INSIGHT Mobile Operator Machine-to-Machine Solutions Add Value to the Health Industry
Suzanne Hopkins Carrie MacGillivray
As mobile operators investigate growth strategies, machine-to-machine (M2M) solutions are emerging as a focus for future opportunities within their B2B organizations. Monetizing the opportunity of M2M solutions across verticals is a challenge operators are attempting to overcome. At the same time, the health industry is confronted with stark challenges including cost constraints, federal approval cycles, regulation changes, and health delivery models. As a result, the industry has increasingly looked toward M2M solutions to help drive efficiencies and better quality patient care. The prospect for widespread deployments of cellular M2M solutions is limited, but opportunities do exist in the select pockets of the healthcare segment. IDC examines these trends and presents the following highlights from its analysis: IDC expects M2M (cellular) connection revenue from the health sector to reach $67.9 million in 2012, an increase of 80% from 2011. Revenue for the healthcare M2M segment is expected to grow at a five-year CAGR of 67.3% to reach $493 million in 2016. The aging population is putting increased pressure on the healthcare system, especially as more people are surviving with chronic diseases and the importance of preventive care is increasing. Solutions to manage this phenomenon are key items on the agendas of healthcare providers. These providers are increasingly looking at cellular M2M solutions as a viable solution to some of these issues. Conversely, for many M2M use cases within the health industry, alternative technologies can be used. Most notable are smartphone applications, which can communicate similar information but can be introduced into market faster.
www.idc.com Global Headquarters: 5 Speen Street Framingham, MA 01701 USA P.508.872.8200 F.508.935.4015
IN THIS INSIGHT
This IDC Insight examines the role machine to machine (M2M) plays in the health sector and the opportunity that exists for mobile operators in the United States. It evaluates current market conditions, considering the demands of health providers and health professionals while looking at the implementation of solutions and the impact of alternative technologies. The analysis in this document provides a snapshot of the existing landscape and outlines the future trajectory of M2M connections within the health industry.
Filing Information: August 2012, IDC #236365, Volume: 1 United States Mobile Enterprise Services: Insight
However. solutions providers. there are high costs associated with increased data traffic on the mobile network (i.2 million — of AT&T's postpaid subscriber base were smartphones. The increase in smartphone adoption. has helped operator revenue continues to grow.Methodology
The research and analysis in this document are based on both primary and secondary research sources. operators are investigating alternative revenue opportunities. Within the M2M market. As a result. IDC sized the M2M market by analyzing mobile operator financial statements. In the past few years. Note: All numbers in this document may not be exact due to rounding. This document examines the M2M market as the connection of machines using a cellular connection (2G. health. IDC forecasts there will be approximately 85. which has higher ARPU rates than traditional voice connections. nearly 54% — 41. Massive spending in healthcare is expected over the next few years. such as M2M. in reality. however. quarterly and annual results by the mobile operator community. however. This document limits its scope to B2B connections as opposed to B2C M2M opportunities (focused on the consumer market). However. most IT markets were negatively impacted by the economic recession. nearly 47% — 41. and low bandwidth requirements (in the majority of instances) to name a few. For example. IDC has a bearish outlook on the future trajectory of cellular M2M connections in this industry. device manufacturers. The smartphone market continues to be the leading cause for the growth in data consumption. In 1Q12.
Adopters of M2M solutions range across a variety of industries. including health. a variety of other technologies can be used to connect machines. For an operator. Bluetooth. and other key players in the M2M ecosystem throughout the year. mobile operators have investigated new sources of revenue as they are confronted with the decline of their legacy markets (voice revenue) and challenged by how to monetize increasing levels of data traffic. typically longer contract periods. M2M connections have low acquisition costs. to supplement their growth strategies. and IDC analyst conversations with mobile operators. 3G. and even wired connections.2 million — of Verizon's postpaid subscriber base were smartphones. Similarly. vertical pure-play vendors. There is expected to be an unprecedented number of M2M connections in the future. the smartphone market was largely insulated.2 million wireless M2M connections in the United States by 2016. energy. Certain verticals have been labeled as high-growth opportunities. including (but not limited to) automotive. or 4G).
. transportation. limited spectrum. network buildout costs. end users. mobile operators will generate a very small portion of this spending in this sector from M2M cellular connectivity. acquisition costs).e. and manufacturing.. including WiFi. In the past few years. The number of prospective M2M applications within the health industry appears to be endless. There are several reasons why a mobile operator would want to support M2M connections over its network. ZigBee. when compared with other IT markets.
and research. This revenue is associated with services outside of the wireless data connection. Despite the massive spending in healthcare. Census. For example. To provide
.9 million in revenue in 2012. Each of the operators incorporates some (or all) of these strategies to ensure success within the M2M healthcare market. Operators choose partners that offer existing solutions to the health industry. some operators prefer to not develop deep vertical expertise and would rather outsource full solutions to partners. A sampling of operator strategies incorporates vertical experts. IDC estimates the industry will generate $67. Massachusetts. Value-added services. Yet each of the operators is employing different strategies to influence the M2M healthcare market. equipment. spending on healthcare. which helps reach a larger customer base and gain critical buy-in from decision makers. was $2.there are multiple revenue streams that exist within the M2M business model. and Verizon has an M2M Innovation Center in Waltham. This is the revenue extracted from connecting devices and transmission of data over the network. However. Third. RACO Wireless is the preferred provider for T-Mobile.S. the connection and value-added services: Connection. California. handing off deployment and implementation components to its partners. to foster innovation. Second. operators offer services related to but not limited to device enablement. security services. business intelligence and analytics.5 trillion in 2009 and is projected to grow at approximately 5% per year over the next decade. Through partnerships or in-house projects. revenue streams for mobile operators can be broken down into two pieces. mobile operators will generate a very small portion of spending in this sector from M2M cellular connectivity. operators understand the strategic benefits of not only using internal resources but also leveraging partnerships with vertical market leaders. Finally. AT&T has an in-house chief medical officer (CMO) as well as a full team of medical experts to help the operator match solutions with the diverse needs across the healthcare value chain. and innovation centers.
The Health Opportunity for Mobile Operators
The M2M healthcare segment is labeled as having high-growth potential over the next few years. mobile operators have launched centers that allow developers and industry experts to experiment with solutions. consumption management. Many mobile operators are dedicated to the health sector to ensure its success. Sprint launched an M2M Collaboration Center in Burlingame. application development. In more detail: First. some mobile operators have in-house vertical experts. to understand the requirements. For example. Simplified. including services. the revenue potential depends on the types of services offered. T-Mobile is primarily focused on the connection aspect of an M2M solution. Each of the mobile operators has targeted different solutions to gain market share. outsourcing. and professional services. partnerships. According to the U.
M2M Health Solutions
There is a wide range of M2M health solutions currently offered in the market.
are impacting the adoption of M2M solutions in the health industry... With M2M solutions. and with the introduction of M2M solutions.
. hospitals.9 million in 2012 to $493. The value chain in the health industry is complicated. payers (i. it is critical to understand how the healthcare industry functions.e. service delivery providers. As more businesses insert themselves into the mix. the FDA). and healthcare systems).e. there has been a vast array of players required for the delivery of healthrelated products and services. and the end customer/patient. medication reminders) Asset management of healthcare providers' inventory Medical imaging solutions
To fully understand the opportunity for M2M solutions. Penetration and adoption rates vary across each of the M2M segments because each segment is impacted by a different set of barriers. some of the most-common cellular-enabled M2M healthcare solutions today are: Remote patient monitoring Remote device diagnostics Clinical trial monitoring Home healthcare solutions Telehealth mHealth (i. Because the health industry is a highly regulated industry. healthcare providers (including physicians. application developers.e. insurance companies). the value chain expands even further to include mobile operators. medical device manufacturers. The healthcare M2M market will increase from $67. time to market for solutions slows and complexity increases.4 million in 2016. and other contributors to M2M solutions. associations (i. discussed in the sections that follow. American Medical Associations [AMA]).5 billion in 2016.context to the wide range of solutions. the value chain gets even more convoluted. traditionally..
Adoption: Drivers and Inhibitors
A number of factors..e.
IDC believes the total M2M market will significantly grow over the next few years — increasing at a five-year CAGR of 37% — reaching $2. The existing value chain includes the government (i.
Operational efficiencies needed. offering plans that best match the needs of their customers based on the actual health data of individual consumers. Cellular coverage across the United States is virtually ubiquitous. however. the younger generation are already comfortable and reliant on technology for other services.Drivers
Drivers leading to the adoption of cellular M2M health applications include the following: Cost reduction initiatives. offering consumers affordable health insurance plans. interest and demand for M2M health applications will continue to rise. with the use of M2M. insurance companies and health providers will need to develop innovative solutions to comply with these new country regulations. driving market demand for new solutions in the future. With the law. Solutions to manage this phenomenon are being raised to the top of discussions and the agendas of healthcare providers. By leveraging M2M solutions — such as pay as you drive (PAYD). which reduces costs and opens up space in the hospital. For example.
There are a number of inhibitors affecting the market as well. alternative pricing systems will be required. thereby making other technologies (such as WiFi) inappropriate. all individuals must maintain insurance coverage or pay a tax penalty. thereby reducing costs. implementation of these solutions will be slow in the short term. Demand for improved delivery services. M2M can offer solutions to hospitals that monitor patients from their home instead of at the hospital. Aging population and chronic diseases. which is currently used by auto insurance companies — health insurance companies can customize insurance rates. Thus the younger generation are more likely to adopt (and demand) remote telemedicine business models. Some of the major inhibitors within the health segment are: Payer debate: Who is responsible for paying for these solutions? As M2M solutions are developed. Patient Protection and Affordable Care Act (PPACA). Some patients need constant monitoring. Hospitals and the overall health industry are confronted with astronomical costs. End-user expectations. The aging population is putting increased pressure on the healthcare system. M2M can offer hospitals and healthcare providers a strategy to more efficiently manage their assets. The healthcare reform act was signed into law by President Barack Obama in March 2010 and upheld by the Supreme Court in June 2012. inventory analytics will improve a hospital's ability to refill supplies in real time. especially as more people are surviving with chronic diseases. a debate of who pays for the solutions introduces
. As a result. As insurance companies are confronted with changes caused by PPACA. Undoubtedly. thus decreasing inventory costs. Further. Preventive care measures will also reduce the number of critical patients.
For example. alternative solutions can be used. In some cases. In these situations. medical devices need to be built with cellular components. targeting customers with solutions leveraging their smartphone may prove more valuable than investing in another application and device. Compared with an M2M application (which would require a module/device. smartphone applications can be introduced to market much faster. The threat and concern of this exposure will be a significant inhibitor to mass adoption. thus delaying implementation of new solutions. For many of the high-profile use cases of M2M within the health industry. In many cases.complexity into the healthcare business model. Other challenges related to this market include the following: Alternative connectivity is good enough. ZigBee. The health industry is extremely regulated. about
. this is evident as a hospital will most often already have WiFi or wired connections available. providers must ensure that the information is delivered. Since the installed base of smartphones in the United States continues to rise. The addition of new components can drive up costs. Health information distributed via M2M solutions can be propriety and critical information related to the care of a patient. Should it be the insurance companies or the end users (consumers)? How do doctors and healthcare providers impact the types of solutions adopted? Health information requires QoS. Alternative solution: Smartphone applications. Resource issue and competing priorities. smartphone applications can communicate comparable information such as medication reminders and monitoring statistics. and patient security. Costs and cost effectiveness. Within a hospital. within certain time constraints. and an application). the industry has been able to leverage RFID strips in the past and can continue to use this technology (or NFC) for many M2M applications. The list of inhibitors outlines critical reasons for IDC's expectation of slow adoption of M2M services in the health industry. a cellular connection is not required. patient security is of top concern. Significant approvals from the FDA and other organizations are required before going to market with new medical devices and services. and is secure. To offer M2M services. this information is life critical. The ROI of these medical devices is also uncertain at this time. To use a cellular connection. a connection. thereby decreasing adoption. or wired connections can provide connectivity at the same level of service. In addition to regulation and policy issues. In some cases. It is important to have the appropriate level of security to ensure patient data is not exposed. Liability concerns may inhibit some value-added solutions in the short term. given staff shortages. time to market for medical devices is long (two years). Further. leveraging cheaper connections such as Bluetooth. Regulation. Questions arise. Furthermore. policy issues. This is an industry plagued with staff shortages and tight budgets. the ability to deliver information at the necessary QoS levels inhibits adoption rates. WiFi.
it will be important to establish vertically specific relationships. that do not have the same level of regulatory and liability issues. However.
Advice for Mobile Operators
Based on the analysis discussed throughout this document. plagued with governmental regulations and policies. This will help combat QoS issues that currently exist. the ROI might not be clear to decision makers that have competing IT and patient care priorities during this time of change. There is an opportunity for operators to leverage the technologies and systems related to managed mobility to their M2M portfolios. switching costs within this industry can be very high. Furthermore. confusion about M2M is prevalent.
. To succeed. Many mobile operators are currently building out extensive managed mobility portfolios. Solutions can be offered through technologies such as WiFi and wired technologies. with healthcare regulatory and policy makers as well as healthcare providers. and leverage the information to make changes. Established relationships and arrangements will make it difficult for mobile operators to insert themselves into the value chain. while M2M may help streamline some of these changes. Leveraging those existing relationships will be critical for long-term success. where they are helping enterprises manage employee devices. Finally.who will manage the connection. Doctor and insurance company buy-in. These relationships will help operators navigate the labyrinth of liability and policy issues and will also offer operators insight into alternative solutions. taking full ownership of managing M2M devices and machine connections for customers. mobile operators must have an internal team dedicated to the success of M2M health solutions. mobile operators will be able to understand the requirements of the market and match those needs. Armed with vertical expertise. for example. In the M2M ecosystem. partnerships are critical. make sense of the data compiled. convincing decision makers to move to and implement a new system can be difficult. Since suppliers and buyers have these established relationships. mobile operators should not limit themselves and should instead look to alternative technologies and solutions outside of the cellular network. Mobile operators have strong relationships with device manufacturers. IDC offers the following suggestions for long-term success related to mobile operators offering M2M services in the health industry: The health industry is a complicated environment. such as preventive products and services. There are many opportunities to offer value-added services to the healthcare industry using the cellular network. The health industry is undergoing significant changes.
IDC's Worldwide Machine-to-Machine (M2M) Taxonomy. and conferences. March 2012) IDC MWC Mobile Industry Dynamics. providing written research. Mobile operators must understand their clients' needs and then customize a solution to match those needs.4952. Reproduction is forbidden unless authorized. 7988 (or +1. Buy-in among healthcare decision makers will be a deterrent for many M2M solutions. May 2012) Mobility in the Enterprise: Key Initiatives for 2012 (IDC #233970. August 2012) Verizon Enterprise Solutions Industry Analyst Meeting 2012: Creative Disruption (IDC #234838.508. telebriefings. Visit www.com/offices. March 2012) M2M Market Evolution (IDC #233989. Remaining flexible will help clients understand and extract real value from an M2M solution. visit www.idc. March 2012) Sprint Takes Its M2M Solutions Global with Orange Business Services (IDC #lcUS23317712. All rights reserved. To view a list of IDC offices worldwide.7988) or sales@idc. 2012 (IDC #236136. December 2011) Mobile Operators Help Enterprises Embrace Consumerization with Dual-Persona Device Solutions (IDC #231336. analyst interactions.988.
. February 2012) Tablets in the Enterprise: Opportunities and Challenges for Businesses and Mobile Operators (IDC #231153. ext. 2012: Multiple Perspectives on a Shifting Industry Landscape (IDC #I52U. Copyright 2012 IDC.com for information on applying the price of this document toward the purchase of an IDC service or for information on additional copies or Web rights.idc.343. November 2011)
This IDC research document was published as part of an IDC continuous intelligence service. Please contact the IDC Hotline at 800.com to learn more about IDC subscription and consulting services.