTION 2.http://www.gartner.com/newsroom/id/2905717 3.http://www.analysysmason.com/Documents/1/TelecomFinance227.pdf 4.Frost Sullivan,Australian Machine-to-Machine (M2M) Communications Market Report,2014 5.http://www.pressroom.ups.com/About+UPS/UPS+Leadership/Speeches/David+Barnes/ci.The+Logistics+Cloud.print 6.Source:NBN Weekly Progress Report as of December 31st 2014.http://www.nbnco.com.au/corporate-information/about-nbn-co/corporate-plan/weekly-progress-report. html#.VLKrnHsuxDQ 7.http://www.budde.com.au/Research/Australia-Mobile-Communications-Statistics-and-Forecasts.html Same meaning,different terminology The concept of machine-to-machine communications (M2M) can appear daunting at first glance,in part because of industry jargon. In practice,however,M2M simply means using communications technology in new ways to better manage assets,further automate processes or enhance current tasks.In the survey conducted for this report,we defined M2M as“the devices and sensors that are connected to the Internet and can thereby interact with each other or with humans.”This definition captures three distinct but interrelated aspects of M2M:hardware (such as sensors and cameras), software (the applications that process the data),and the networks that allow them to communicate (fixed or mobile). M2M is a subset of the Internet of Things (IoT) – which extends well beyond machine connectivity and includes the element of big data analytics – although the two terms are sometimes used interchangeably due to their commonalities. However,M2M is generally seen as easier to implement since it focuses on automation of processes rather than having to derive analysis from big data. Similarly,telemetry,which refers to remote data automation,is subsumed in our definition of M2M.Industry jargon varies but it all refers to the same underlying objective of using technology in new ways to enhance processes. BOX 01 The Australian operating environment Nearly one-half (44%) of Australian executives agree that they are better prepared for M2M than other OECD countries.In part this can be attributed to government efforts.Overall four in 10 (39%) say government regulations are an enabler for M2M as opposed to three in 10 (29%) who say they are an inhibitor.Telecommunications executives are particularly fond of current policies:almost two-thirds (62%) of them claim they are an enabler. Recent progress regarding the NBN may have tilted opinion towards a favourable view.At the end of 2014 some 322,000 premises had an activated NBN connection, up from 210,000 only six months earlier6 .In the survey conducted for this report, six in 10 (60%) Australian executives also say the NBN is important to realising M2M for their organisation,indicating that fixed and wireless networks are often complementary rather than competing. At the same time,the mobile penetration rate in Australia reached 135% in mid-2014.Almost two-thirds (64%) of Australian executives in the survey also say mobility is important to realising M2M for their organisation.The quality of network connectivity is a lively discussion topic anywhere in the world.In Australia, the view is largely favourable.Nearly one-half (46%) of Australian executives in the survey say current network infrastructure is an enabler for M2M as opposed one-third (29%) who say it is an inhibitor.However,the overall view is also skewed by telecommunications executives,who are far more positive than the average executive in the survey:two-thirds (67%) of them view it as an enabler.Demand- side executives in the four industries are essentially split on the issue with those in agribusiness being the least convinced and the only group who view it more as an inhibitor (40%) than an enabler (24%). BOX 02 Figure 1:How important will M2M be for revenue growth in your industry three years from now? All respondents IVCS is one company that specialises in M2M transport solutions by using the Lytx DriveCam Program that includes an in-vehicle camera to remotely sensemonitor driving behaviour and allows for real-time feedback. This helps improve fuel efficiency,for instance by analysing breaking patterns and poor driving practices.But more importantly,it can also identify risky driving behaviour and prevent collisions accidents before they happen,leading to safer roads and in the process lower insurance premiums.In the Australian market,IVCS is so confident of the DriveCam Program that it offers a guaranteed return on investment within 12 months of installation,assuming proper procedures are followed.“We win because we offer return on investment,” says Haydn Bowbyes,managing director at IVCS Australasia.“Our customers win because they save on operating cost in a competitive industry.” VERY IMPORTANT SOMEWHAT IMPORTANT NEITHER IMPORTANT NOR UNIMPORTANT SOMEWHAT UNIMPORTANT VERY UNIMPORTANT DON’T KNOW 0 10 20 30 40 50 60 70 80 90 100 % This report looks at the M2M opportunities in Australia as identified by telecommunications companies with a view towards the future in terms of challenges to adoption,and gaps in perception between suppliers and their potential users,in particular in logistics,transport,manufacturing, and agriculture.