“Machine-To-Machine Communications: Still On the Rise” Duncan Stewart, Deloitte

Aug 12, 2011 | Corporate Member News

R2D2 NEVER returns my calls! Tell me machines don't feel pain - I dare you.

 Deloitte’s 2008 TMT Predictions report was around 60% accurate, according to our annual report card. But one of the less successful Predictions was our projection of a rapid rise in Machine-to-Machine (M2M) communications. These are cellular radios connected to machines and used for sending and receiving data. Think vending machines that say when they are empty, or e-readers that can download books. I was one of the co-authors of the 2008 TMT Predictions, and we talked about the potential for billions of machines to start connecting to the global cellular networks.

That didn’t happen in 2008. Or in 2009 or 2010 either! The total number of M2M modules sold since we wrote our Predictions is in the tens of millions, and some analysts don’t see the market reaching 100 million units until 2015.

That doesn’t stop some more enthusiastic commentators from projecting much bigger numbers. In one very recent article, the author talks about a potential M2M market of 7 trillion devices, with a 2020 market of over 50 billion. The headline is “M2M is bigger than social networking”.

Wow.

I suppose anything is possible between now and 2020. But I have some really good data that makes numbers in the tens of billions look awfully unlikely.

The world’s leading M2M module manufacturer happens to be Canadian, and a former Deloitte Technology Fast50 winner. In their most recent quarter, they broke out M2M sales and yearly growth rates. Although overall M2M sales were down (due to a windfall order from last year that wasn’t repeated) if you exclude that one big customer, the division is growing 14% year over year.

That’s a great number! Lots of technologies don’t grow anywhere near that level.

But if we assume that 2011 M2M global module sales will be about 50 million units, then just to get to 100 million in 2015 requires growth to accelerate to about 19% annually. And to meet the 2020 market of 50 billion, the annual growth rate would need to be 116%!

That seems pretty unlikely to me. (There are very few tech markets that more than double every year for a decade.)

Our 2008 Predictions may have been too aggressive, but I’m still a big believer in the space. However, targets need to be grounded in realistic assumptions. And that means tens or hundreds of millions of M2M modules in the near term…not billions or trillions.

What is your take on the future of M2M communications? Will growth dramatically accelerate, and start doubling every year? Will there be billions of connected machines by 2020? Should I start working on my time machine so I can go back to August 29, 1997 and destroy Skynet?

This article originally appeared on Deloitte’s iDeas blog – check it out here

To learn more about Duncan Stewart click here.   

About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte’s approximately 170,000 professionals are committed to becoming the standard of excellence.

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