Ok, while my kids think that I am old, I am not really THAT old.  I wasn't in the business world yet when the PC boom started, so I can't speak intelligently on how it was in the "early days". However, I can be confident to say that it likely started out with a lot of entrepreneurs who risked everything to start their own company, such as in the case of companies like Cisco, Microsoft and Apple.  Their success brought larger technology companies into the mix…companies who figured that they simply had to get into this exciting, new market (once the market got to a critical mass that would allow them to see enough growth to justify their time/investment, of course). 

Eventually, those initial startup companies either got sold or grew to become giants of their own, often by acquiring other startups.  Now, the main PC world is controlled by a number of very large companies, with niche companies working on certain markets that aren't covered by those behemoths. 

Fast forward a few decades....Am I the only one who thinks that history may repeat itself with M2M?

For many reasons, this market is completely ripe for consolidation:

•  Size of the current "market leaders"  As a business owner, you always think of your company as being huge.  I am sure that most companies in the M2M space feel the same.  However, even the largest companies in the M2M space have market caps of less than $300M, making them "chump change" for truly large companies.  A company like Cisco would be able to buy the top 10 biggest companies for less than what they would profit in a single month or two....not a huge investment.

•  Current growth opportunities  Sure, the M2M market is a lot smaller than the tablet or smartphone space, markets that also have a fair amount of growth.  Where the two markets differ is the incredible investment that tablets/smartphone development and sales require and the incredible ability to use M2M solutions to leverage sales of other products.  Consumer products (yes, that is what smartphones are, even if businesses use them) need to be refreshed very often, and require massive marketing campaign dollars to stand out from your competitors.  As well, M2M solutions are extremely appealing in many circles due to the amount of data (and the quality of data that they produce).  This appeals a lot to CRM system resellers, ERP platform providers, data storage companies and any other large IT players who want to expand away from their current base.

•  Lack of standardization  Ok, I have written about this a lot, but it still irks me.  In a market where most CEOs know each other, I am shocked that we can't come to an agreement on how we can get a very small amount of devices to communicate with each other.  Well, one good thing about a large player (or two) coming into our M2M world is that this will change, and change quickly.  If IBM, Cisco or SAP puts their foot down, the market can move towards standardizing on a certain protocol or system.  This means that a company or two COULD find themselves as the market standard for what we all agree is a booming market.  This HAS to appeal to many companies.

•  Limited growth in many other areas   I can't imagine that the world of IT is a great space to be at this point.  Sure, there is growth in the developing world for many routers, software packages and tablets, but there are also a lot of regional players who are making it tough to compete profitably.  So, if you are the CEO of a multi-billion dollar customer, whose product is used by 90% of the Enterprise world already, what do you do for growth?  Your only choice is to get your existing customers to buy more products from you and to find ways to get into new markets (for large Enterprise software companies, that can mean finding ways to appeal to the SMB base, as an example).  M2M helps solve both of those growth initiatives.  It provides an exciting level of real-time data…data that has to be sorted and formatted into ways that simplify decision-making... something that many Enterprise software companies do very well and could upsell their existing base to do.  Appealing to the SMB market can be tough for these organizations, but M2M solutions are ideal in the cloud, which is a strong initiative for many large IT companies who are looking to massively grow their cloud services offerings.

So, which types of companies are the most likely to be acquired and by whom?

M2M hardware manufacturers by large IT players  I imagine that companies like Texas Instruments and Intel are keeping an eye on this space.  And sure, these two companies do have some play already in our space (I imagine that TI has some components in current M2M hardware and Intel does power many of the devices that are used in devices that M2M hardware communicates with).  However, it isn't hard to imagine that one of these companies could easily step in and purchase one of the existing module/component manufacturers to bring it into their mix.

M2M middleware software platforms by large CRM / ERP companies   This is quite obvious, as most of these relationships exist already.  Companies like SAP and Oracle have signed partnerships with a few of these companies, and it is well known that Digi has a strong relationship with many players in this space, further helped by their recent acquisition of Etherios. So, it makes sense that these companies could be acquired by their current partners.

Current solution providers by large IT service companies  It is no secret that IBM has been involved in a few key areas of the M2M space, namely in the Smart Grid space among others.  It doesn't take a lot of a jump to see them looking to acquire companies in areas such as Fleet Management, Oil and Gas, SCADA and Finance.  This could trigger other large SI to do the same.

Some of you may recall the hunter and prey predictions I blogged about last fall. It is always fun to speculate and that's all this really is. Let me know your thoughts and remember Novotech is ready to assist with your M2M needs. Whether you’re looking to control, track, monitor or back-up, Novotech has the solutions and products you need. View our Line Cards and let us know how we can be of assistance.

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