Location Based M2M Opportunities

Michael Grossi, DirectorAltman Vilandrie & Co.

Industrial Ethernet Powerline Broadband

Fixed (Wireline) Technologies

Cellular GSM/GPRS/EDGE CDMA/1xEV-DO 3G Satellite Wireless LAN Bluetooth ZigBee Other 802.15.4 and related technologies

Wireless Technologies

M2M offers opportunities in many service sectors

Buildings/Facilities Office Equipment HVAC/Environmental

Systems Access Controls

Consumer/Professional White Goods/Appliances Game Systems Consumer Electronics

Energy Meters Distributed Generators Electricity Grid Pipelines

Industrial Automation & Control

Equipment Capital Equipment

Medical/Healthcare Medical Devices

Retail Scanners & Registers Lighting & Refrigeration

SystemsSecurity/Public Safety

Homeland Security

Transportation Vehicles Airplanes Transport Systems

IT & Networks Enterprise: IT/Data

Center, Office Public: Services,

E-Commerce, etc.

M2M and “The Internet of Things” describe the connection of machines and sensors through any means to the Internet

The M2M market is highly fragmented in each component of the value chain – no single market leader has been established

Hardware Enablement Network ServicesManaged Services

EndUsers

Chip VendorsM2M Modules/

Devices

Aggregators/Platform Software

Comm ServicesValue-Added

Services / Applications

24 32 5083

124167

209260

11

16

23

34

47

66

1927

39

56

78

102

134

11

15

21

28

38

13

19

27

38

53

69

92

12

17

25

81

119

182

267

365

473

615

14

59

2008 2009 2010 2011 2012 2013 2014 2015

Middle East & Africa

Asia-Pacific

Latin America

North America

Central Europe

Western Europe

Machine to Machine Market OpportunityM2M devices are poised for rapid growth, exceeding 600 million devices by 2015 and accounting for $24B in service revenues

Source: Strategy Analytics, AV&Co analysis

Worldwide M2M Devices(Millions) CAGR%

40%

40%

34%

40%

38%

42%

40%

Revenue ($B) 7.6 8.5 10.1 12.9 15.9 18.5 20.9 24.2

M2M – devices that communicate data wirelessly to other devices for the purpose of automating data collection and monitoring of large complex systems/networks

M2M – devices that communicate data wirelessly to other devices for the purpose of automating data collection and monitoring of large complex systems/networks

UtilityMeters

Mobile Internet Devices (MIDs)

Emerging MIDs and especially netbooks are gaining popularity worldwide, and will be a key driver of traffic growth within 3 to 5 years

54

416

633.2

2007 2012 2015

Worldwide Mobile Internet Devices(Millions)

CAGR%

36%

Worldwide Notebook/Netbook Shipments(Millions)

124.7149.6

177.9202.4

230.6

20.6

32.0

39.0

46.3

51.7

145.3

181.6

216.9

248.7

282.3

14.2%

17.6%18.0%

18.6% 18.3%

2008 2009 2010 2011 2012

Netbooks/UMPCs

Notebooks

Netbooks/UMPCs Share %

CAGR%

25.8%

18.1%

16.6%

MIDs cover a wide range of devices: Smartphones UMPCs Netbooks Portable navigation

devices E-book readers Portable media/MP3

players Handheld gaming devices

MIDs have Internet access via WLAN (WiFi) or WWAN (3G or better)

MIDs cover a wide range of devices: Smartphones UMPCs Netbooks Portable navigation

devices E-book readers Portable media/MP3

players Handheld gaming devices

MIDs have Internet access via WLAN (WiFi) or WWAN (3G or better)

Consumer Electronic DevicesThere are a wide range of device categories, across the mobile, in-home and in-car environments, that are wirelessly enabled or will be soon

Widescreen Personal

Media Player

Home Network Storage

NetBook/Tablets

• Portability• Large Capacity - 320GB• All forms of media playback• DVR capability• Sold online, big box and boutiques

• Home media server for photos & movies with network WLAN & Internet connectivity

• Storage expandable and robust• Sold 3rd party online and big box

• Small full-functional computers• Network WWAN capable• Communication-focused – Integrated web-cam• Sold direct, 3rd party online

• Niche device for reading• Network WWAN capable• Ancillary network-based features• Sold by 3rd party online and big box• Subscription model

• Digital cameras with geo-tagging capability and photo upload capability over the air

• Photo location integrate with mapping software for creating and sharing stories

DigitalCameras w/ GPS

NetworkedPortableGaming

Smart Phone

Smart HomeDevices

In-VehicleMultimedia

• Portability & Wi-Fi• Thousands of game titles• Internet browsing and chat

capability• Sold online, big box

• Ultra portability• WWAN & WLAN connectivity• Superior form factor for text input• Integration of portable media• Extensible OS for 3rd party apps• Sold via service provider

• Home monitoring & security• Energy and climate control• IP-based devices for remote

viewing and recording• Sold direct from service providers

or online for DIY kits

• Design specifically for in-car entertainment

• Wi-Fi and Bluetooth connectivity• Available from car manufacturers

and aftermarket vendors

NetworkedBlu-Ray

DVDPlayer, Roku & SlingCatcher

• High definition disc play• Internet integrates with home

media center• Streaming media capable• Push/pull of information & user

generated content

E-book Reader

All four U.S. carriers have made significant investments in strategic relationships or network improvements to capitalize on this emerging market

GE developed Wi-MAX-based smart meters that were available as of 2009

GE Healthcare signed an agreement with Sprint for wireless networks, services, and software at six Texas hospitals (April 2009)

AT&T signed an exclusive deal with Jasper Wireless to facilitate connection of consumer and M2M devices to their network (May 2009)

KPN became Jasper’s preferred European network operator and exclusive operator in Belgium, Germany, and the Netherlands. KPN has also made an equity investment in Jasper (Q1 2010)

AT&T announced a developer connection kit to facilitate deployment of new M2M devices on their network (March 2010)

Sprint and M2M DataSmart have a multi-year agreement to facilitate the deployment of M2M devices on Sprint’s network (September 2009)

Vodafone, Verizon, and nPhase announced a strategic alliance to accelerate adoption of M2M technologies (February 2010)

Verizon reported in Q1 2010 that 7.3% of 101 million wireless connections are M2M

Cadec Global, provider of fleet management solutions, began an M2M partnership initiative with Aeris in February 2010

T-Mobile and Sierra Wireless agreed to work together on product development, marketing, sales, and deployment of M2M solutions, starting in Germany (September 2009)

Diverse rate plan needs of different M2M devices and services means increased complexity on the part of wireless carriers

Evolving network technologies (GSM vs. CDMA, LTE vs. WiMAX) create complex choices for device manufacturers

Supply Side Challenges

Operation/running cost was by far the highest concern of adopters surveyed

Data integration/ interoperability, initial/ installation cost, and development of new support structure followed in importance, but were still considered critical challenges

Demand Side Challenges

Sources: Wireless Week Magazine “A Web of Challenges, Connections: M2M,” 2/1/2010; Beecham 2008 M2M Adopter Survey

0 20 40 60 80 100 120

Privacy & Security Issues

Reliability of Technology

Choosing Right Partner/ Supplier

Regulation &/or Liability

Gaining Successful Adoption

Complexity/ Risk Assessment

Development of Support Structure

Initial Cost/ Installation

Data Integration/Interoperability

Operation Cost/Running

4%

8%

10%

14%

17%

17%

19%

21%

23%

24%

25%

26%

41%

0% 10% 20% 30% 40% 50%

Changing the M2M acronym

Eliminating channel conflict

Creating app. Developer awareness and interest

Forming partnerships with "machine" manufacturers (OEMs)

Establishing cooperation between carriers

Overcoming market fragmentation

Reducing sales cycle time

Identifying business models

Forming partnerships between operators and HDW vendors

Supporting open access network policies

Reducing M2M industry value chain complexity

Improving device certification process

Educating the market

GPS tracking and security are the most likely uses of M2M communication for SMBs based upon our survey What are the most likely uses for M2M communications at your location? (select all that apply) Do you have any ideas concerning M2M that you would like to see developed?

17%

17%

32%

34%

0% 10% 20% 30% 40%

Machinecontrol

Assetmanagement

Safety andsecurity

Tracking andnavigation

Most likely uses for M2M communications Selected Comments from the interviewees

• “The current M2M applications would provide the resources that we are looking into at this time such as tracking fleet vehicles”

• “Implantable chip to allow tracking access to sales reps. Make sure they work a full day”

• “Read tanks remotely”• “Not familiar with the applications. Am

taking a seminar on this right now”• “Able to incorporate with in store computer

systems. Such as Open Table or Hot Schedules”

• “Up - to - the minute information regarding wine barrel system pressure after harvest transmitted from remote location (i.e. form California to France or vise versa)”

• “Automation of commercial food production equipment, room temperature control”

Source: AV&CO primary research survey, n=500

Location-based messaging and monitoring has many potential applications

Customer Select Applications

Government

• Natural disaster/crime/safety alerts• Crowd monitoring/management• Terrorist tracking and monitoring• Amber Alerts (improved response with tracking abducted child)• Monitoring of Check Points (e.g., borders, battleground check points)• Communication for military personnel family (e.g., birth announcements)

Commercial

• Mobile device management• Monitoring foot traffic at major events• Customer notifications and communication• Healthcare applications (monitoring, emergency response locating, messaging)• Order completion• Weather/safety alerts

Education(select vertical)

• Weather Response: school closures• Student/ faculty notification of school class cancellation, room/ building changes• Communication of registrar and student finance deadline requirements• Tracking school buses/traveling teams• Crime/ safety alert

Parents • Family member location• Controls on Illicit text messages, emails, instant messages or voicemails received by children

• Key features across all applications include two-way, location-specific communication and monitoring• Opt-in and Opt-out models are available and have significant impacts on specific applications

Types of MRM Solutions

Field Force Management• Business need: to manage the field

workforce in order to reduce business costs and maximize ROI

Field Service Management• Business need: to manage the

delivery of products and services to customers in order to maintain strong customer service while keeping business costs to a minimum

Field Asset Management• Business need: to manage fixed and

mobile assets in order to ensure utilization is maximized and therefore minimize costs

Mobile Resource Management (MRM)

MRM is a category of business solutions that enables companies to more effectively manage mobile workers, mobile tasks and mobile assets

Industry Drivers

Attractive, hard dollar ROI• Benefits include reduced overtime, fuel

and labor costs due to increased dispatch and scheduling efficiencies, improved job completion rates, tighter control over spare parts inventory, and higher insurance policy discounts

Affordable entry points• The ability to monitor and track

employees and assets from IP-connected devices and the growth of low-cost GPS-enabled mobile devices has increased affordability and flexibility

Competitive advantage with customers

• MRM can positively impact a company’s customer satisfaction and customer retention metrics through more timely and prepared technicians and increased first call resolution rates

Key Purchase Criteria

Features and Functionality• GPS location, tracking, monitoring• GPS navigation and optimized

routing• Timecard recording and reporting• Work order management• Alerts and geo-fencing• Data collection and reportsIntegration and Customization

Options• Simple configurations: back-office

integration not required• Configurations and integration:

MRM software is configured with back-end systems

• Complete customization: open developer tools and APIs for customized development

Cost Components• Mobile devices• Monthly carrier data subscription• MRM application software• Systems integration work

Strategic Implications in the M2M Ecosystem

• Given the industry fragmentation – how will industry evolve?

• Reliance on carriers and other third parties to provide network access – how can carriers play a larger role?

• Who is positioned to win in the space?

Contact Details

Michael Grossi, Director

Michael is a Director with Altman Vilandrie and Company and focuses on wireless and digital media sectors. Prior to AV&Co, Michael was an SVP & GM with Helio, a highly innovative MVNO

in the U.S. While at Helio, Michael led all Strategy, Business/Corporate Development and was GM of the Mobile Data Services team responsible for both the data P&L and product

development.

Prior to AV&Co, Michael was a Vice President with Adventis, a strategy consultancy, and a leader in the wireless practice and has 10 years consulting experience. Michael has led many strategy engagements for his clients spanning all facets of the wireless value chain including equipment

manufacturers, service providers and content providers.

Michael GrossiDirect 617.753.7209Mobile 617.480.9389mgrossi@altvil.com

Altman Vilandrie & Co.53 State Street37th FloorBoston, MA 02109Telephone 617 753 7200Fax 617 439 4290www.altvil.com