Parsing Kore’s M2M connections

The world of machine-to-machine communications is no longer just about vehicle tracking applications, Kore Telematics is fond of saying. But according to its own numbers, 70.7% of the M2M device connections Kore manages still connect GPS devices in vehicles and other assets. What gives?

The answer, explained president and chief operating officer Alex Brisbourne, is that the vehicle tracking sector of M2M has evolved. Once used primarily as a means of pinpointing a truck or car on a map, the in-vehicle module is now used for a range of functions: digital dispatch and navigation, point-of-sale transactions, in-vehicle entertainment, security and even remote video monitoring, he said.

Brisbourne estimates that the 30% of the connections on Kore's networks are used for simple vehicle location. And those applications have become so sophisticated they’ve penetrated into far more vehicles then long-haul trucks. They’re finding their ways into taxis, buses, delivery and service vehicles and into ordinary cars like those using Ford’s Synch technology.

“When vehicle location was just track and trace there were only 100 KB of data flowing from individual connections,” Brisbourne said. “Now they’re using 10-to-20 MB a month. It’s not fair to say these are just vehicle tracking applications anymore.”

Several years ago, Kore’s networks were dominated entirely by those types of simple tracking apps, but since then its business, and the M2M sector’s in general, has blossomed into numerous other verticals. Utility smart grids now account for 8.3% of connections, personal monitoring and tracking devices such as those used in telemedicine account for 8.7%, and point-of-sale and credit card applications make up 6.1%. Kore is even connecting more than 1000 vending machines to its wireless network.

Brisbourne believes that Kore’s connection breakdown is fairly similar to the M2M industry’s at large except in two areas. Kore focuses more on the medical and telemedicine space — still an emerging telematics business — than its competitors, but it also has very little exposure to the second-largest sector in M2M, premises security — making up about 2.6% of its connections.

The only major sector that isn’t included in Kore’s breakdown is the consumer space: ebook readers, tablets like the Apple (NASDAQ:AAPL) iPad and other direct-to-consumer gadgets are emerging with M2M modules embedded. But that’s a market that M2M specialists like Kore are mainly ceding to the operators, Brisbourne said. “They understand the one-to-one relationship with the consumer,” he said.

Kore doesn’t reveal its total number of connections, though Brisbourne said that both the overall number and revenue from each connection have grown as the M2M market has expanded into more businesses and the sophistication of applications has increased.

What surprises Brisbourne most is how M2M devices have developed to fit their application needs specifically. Rather than witness an industry trend in which M2M devices become generic, hundreds of new devices have emerged tailored for their uses. Kore this week announced it certified its 500th device for use on its network. Of those devices, about 100 are modules or generic M2M radios designed to be integrated into an existing machine or plugged into the back of one through a serial port. The rest are custom-built to their application, whether they’re taxi payment terminals, medical monitoring devices or package tracking scanners.

“There’s a trend toward more discreet devices,” Brisbourne said. “The devices are very much designed for their purpose, taking form factor, packaging and environmental conditions into account.”

Five years from now, Brisbourne expects the device and application makeup of its connection base to change, but not change radically. There will be a huge boom is connected consumer electronics, but on the B2B side, he expects the innovation in vehicle applications to continue, giving some ground only to a big leap in health care and medical connections.

While the utilities have been targeted as one of the big beneficiaries of M2M, Brisbourne said it will take more than five years for those applications to become commonplace. “I’m an ardent supporter of the smart grid, but it’s a long road,” he said.