MOBIQUANT / mSecLabs: Yankee Group Enterprise Mobility predictions 2014 société

December 2013
2014 Predictions: Mobility
Hits a Tipping Point as
Markets Consolidate, Players
Build Out Capabilities
Predictions
TABLE OF CONTENTS
2014: Consolidation Hits Many
Mobility Markets 2
Predictions 4
Further Reading 17
The Bottom Line
Highlights
• Mobile video viewing levels will equal those of PCs. A combination of factors
(better devices, faster networks and more affordable data plans) is leading people to
spend more time watching video—and not just short, viral content—on their mobile
devices. In addition to reaching PC levels, mobile video viewing by some measures
will begin to approach that of TV and DVR.
• Consolidation will come to the mobile point-of-sale (mPoS) market. For several
years, the mPoS market has promised big things for the micro-merchant. But with an
unabated stream of new entrants to the market, something’s got to give in 2014. We
predict a surge of consolidation as several players look to exit the market.
• Kony will break out the “For Sale” sign. The time of the mobile enterprise application
platform (MEAP) has come and gone. As new, agile app development players steal the
spotlight, traditional vendors have a decision to make. For Kony, that means putting itself
up for sale as it looks to join the likes of Antenna Software as an acquisition target.
• NFV will be the new black for mobile network operators. Increasing traffic and
demand for highly performing networks have operators looking for new ways to
deliver. By this time next year, we believe 70 percent of mobile network operators
will have a network functions virtualization (NFV) trial in place, while another 20
percent will have solutions already implemented.
• Contrary to popular belief, small M2M deployments will pace the market. Although
they may not grab the headlines of government-sanctioned, large-scale smart meter
rollouts, we believe the small-scale machine-to-machine (M2M) implementations will
drive the market in 2014. Already today, 66 percent of IT decision-makers we survey
say their planned deployments will have no more than 499 devices.
The mobile ecosystem has been experiencing dramatic growth for a number
of years now. But in 2014, several segments—namely mobile commerce,
mobile app development and mobile broadband—will reach a tipping point as
consolidation works to pare down the market. We expect to see new entrants
and established players alike exit their respective markets. Elsewhere, the
onward march of mobility into everyday lives will continue unabated.

2014 Predictions: Mobility Hits a Tipping Point as Markets Consolidate, Players Build Out Capabilities December 2013
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2014: Consolidation Hits Many Mobility Markets
This year will be remembered mostly as a positive one for
the mobile industry. Deployment of 4G networks continued
at a fast pace. Though economic challenges continued in
several markets—most notably Europe—customer demand
for mobile devices and services held up well. In regions such
as the U.S., network operators demonstrated that if the
proposition and network performance is good enough, end-users
are willing to pay more. Of course, 2013 also saw big
things for the mobile commerce and apps spaces. In terms of
the former, a number of new players jumped into fray with
mobile wallets (both NFC and QR code), while retailers began
to recognize the need for loyalty and engagement programs.
As for apps, this year marked the beginning of the end for
traditional enterprise development platforms as companies
now require more agile approaches.
As we look ahead to 2014 several of our predictions focus on
mobile data, as well as MNOs’ attempts to deliver enhanced
user experiences with profitable services. Though operators’
traditional service revenues (voice and messaging) will
continue to come under pressure from over-the-top (OTT)
applications, connectivity revenues will remain strong. Video
will be a growing contributor, and we even expect that in the
coming year mobile video watching will match PCs and begin
to approach DVR/TV levels. Meanwhile MNOs will continue
to respond to the growing OTT threat, and we expect more
than half will have deployed at least one of their own OTT
communications apps by the end of 2014.
To cope with the growth in demand for data, MNOs will
continue to invest in enhancing their network infrastructure
and operational efficiency. Demand for more effective
network management and planning tools will increase. For
example, centralized self-optimizing network (SON) tools
will be in big demand and will lead to consolidation among
solution vendors. MNOs will also begin to invest in solutions
that deliver operational cost savings. With this in mind, we’re
predicting that by year end, 70 percent of Tier 1 MNOs will
have network functions virtualization (NFV) trials in place and
20 percent will have a production implementation.
Demand for data connectivity will also be driven by increased
implementation of machine-to-machine (M2M) solutions.
In this space we are predicting that relatively small mobile
virtual network operator (MVNO) specialists will benefit the
most in 2014 based on their strong focus on the needs of
small and medium-sized businesses (SMBs).
During 2014 we will also see mobile technology continue to
extend its reach into adjacent industries to deliver enhanced
user experiences. Marketers want mobile to deliver
flexibility, speed to market and new marketing management
capabilities. To achieve this, more companies will begin
to allocate significant investments for mobile customer
experience solutions.
Likewise the influence of mobile technology will be felt more
strongly next year in the retail sector. But it won’t all be
smooth sailing for vendors. Indeed, during 2014 we expect
to see a weeding out of vendors in the mobile point-of-sale
(mPoS) market. The number of vendors serving this space has
increased significantly during the past year. A combination of
razor-thin margins and market maturity will begin to pull the
rug out from under newcomers and established players alike.
Consolidation will also come to the mobile backend
as-a-service (mBaaS) market, which is due to undergo a
“survival-of-the-fittest” scenario next year. Technology and
commodification will drive out the weaker players, while
market traction will define the winners.
Sticking with the consolidation theme, in the enterprise
applications space we also expect to see the market reach a
tipping point.
As demand for enterprise mobile applications grows, legacy
mobile enterprise application platform (MEAP) solutions
such as Antenna Software and Kony will continue to lose
favor due primarily to their lack of scalability, flexibility and
extensibility. Because of this, Kony will follow in the footsteps
of Antenna and put itself up for sale.
On a somewhat happier note, we expect that during 2014
consumers will champion smart watches and wrist-based
applications; enterprises will gravitate toward heads-up
displays (HUDs) and smart glasses-type solutions. As a result,
we will see an influx of new entrants in the wearable tech
space, and this will produce downward price pressures to
divide the market by device and use case.
With these developments in mind, Yankee Group presents
its mobility predictions for 2014. For each prediction, we
offer our take on industry winners and losers (see Exhibit 1
on the next page), as well as recommendations for players
looking to capitalize on the changes we expect. Read on to
see what organizations and technologies are best positioned
to become leaders in 2014 and beyond.

Winners Losers
More Than Half of MNOs in
Developed Markets Will Offer Their
Own IP Communications Apps
Leading independent OTT application companies
such as WhatsApp, LINE and Viber, and white-label
OTT communications apps from the likes of
GENBAND, Kineto Wireless and StreamWIDE
Traditional mobile messaging platform vendors
such as Acision, Comverse and Telsis
Mobile Video Watching Will
Match PCs, Begin To Approach
DVR/TV Levels
Operators with the spectrum, capital and
aggressive network planning needed to build
networks that can unleash the potentially
explosive demand for mobile video
Sprint and T-Mobile in the U.S. and Telefonica,
Orange and Vodafone internationally
More Vendors Will Exit Than Enter
the Saturated mPoS Market
Vendors such as Square and Intuit with
value-added services that benefited from
a first mover advantage
Undifferentiated vendors such as PayAnwhere
and Jusp that offer little beyond payment
acceptance
Marketing Investment for Mobile
Customer Experience Measurement
Will Take Center Stage in 2014
Mobile app analytic providers that focus on
marketers—such as Appboy, Kontagent and
Localytics—as well as mobile experience
management providers such as Artisan Mobile
MAM vendors such as Adobe PhoneGap, Antenna
(now Pegasystems) and Kony, as well as analytics
firms—such as Omniture, SAS and WebTrends—
that don't focus on apps
The MBaaS Segment Will Become
Polarized and Undergo a Survival
of the Fittest Scenario
Companies that bring a better technology into the
market with solid market performance, including
Kinvey, Kii, KidoZen, AnyPresence, FeedHenry
FatFractal, Point.io and other
vendors with no sales traction
Kony Will Put Itself Up for Sale
While no single vendor currently matches the
blueprint for app development success, platform
vendors such as Appcelerator, FeedHenry,
IBM, Spring Mobile Solutions, SAP, Salesforce
and Verivo are nearer to it than the legacy
approaches
Legacy platforms, as enterprises look for
better ways to scale their mobilization
70 Percent of Tier 1 MNOs Will Test
NFV and 20 Percent Will Have a
Production Implementation
Vendors that are focusing on the SDN and
VFN markets, such as Intel
Traditional IT vendors that are not faring
well with their SDN and NFV trials
Consolidation of Centralized
SON Players Peaks
Companies such as TEOCO, Reverb Networks
and Newfield Wireless stand to gain in the
coming months as LTE network deployments in
Europe and Asia spread
New entrants hoping for market position
Low-Volume M2M Projects Deliver
Growth to M2M Specialists
M2M MVNOs such as Aeris Communications,
Numerex, Wyless, RACO Wireless and KORE
Telematics, which have shown strong growth by
maintaining focus and flexibility while meeting
the needs of smaller customers
Tier 1 service providers that fail to capitalize on the
opportunity to attract smaller M2M deployments
to their networks through a strong focus on
indirect channels and wholesale operations
An Influx of Wearable Tech Entrants
Will Open the Door for Downward
Price Pressures To Divide the Market
by Device, Use Case
Fitbit, Misfit and Pebble will lead consumer
markets if they stay true to their competitively-priced,
fitness tracking or smart watch-based
products, while companies with enterprise-focused
wearable tech solutions—such as Epson,
Motorola and Vuzix—will move the HUD needle
by drawing from their vast resources
Operators that turn a blind eye to the wearable
tech market, regardless of whether or not
today’s offerings support direct network
connectivity; others include companies that
confuse the match between form factor and use
case (as demonstrated by Google Glass)
Exhibit 1: Yankee Group’s 2014 Predictions
Source: Yankee Group 2013

Prediction 1: More Than Half of MNOs in Developed
Markets Will Offer Their Own IP Communications Apps
The Upshot: Different operators will take different routes.
Some large players will build their own communications
apps—the Telco-OTT approach—while others will white-label
existing apps from third parties. At the same time, several
large operators will partner with leading OTT players to
create differentiated connectivity propositions.
Profound changes are taking place in the way consumers
communicate. Long gone are the days when most individuals
relied primarily on voice and SMS to stay in touch while on
the move. A growing number of consumers are now using a
variety of IP-based communications apps (see the April 2013
Yankee Group report “Learning To Live With OTT”). As shown
in Exhibit 2, Europe is experiencing heavy use of Facebook
Messenger, Google Talk, iMessage, LINE, Skype, Viber and
WhatsApp, among several others.
Exhibit 2: Europeans Use a Multitude of Messaging Apps on Their
Mobile Phones
Source: Yankee Group’s 2013 European Consumer Survey
MNOs are already taking steps down this path. Several have
introduced new price plans that are data-centric and include
generous allowances of voice and messaging as standard.
This ensures MNOs are less exposed to continued reductions
in customers’ use of traditional messaging services. But these
defensive moves are not enough. As IP-based services begin
to dominate, MNOs must ensure they remain relevant in the
delivery of advanced communications services. They have
several choices for how they achieve this. They can:
• Deploy Rich Communications Services (RCS). This can be
achieved either via IMS-based or hosted RCS solutions.
Though the level of commercial activity has been
disappointing, RCS remains one option for MNOs to deliver
more advanced messaging capabilities.
• Partner with OTT players. For example, in September
2013 Optimus launched its youth-oriented WTF price plans
in Portugal. This bundles free use of OTT apps such as
WhatsApp, Facebook Messenger and BBM with traditional
mobile services.
• Develop an OTT app in-house. This is the approach taken
by Orange with its LiBon application and Telefónica with
TUGo. Sprint also recently launched its Messaging Plus app
using technology from Jibe Mobile.
• White-label an OTT app. MNOs can also partner with
vendors that bring the best of both worlds (IP and telecom)
to end-users through operator-branded OTT services.
This approach allows MNOs to get to market quickly with
an established OTT app that can be offered under their
own brand. Examples of vendors offering this type of
solution include GENBAND (with fring), Kineto Wireless and
StreamWIDE (see the September 2013 Yankee Group report
“GENBAND Helps Service Providers Address OTT Challenges”
and the October 2013 reports “Kineto Wireless Enables
MNOs To Blend RCS with Telco Services” and “StreamWIDE
Bridges Telco and OTT Worlds With SmartMS”).
The final two options listed above essentially involve MNOs
bringing their own IP-based communications apps to market,
which is sometimes referred to as Telco-OTT. Whatever
approach they take, MNOs must maintain a central role in
enabling and—where possible—delivering the next generation
of IP-based communications directly to consumers. That’s why
we’ll see an influx of these apps in 2014. And because they
also recognize the importance of enabling consumers to easily
access today’s most popular independent communications
apps, MNOs will also partner more extensively with players
such as Facebook, Skype and WhatsApp.
33%
31%
20%
10%
10%
9%
9%
8%
6%
6%
5%
43%
Which of the following services do you use to
communicate on your mobile phone? (n=729)
WhatsApp
Facebook Messenger
Skype
LINE
Google Talk
Apple iMessage
Viber
Kik
BlackBerry Messenger
KakaoTalk
Other
None of these
Base: People who own a mobile phone or smartphone
Increased use of these so-called OTT apps creates serious
commercial challenges for MNOs, including reduced
communications traffic and revenues, as well as more
precarious customer relationships. For example, in July
and August 2013 Vodafone revealed that its year-over-year
mobile messaging traffic declined by 35 percent in Germany
and 29 percent in both Italy and Spain. For this reason, we
are predicting that by the end of 2014 more than half of all
mobile operators in developed markets will offer their own IP
communications apps.

Recommendations
• Place your eggs in several baskets. As demonstrated in
Exhibit 2, communications is an increasingly fragmented
business and is certainly not a winner-take-all market.
Moving forward MNOs’ primary business will be data
connectivity. On top of this they should offer services
that can add value or that are a natural fit with their core
business. Communications falls into the latter category.
MNOs should pursue multiple strategies including
partnerships with OTT players, offering their own-branded
OTT apps and also adding RCS capabilities.
• Go the white-label route if you’re small. Though further
consolidation will lead to a reduction in the number of
MNOs in some regions—including the removal of some
of the smallest players—there will always be a Tier 2
category of operator. For these companies that lack the
scale of companies such as Vodafone, Telefónica and AT&T,
launching OTT communications apps can be best achieved
through a white-label approach. Taking this route also
reduces an operator’s financial exposure in the event that
its app is unsuccessful.
• Help MNOs combine the old with the new. Rather than
selling stand-alone RCS platforms, messaging vendors
should help MNOs bridge the divide between legacy and
IP-based communications. RCS vendors that fail to address
this opportunity are at risk. Examples include Comverse,
Ericsson, Huawei, Infinite Convergence, NewPace and
Openmind Networks.
Winners: Leading independent OTT application companies
including WhatsApp, LINE and Viber will only become
more popular in 2014, and partnering with leading MNOs
extends their reach and distribution. White-label OTT
communications apps from the likes of GENBAND, Kineto
Wireless and StreamWIDE also stand to benefit. Though not
all operator efforts with white-labeled apps will succeed,
vendors can certainly look forward to a healthy period of
experimentation beginning in 2014.
Losers: Traditional mobile messaging platform vendors
such as Acision, Comverse and Telsis. There will be pockets
of growth in some regions, but in general demand for
capacity upgrades to SMS and MMS systems will begin to
decrease in 2014. RCS platform vendors are also in for a
long year. Although RCS will be deployed in several markets,
momentum is slowing and most MNOs are not relying on the
technology to maintain a role in future mobile messaging.
Prediction 2: Mobile Video Watching Will Match PCs,
Begin To Approach DVR/TV Levels
The Upshot: Among U.S. consumers, TV will still win the pure
minutes-per-day, time-sink battle, but better devices, cheaper 4G
rates (not to mention more LTE services) and creative operator/
content provider partnerships will reward users who increase
their mobile video consumption, including eventually more long-form
content, which will put pressure on operator networks.
Mobile video is about to be unleashed, and some mobile
operators—such as Verizon Wireless with its early-deployment
LTE network—are already seeing heavy video usage. For
instance, although only one-third of Verizon subscribers are
on LTE, those users are nonetheless consuming 64 percent
of its data, with a “surprising” amount of that being video
content, according to Verizon executives. Yet elsewhere
video consumption has been tamped down by the processing
limitations of first-generation smartphones, hit-and-miss 4G
availability and in particular tier-based mobile data fees, which
make bandwidth-heavy video—especially television shows
and movies—too costly for most users. Those challenges are
reflected in the numbers: Daily/weekly video consumption
on tablets in Q3 2013 was 60 percent, actually down from
64 percent a year ago, with daily/weekly phone-based video
consumption falling from 45 percent to 43 percent during the
same time frame (see Exhibit 3).
Exhibit 3: 60 Percent of Tablet Users and 43 Percent of Phone Users Watch
Mobile Video at Least Once per Week
Source: Yankee Group’s 2013 US Mobile Apps and Cloud Survey, September
How often do you watch video on your… (by video,
we mean anything from TV, films, YouTube clips, etc.)?
65% 14%
43% 29%
43% 24% 12%
34% 26% 14% 13%
21% 25% 12% 19%
19% 18% 16%
29% 14% 12%
13%
6%
5%
7%
10%
10%
11%
8%
10% 8%
7%
TV (live TV) (n=2,350)
DVR (TV programs recorded on a DVR) (n=1,279)
PC/laptop (n=2,365)
Tablet (n=961)
Video game console (n=1,589)
Handheld game console (n=832)
Mobile phone (n=2,240)
Digital media adapter (n=1,390)
At least once a day At least once a week
At least once a month Less frequently than once a month

We predict that trend will reverse itself in 2014 with the
frequency—to be clear, not the volume—of tablet-based
video viewing surpassing PC/laptop-based viewing for the
first time, which will be the start of a rapid approach toward
DVR and live TV viewing frequency levels (as shown in Exhibit
3). A number of trends and activities will drive increased
mobile video consumption:
• LTE networks move from drawing board to reality—
upping video-ready bandwidth. As we saw in the Verizon
example, true 4G services drive data consumption and
video viewing. Yankee Group forecasts U.S. registered
LTE lines to grow from 72 million in 2013 to 181 million by
2017, and globally from 123 million to more than 1.3 billion
(for more, see Yankee Group’s Mobile Broadband Forecast,
September 2013). Greater bandwidth will improve the
video experience and drive consumption.
• Tablets, smartphones and new classes of connected
devices provide better mobile video viewing capabilities.
Improved devices—thanks to more powerful processors,
larger screens, etc.—make mobile video viewing more
enjoyable. Devices are also becoming more connected:
For instance, the total number of cellular-connected—not
just Wi-Fi-based—tablets will grow from 30 million in
2013 to 118 million worldwide by 2017, according to our
Mobile Broadband Forecast. Those tablet connections will
fuel more quality, on-the-go viewing. Also looming: the
connected car, in which a combination of seatback screens
and 4G connections will boost mobile video viewing as well.
• Long-form mobile video begins to find its place. Today,
most mobile video consumption is centered around short,
viral clips, with apps such as six-seconds-to-glory Vine
only deepening that trend. For instance, according to
Yankee Group’s 2013 US Mobile Apps and Cloud Survey,
September, U.S. subscribers today primarily consume
user-generated video (53 percent of respondents) over
full-length TV shows (21 percent) or movies (13 percent)
on mobile phones. On tablets, those numbers rise to 36
percent for TV shows and 27 percent for movies. While it
didn’t happen in 2013, we do expect mobile operators and
premium content providers such as HBOGo, Hulu, Netflix
and others to cut so-called “toll-free” pricing deals to make
it easier (and cheaper) for consumers to mobilize their
growing OTT video consumption.
Recommendations
• Mobile ecosystem players must encourage—and more
importantly give incentives for—video usage. Until now,
mobile operators haven’t done much to promote mobile
video. In some cases—most often through punitive pricing—
they’ve actively discouraged it at least in part because
their networks weren’t ready for it. It’s time to unleash the
beast. Operators, especially those with tiered or shared data
plans, should introduce special pricing or premium tiers
that provide incentives for users to consume video without
getting slammed by high pay-as-you-consume fees. Content
providers, meanwhile, can help fuel adoption by cutting
deals with operators that help subsidize optimized content
delivery and underwrite end-user costs.
• Operators must prepare their networks for the deluge.
Verizon provides a great illustration of how to support
increased video consumption, while also sidestepping
its dangers. With its mandatory shared data plans for
LTE users, Verizon has set up a strong monetization
environment as bandwidth consumption rises. With a few
tweaks (broadening tier levels or crafting special video
offers) it can continue to grow its data/video average
revenue per account (ARPA) while delivering a fair price-to-
value equation to mobile video consumers. Meanwhile,
Verizon is rapidly moving to beef up its already full-coverage
LTE network with additional carrier-aggregated
LTE, Wi-Fi and small cell overlays. Savvy mobile operators
will avoid playing the scarcity card and rapidly deploy more
and more bandwidth to support greater mobile video
consumption. The good news: Yankee Group surveys show
consumers strongly prefer to pay their mobile operator
(43 percent) than a content provider such as Netflix
(13 percent) or content owner such as Sony Pictures (7
percent) to access mobile video content.
Winners: Operators with the spectrum, capital and
aggressive network planning needed to build networks that
can unleash the potentially explosive demand for mobile
video will win. In the U.S., Verizon and AT&T can be expected
to be aggressive mobile video players, ideally tapping the
quad-play capabilities of their TV/broadband businesses
as well. Globally, Asia-Pacific operators have aggressively
deployed the LTE networks necessary to support strong video
growth. On the content side, Netflix and HBOGo have used
mostly fixed network OTT streaming to rapidly grow and are
well-positioned to better serve on-the-go users if they can
cut advantageous deals with operators.
Losers: Sprint and T-Mobile, with trailing (though
catching-up) 4G network rollouts and exposed to supply-demand
dangers via their unlimited data offers, must be
simultaneously cautious and savvy or risk falling behind.
Elsewhere, Orange, Telefónica and Vodafone—operators
exposed to mature European and lower-ARPU Latin American
markets—will be challenged to time network build-outs to
meet growing video demand. On the content side, traditional
TV and cable content providers such as Comcast and Time
Warner Cable will see their lucrative ad-supported, bundling
and syndicated content business models challenged by new
video delivery paradigms. Like book and music sellers before
them, traditional TV providers must evolve or get left behind.

Prediction 3: More Vendors Will Exit Than Enter the
Saturated mPoS Market
The Upshot: The number of vendors serving the mobile point-of-
sale (mPoS) market has increased more than threefold in
the past year. A combination of razor-thin margins, market
maturity and the upcoming EMV liability shift will begin
to pull the rug out from under newcomers and established
players alike. In the coming year we expect a number of
mergers and exits from the market.
Today’s small merchant mPoS market is analogous to the U.S.
automotive industry in the early 1920s: High levels of saturation
have resulted in unsustainability. On a monthly basis, new
vendors jump into the fray with solutions that are by and large
undifferentiated from the scores of existing competitors,
and competing on price instead of functionality has been
the strategy de jour (see the January 2013 Yankee Group
Perspective “The mPoS Bubble Shows Signs of a Slow Leak”).
Initially, demand for mPoS was through the roof and business
models centered on razor-slim margins and scale were
relatively sustainable. However, with mPoS available to low-volume
merchants for more than three years this is no longer
is that the case. As illustrated in Exhibit 4, the slowest area of
mPoS growth during the next 12 months will be merchants
with one to 20 employees—the core clientele of vendors
such as Square and PayAnywhere. With the market becoming
increasingly congested and its growth potential becoming
limited, opportunities to sign on small and micro-merchants
are quickly evaporating.
Exhibit 4: Micro-Merchants Represent the Smallest Growth Opportunity for
mPoS Vendors
Source: Yankee Group’s 2013 Mobile Marketing and Commerce
Survey, September
Throughout 2014, we foresee a number of vendors following
VeriFone’s lead by cutting their losses and seeking a graceful
exit from the mPoS market. This will be fueled by:
• Unprofitability. There’s a reason smaller merchants are
underserved by acquirers: They’re highly unprofitable
(see the January 2013 report “Squaring Payments: The
Exploding mPoS Market”). At the standard per transaction
rate of 2.75 percent charged by most mPoS providers,
small dollar transactions are often losing propositions. For
instance, a typical $5 debit card purchase at a coffee shop
costs a vendor such as Square somewhere close to $0.23.
But it only collects 2.75 percent of the total purchase, or
about $0.14, resulting in a whopping loss of 64 percent.
This is the case for every debit transaction under $8 or $9.
For a larger transaction of $10 to $20, there is some profit,
but once an mPoS provider gives up 2 percent or more on
interchange and fees to the card brands and issuers, the
margins are next to nothing. Clearly, targeting merchants
with both low volume and small dollar transactions isn’t
the most lucrative business strategy.
• Market maturity. It’s important to remember that mPoS
is a game of scale. Vendors must sign on many merchants
to turn a profit on a fraction of a percent. In the world of
mobile payments, mPoS is no longer a new technology,
having been around for more than three years. The
majority of smaller merchants that were longing for
cost-effective card acceptance have already adopted
the solution of their choice. While new merchants will
undoubtedly adopt mPoS long into the future, the size
of the opportunity—when paired with the number of
competitors—is significantly smaller than it was just one or
two years ago.
• EMV. With the U.S. liability shift less than two years
out, the traditional mPoS business model of providing
merchants with a free magnetic-stripe dongle will soon
be turned on its head. EMV card readers are considerably
more costly to manufacture and giving them away would
be cost prohibitive. Paying for what was once free will be a
tough pill to swallow for small, cash-conscious merchants.
Recommendations
• Target emerging and underserved markets. While the
small-merchant
mPoS opportunity may be drying up in the
U.S., other markets hold potential. We suggest targeting
countries where credit card penetration is on the rise.
Working with partners in other nations—such as financial
institutions—is a lucrative and relatively easy way to expand
internationally. The first mover in any market will benefit.
Plans to deploy mPoS within the next
12 months by company size
Very large (more than 10,000
employees)
Large (2,500-9,999 employees)
Medium-large (500-2,499 employees)
Medium (100-499 employees)
Small (20-99 employees)
Very small (less than 20 employees)
30%
27%
26%
29%
30%
19%

• Add value beyond the transaction. Incorporating tools
that go beyond payment acceptance is essential. Square’s
recent launch of Square Market and Intuit’s integration of
QuickBooks with GoPayment serve as excellent examples.
By providing merchants with a full suite of products that
revolutionize the way they do business, mPoS vendors can
stand out from the pack.
• Move upmarket. Small and medium-sized businesses
(SMBs) have a thirst for easy-to-use PoS equipment that
offers tools such as analytics and customer relationship
management (CRM). With larger merchants, mPoS vendors
can leverage a software-as-a-service (SaaS) pricing model,
providing a far more lucrative revenue stream than
transaction-based pricing.
Winners: Vendors such as Square and Intuit with value-added
services that benefited from a first mover advantage.
Losers: Undifferentiated vendors such as PayAnwhere and
Jusp that offer little beyond payment acceptance.
Prediction 4: Marketing Investment for Mobile Customer
Experience Measurement Will Take Center Stage
The Upshot: As customers’ individual preferences, behaviors
and attitudes toward mobile drive business priorities, chief
marketing officers (CMOs) are increasingly demanding
solutions that ensure a positive mobile experience.
The exponential growth of unstructured data from Bluetooth
smart and Wi-Fi sensors, connected devices and social media
is providing CMOs with the data to change business and
transform the customer experience. At the same time that
apps are winning the hearts of mobile consumers (Yankee
Group survey data shows consumers spend 60 percent
of their browsing time in apps), 63 percent of businesses
are prioritizing mobile as a way to improve customer
responsiveness. Still, many marketers struggle to achieve
the right combination of personalization and flexibility in
their deployments using modern development tools (see the
November 2013 Yankee Group Perspective “New Technology
for New Immersive Customer Experiences”). What marketers
want is the same flexibility, speed to market and marketing
management enabled by Web tools such as Adobe Omniture
and Google Analytics. To gain such capabilities on the mobile
side of the equation, companies in 2014 will begin to allocate
more of their investments on mobile customer experience.
Two years later we’ll see this spend begin to outpace that of
IT development.
Today, engagement needs to be able to occur anywhere
and on any device. It’s all about providing an immersive
experience: Situational context and personalization will
become increasingly important throughout 2014. Any device
can be tuned to its user, but context should encompass
much more. By leveraging analytical insight, context as it
relates to mobile can be determined using an individual’s
location, stated preferences, behavior (e.g., purchases) and
social interaction with a brand in order to build a customized
experience. Mobile applications are a great strategy to
not only acquire new customers, but also enhance loyalty
campaigns because a well-made app can provide a much
better user experience.
Our IT decision-maker survey data shows 93 percent of
marketers place a significantly high importance on the ability
to use data to track and measure user experience, as well
as to monitor customer retention and engagement (see
Exhibit 5). This is 20 percentage points higher than their IT
counterparts. There is clearly a need for a next generation
of technologies geared toward marketers that provides
not only the insight necessary to understand mobile user
behavior, but also the agility to take action on that insight.
Successful customer engagement tools will retain the robust
functionality and security of the originally developed native
apps, while also providing critical user experience insight,
speed to market, creative execution and testing/analysis
flexibility. The goal is to provide rich mobile experience
management functionality that enables marketers to achieve
their desired outcomes through mobile app optimization,
analysis and personalization.
Exhibit 5: Context, Apps Represent the Future of Highly Relevant Experiences
Source: Yankee Group’s 2013 US Mobile Marketing and Commerce
Survey, September
The Future of Highly Relevant Experiences
43% would share personalization
information for better rewards
100% of marketers vs. 75% of IT personnel want
to analyze customer segments and leverage that
insight to further fine-tune mobile app marketing
93% of marketers place a significantly high importance
on using data to track and measure user experiences to
see customer retention and engagement
85% of consumers are
interested in mobile coupons

Recommendations
• Customer experience management vendors must
translate best practices from Web to mobile apps.
Marketers have infinite opportunities to modify, test,
analyze and personalize their Web sites. However,
mobile apps and the Web are not the same. Apps are
a unique channel and thus require a platform that has
been purpose-built for managing the ongoing life cycle of
customer engagement in a mobile environment.
• Vendors must also empower non-technical users with
better tools. Ninety-three percent of marketers are highly
interested in testing multiple variations of apps to create a
personalized experience for customers. Furthermore, 100
percent of marketers and 75 percent of IT personnel want
to analyze customer segments and leverage that insight to
further fine-tune a mobile marketing campaign. They also
must be able to analyze which customer segments have
the highest total lifetime value and leverage that insight to
further fine-tune the mobile app. To achieve all this, non-technical
employees need tools they can understand and
that are easy to use.
Winners: Winning companies will provide the tools that help
marketing focus on the customer journey across not just
the Web, but also mobile apps. Winners include not only
mobile app analytic providers that focus on marketers—
such as Appboy, Kontagent and Localytics—but also mobile
experience management providers such as Artisan Mobile,
which not only provide insight, but also the ability to optimize
and personalize the application without the need to resubmit
to app stores.
Losers: When comparing different mobile customer
engagement strategies and tools, the market is ripe with
opportunity. However, many tools not only don’t meet
the needs of non-technical users, but also don’t offer
all the necessary requirements to truly personalize the
experience. These include mobile application management
(MAM) vendors such as Adobe PhoneGap, Antenna (now
Pegasystems) and Kony. Others in danger of falling behind
include analytics providers such as Omniture, SAS and
WebTrends that just focus on the desktop and mobile Web.
There are a lot of mobile Web analytics options, but very
few vendors that focus on understanding the user behavior
within the mobile application.
Prediction 5: The MBaaS Segment Will Become Polarized
and Undergo a ‘Survival-of-the-Fittest’ Scenario
The Upshot: Technology and commodification will drive out
the losers, while market traction will define the winners.
Mobile backend as a service (MBaaS) is a relatively recent
development, with most vendors dating from only 2011. In
the time since, the segment has quickly evolved, and many
new players have entered the space; there are currently
approximately 40 providers in the U.S. alone. Some vendors
such as KidoZen and AnyPresence focus exclusively on the
enterprise market; others such as Kinvey got their start with
consumer mobile apps and are expanding into the enterprise
segment (see the November 2013 Yankee Group report
“AnyPresence Set to Increase Footprint in a Crowded Space
With Meta-Platform” and the October 2013 report “Kinvey
Creates Competitive Advantage as BaaS Provider With Best
Practices in Sales and Marketing”).
We have also seen interest from big players including Facebook,
Google and Microsoft, as all have entered the space in different
ways. Facebook became a mobile apps development tools
provider when it acquired MBaaS startup Parse in April. In June,
Google and Kinvey announced a partnership, bringing together
platform as a service (PaaS) and MBaaS. We expect this trend
will continue, with backend storage providers moving into the
space via partnerships or acquisition.
Exhibit 6: Market Footprint and Sales Revenues Will Define MBaaS Segment
Winners and Losers
Source: Yankee Group, 2013
Market performance
Number of deployments, customers, sales revenues
Low
Most
demanding
customers
Point.io
FatFractal
KidoZen
AnyPresence
FeedHenry
Kinvey
Kii
Least
demanding
customers
High
Level of capabilities

In 2014, the MBaaS segment will become polarized and
undergo a “survival-of-the-fittest” scenario with:
• The “fittest” enterprise-focused vendors remaining stand-alone
solutions. Not all vendors have the technology to
meet the requirements of the most demanding customers
in the enterprise segment. These requirements include the
ability to deliver both cloud and on-premises deployments,
data-level management capabilities and compliance
with strict industry regulation in verticals such as finance
and health care. Examples of companies that fit into this
category are AnyPresence and KidoZen.
• The “fittest” developer/consumer-focused vendors
becoming targets for acquisition by larger cloud
providers. Less demanding customers, usually developers
working with consumer mobile apps, or common use cases
for the enterprise, require a low-cost business model. We
consider this to be unsustainable for small players in the
long term, as it requires a huge effort to build momentum
in the market. Examples include Kii and Kinvey.
Recommendations
• BaaS vendors should identify their key strengths and
build a strategy around them. For some, market share can
be a key strength; for others, technological capabilities are
key. Which category they fall under will determine if a BaaS
vendor is a better fit for the enterprise or the consumer
segment. Each segment requires not only different levels
of technological capabilities, but also different pricing
models, sales approaches, and sales and customer
acquisition cycles. It will be very difficult for one company
to deliver and excel in both segments.
• No matter the segment, vendors must focus on market
presence for survival. Start-ups with strong technological
capabilities that are fit to serve the most demanding
enterprise customers will need to build sales traction
and generate sales revenues to stay afloat (e.g., Point.io,
FatFractal). Companies in the consumer apps space will need
to validate their technology with enough paying customers
and sales revenues to be an attractive target for acquisition.
Winners: Next year is looking good for companies that
bring a better technology into the market with solid market
performance. Candidates for this include AnyPresence,
FeedHenry, Kii, KidoZen and Kinvey. Cloud providers that expand
their offering to include BaaS also stand to benefit in 2014.
Losers: Vendors that have no sales traction will not survive a
negative cash flow. Those at risk include FatFractal and Point.
io. These companies have the technological capabilities and
differentiation that can place them in the Winners category,
but they need sales traction to build market presence and
validate their technology.
Prediction 6: Kony Will Put Itself Up For Sale
The Upshot: Kony will put itself up for sale, giving way to
newer, more agile mobile application platform solutions.
Applications are becoming a very hot area in enterprise
mobility. Yankee Group’s IT decision-maker survey data
show that 54 percent of all companies will be increasing
their budgets for mobile applications in the coming year. As
demand grows the marketplace of platform solutions used to
develop, deploy and manage these applications is at a tipping
point. Legacy MEAP solutions such as Antenna Software
and Kony are quickly losing favor for their lack of scalability,
flexibility and extensibility.
Antenna Software has already sold itself to Pegasystems at
what anecdotal evidence points to as a bargain basement
price of around US$30 million. Kony too is struggling to
convince prospect customers that it has longevity as a
stand-alone platform solution. Yankee Group recently
independently sourced and surveyed customers of 10
different mobile application platforms, and only 26 percent
of Kony’s customers reported that they get high business
value (scores of 9 or 10 out of 10) from their platform
compared to 54 percent of customers of both IBM’s
Worklight and Salesforce’s Force.com and 43 percent of SAP
customers (for more see the September 2013 Yankee Group
reports “Scoring Today’s Return on Mobility for Mobile
Application Platforms” and “Mobile Application Platforms:
A Blueprint for Future RoM Success”). This predicament is
made worse by an emerging model for much more agile
cloud-based mobile middleware, which is gaining mindshare.
In 2014, this scenario will come to a head and force Kony to
put itself up for sale.
The typical closed MEAP model, of which Kony has been
a proponent, is conceptually and pragmatically dead for a
number of key reasons:
• Proprietary, binary and on-premises (only) solutions
greatly limit enterprises’ mobile strategies. The
traditional MEAP approach of offering proprietary
integrated development environments (IDEs), limited
partnerships, proprietary frameworks, binary architectures
and on-premises deployment is now considered old-fashioned.
Not to mention it is severely limiting to the
intentions of a growing swath of enterprises looking for
greater extensibility and scalability from their platform
provider in order to become more mobile-mature.

• MEAPs offer a poor Return on Mobility (RoM). Just as
much as budgets are growing for mobile solutions so too
is the pressure from executive leadership and the CFO to
justify investments. More than that, the immediacy of the
interface between mobile solutions and their users turns
corporate data into corporate inventory. Companies need
new metrics to measure how their platforms allow them
to use and reuse this data in their mobile applications
to reap greater continuous value. The inflexibility of the
MEAPs means they are being used to really only deploy
point solutions and not allowing companies to think more
expansively and in an agile manner about continuously
reaping value.
• They are too little too late. Realizing the challenge, several
MEAP vendors have tried to open their platforms and
provide more cloud-based deployment. However, bogged
down by legacy architectures and often multiple acquired
assets over the years, in most cases this is too little too late.
Of all of the vendors in our RoM research, Kony customers
had the least confidence that it will be a leading platform in
the future. In addition, it was rated poorly for both company
strengths such as the vibrancy of its ecosystem and technical
features such as its ability to mobilize legacy processes,
where only 20 percent of the customers we surveyed
believed it was highly effective. That score was about half
the proportion of the next worst vendor score, Xamarin, with
35 percent. These scores from Kony and Antenna Software’s
customers are testament to a lack of deep customer
engagement with the MEAP approach.
Recommendations
• Procuring enterprises must look for a strategic platform
partner. Now is the time to lay the groundwork for a more
strategic approach to mobilization. Look for a strategic
mobile application platform partner that has a future-oriented
roadmap that will provide extensibility (think
100s or 1,000s, not single-digit applications), scalability
(rapidly from a few to potentially millions of customers
and back down again) and flexibility (prioritizing open-source
standards and some degree of agnosticism to
tools, standards and infrastructures). This is unlikely to
be on offer from a MEAP vendor, but looking for these
capabilities will give you a better chance of reaping a
positive RoM and longevity in your investment.
• Question the traditional pecking order. At one time
Antenna Software and Kony were front runners. While
these MEAP pure-plays are falling by the wayside,
platforms from the larger service providers such as SAP,
IBM and Salesforce and legacy MEAP providers such
as Verivo are more effectively making the transition.
And a raft of newer, cloud-based platforms including
Appcelerator and FeedHenry and infrastructural solutions
such as Webalo are driving new more agile and scalable
models. Look for real-world customer feedback and a
quantified RoM.
Winners: The leading platforms will be those that provide
open and extensible architectures, vibrant developer
ecosystems, embedded API management and data
orchestration capabilities, integrated analytics, a broad
ecosystem, and agnosticism to tools, infrastructures and
standards. While no single vendor currently matches this
blueprint, platform vendors such as Appcelerator, FeedHenry,
IBM, Spring Mobile Solutions, SAP, Salesforce and Verivo are
nearer to it than the legacy approaches.
Losers: Although this is less of a problem now for Antenna
Software after having been acquired by Pegasystems (which
is likely to choose the bits of Antenna that fit best in its
portfolio and de-prioritize the rest), legacy platforms such as
Kony will struggle to compete as enterprises look for better
ways to scale their mobilization. To guarantee any kind of
longevity their best bet will also be to find a strong acquirer.
Prediction 7: 70 Percent of Tier 1 MNOs Will Test NFV
and 20 Percent Will Have a Production Implementation
The Upshot: Network functions virtualization (NFV) is too
enticing in terms of operational savings for the telcos to ignore.
In response, operators are being proactive with trials and
proof-of-concept (PoC) tests. They are also being opportunistic:
Disruptions in infrastructure caused by technology upgrades
are resulting in procurements that specify an NFV product
roadmap or, better still, a virtualized solution.
In an industry more than accustomed to hype cycles and
the inevitable crash that follows, we predict that NFV will
buck the trend in 2014. We believe that while 70 percent
of Tier 1 MNOs will have live NFV trials, another 20 percent
will have product implementations in place. Much of the
usual ramp up in hype was short-circuited by the operators.
Rather than coming out of academia or the vendors, NFV
was the brainchild of the operators, and was launched with
the “Network Functions Virtualisation— Introductory White
Paper,” published at the SDN and OpenFlow World Congress
in Darmstadt, Germany, in October 2012. The 13 operators
that sponsored the whitepaper were, in many cases, already
well into tests at the time.

The ETSI NFV Industry Specification Group (ISG) did not
start work on the standard until January 2013. However, in
the short time since, that group has already published five
documents: four ETSI Group Specifications (GSs) covering
NFV use cases, requirements, the architectural framework
and terminology, and a fifth GS that defines a framework for
coordinating and promoting PoC testing. A more detailed
spec is due out from ETSI in 2014 (we estimate not until Q4).
Nevertheless, this has not stopped service providers and
their vendors from plowing ahead with trials.
Given how guarded operators are about publicizing trials,
it is a testament to the degree of interest in and early
commitment to NFV that just a year after the publication
of the NFV whitepaper, we are aware of a wide variety of
tests, trials and implementations from the likes of AT&T,
BT, Deutsche Telekom, Myanmar P&T, NTT, Optus, Orange,
Telecom Italia, Telefónica, T-Mobile, Vodafone and Verizon.
To give a few examples:
• BT has executed a variety of virtualization tests with
positive results including: a virtualized BRAS, hierarchical
QoS, virtualized content delivery networks (CDNs) and
virtualized IP SEC.
• Deutsche Telekom is involved in a PoC for an IP multimedia
subsystem (IMS) platform.
• Orange is using its Orange Silicon Valley subsidiary as a test
bed for a virtualized evolved packet core (vEPC).
• Telefónica is jointly testing software-defined networking
(SDN) and NFV in Brazil in an interesting trial of home
gateways. The carrier is also trialing virtualized deep
packet inspection (DPI) and carrier-grade network
address translation.
Are we suggesting that it will be smooth sailing from here
on out for NFV? Far from it. Despite the advantages that
NFV brings in terms of scalability, flexibility and operational
efficiencies there will be disillusionment along the way for
those who do not have a pragmatic view of the technology.
Firstly, it is unlikely to result in appreciable capex savings
and may, in fact, carry a slightly higher price tag than a non-virtualized
version. Further, we believe that NFV will have
little effect (positive or negative) on floor space or power.
Secondly, early implementations are unlikely to have the
feature/function parity of their metal-box equivalents.
Performance of early virtualized DPI, for example, suffers
when inspection is turned on up to layer 7. All the kinks have
not been worked out of automatic scaling of the virtualized
solutions. Management, policy and charging features and
interfaces are still limited. Likewise, security features have
been lacking early on.
Lastly, initial NFV implementations represent incremental
costs to the operators, since they will insist on running the
virtualized and metal box versions of the network app in
parallel until they are certain that the NFV version is safe to
unleash on the network by itself. Operators under a budget
crunch will still move to NFV, but will do so more slowly than
they might like (see Exhibit 7).
Exhibit 7: NFV Market Opportunity Is Emerging Now: Will It Track High or Low?
Source: Yankee Group, 2013
$327
$759
$1,610
$3,092
$131 $268
$533
$1,004
$1,793
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
2013
USD (in millions)
2014 2015 2016 2017
Overall move to virtualization
Move to cloud
Rich developement community
Feature/function parity
Early pilots/trials
Carrier capex limitations
Unclear ROI
Market drag of incumbents

Recommendations
• Vendors in the discrete network application product
space (security, DPI devices, network policy control) have
run out of lead time and need to start developing an
NFV version of their solutions. Operator RFPs require an
NFV roadmap, regardless of when the operator intends to
implement NFV.
• Operators need to start small and must be rigorous in their
testing of the NFV solutions. Feature and functional parity
will be the challenge for NFV solutions in 2014. We believe
some will succeed (DPI, domain name system and dynamic
host configuration protocol) and some will fail (security).
• Operators must examine their goals closely and compare
them to the available solutions. The ROI on an NFV
solution is not self-evident in all cases.
Winners: NFV is a tide that is raising all ships in the telecom
ecosystem. All operators, but cloud operators especially, are
anticipating NFV just like dads anticipate a universal remote.
Most of the network application vendors, from firewalls to
packet gateways, readily admit that the majority of their
value is already in software and few are dismayed at turning
into a virtual appliance. Nevertheless, there will be winners
in NFV. As these applications transition to standard compute
platforms, much of the differentiation will be enabled at
the subcomponent level and vendors that are focusing on
the SDN and NFV markets such as Intel will benefit. We also
believe that the Tier 2 operators are likely to benefit as they
will be willing and able to implement NFV into the production
environment more aggressively than their Tier 1 counterparts
and will be able to capitalize on operational efficiencies,
increased flexibility and improved time to market for services
much earlier.
Losers: SDN and NFV are opportunities for non-traditional
vendors to play in the telecommunications space. However,
operators are very different even from large enterprises. We
are already hearing of cases where traditional IT vendors are
not faring well in SDN/NFV trials.
Prediction 8: Consolidation of Centralized Self-
Optimizing Network Players Will Peak
The Upshot: Scale matters and SON players failing to fall into
the camps of larger operators risk becoming irrelevant.
Getting maximum performance out of mobile broadband
networks is now a business imperative for leading MNOs
around the globe. The days of “good enough” voice quality—
supported by customer joy at simply establishing a scratchy
and occasionally unintelligible conversation when away from
home or office—is no longer acceptable (see the August 2013
Yankee Group Perspective “When the Wind Blows: Stepping
Up to Resilient Mobile Broadband Networks”). Today, high-speed
mobile data services are the vehicles for navigation,
traffic updates, video, gaming and social interaction. As a
foundation for these rich networking interactions, the mobile
network must be robust and resilient. Anything less is quickly
detected as end-users experience poor performance, which
is typically—and quickly—blamed on the mobile operator.
To keep the network’s foundation sound, operators employ
optimization tools that tune base station and antenna
parameters to meet needs of shifting traffic patterns.
Without tools, mobile network optimization is tedious and
costly. Operator staff must conduct drive tests to determine
network performance. Following analysis of test results,
base station configuration parameters must be recalculated
to determine ideal power characteristics. Likewise, antenna
tilt characteristics must be re-evaluated. When analysis
is complete, engineers hunker down to the painstaking
task of changing base station parameters and re-setting
antenna tilts. Fortunately, a new generation of automated
optimization tools eliminates much of the hassle. With
centralized and de-centralized approaches, these SON tools
accelerate the cycle of monitoring, analyzing and adjusting.
New companies offer centralized SON tools that complement
distributed SON capabilities built into network equipment.
In the past year, two companies—Intucell and Celcite—
were snapped up by larger industry players. Yankee Group
believes there will be further consolidation, but M&A in the
centralized SON market will peak during 2014. In the coming
year, we see companies such as Movik Networks, Newfield
Wireless and TEOCO as M&A candidates as large players
move to bulk up SON portfolios. Among those companies
looking to do the acquiring, the likes of Oracle and Tektronix
appear to fit the bill.

Market players should consider that:
• SON expertise remains an excellent pathway to
relevance. It is no secret that large software companies
crave a place in the center of the radio access network
(RAN), but translating desire to success is a tough
challenge. With centralized SON, clever startup companies
have delivered value to mobile operators by automating
traditionally costly and cumbersome optimization
processes. By acquiring a successful SON startup,
companies with minimal relevance to network operations
teams suddenly gain a prominent role. Because mobile
operators look to centralized SON deployments as a
needed multi-vendor overlay delivering status information
and optimization across equipment from different
vendors, failure to have a base station portfolio is not
a liability. In fact, operators may view software-centric
vendors as a neutral party with no axe to grind—a benefit,
not a problem.
• M&A activity is driven by scale. Beyond large players’
accretive desires, the increasing pace of M&A activity
is driven by a need for scale. Operators value start-up
companies with clever innovations, but a small outfit raises
questions about longevity and depth of resources. As
centralized SON deployments become more important to
operators, so does the need to consolidate the sector.
• There are limits to new entrants. Gaining operator
trust is never an easy proposition. With SON, however,
the challenge is even steeper. New companies with
brilliant ideas requiring the operator to open interfaces
into mission-critical operational support systems must
convince skeptical technical staff that no harm will come
to the network. Beyond having to make a convincing
argument that the proposed approach has overwhelming
benefits without risk, the new supplier must wrest time
and effort from an operator’s technical staff. Once an
operator settles on a SON approach, switching vendors
becomes a costly and impractical exercise. As existing SON
companies gain traction it becomes much more difficult
for new players to enter the picture. And with fewer new
entrants, the pressure to acquire existing players gets
more intense.
Recommendations
• Software players should move to secure a SON position.
Companies such as Tektronix and Oracle should consider
M&A to bolster their growing presence among mobile
operators. The move would create opportunities to
leverage existing sales resources and grow scale. Because
SON is fundamentally a software-based technology, it fits
well into these large software players.
• Network equipment providers (NEPs) should think twice
about centralized SON offers. Mobile operators benefit
when a centralized SON suite embraces all deployed
vendor equipment equally. An NEP that seeks to supply
the SON offer may lack credibility when it comes to
consistency across product lines. While professional
and managed services business units may seek to add
centralized SON capabilities—as Ericsson did when it
acquired Optimi—the value of adding this portfolio asset
may not be realized.
Winners: Centralized SON players that have gained the trust
of major mobile operators to touch sensitive parameters will
be winners. Companies such as TEOCO, Reverb Networks and
Newfield Wireless stand to gain in the coming months as LTE
network deployments in Europe and Asia spread.
Losers: New entrants hoping for market position stand to
be the losers. Selling to mobile operators is always a difficult
challenge. As time goes by and operators make decisions on
centralized SON architectures, new players will find fewer and
fewer open-minded operators willing to invest time and effort
evaluating incremental improvements to existing toolkits.
Prediction 9: Low-Volume M2M Projects Will Deliver
Growth to M2M Specialists
The Upshot: A select group of M2M MVNOs will continue
to grow faster than the overall market based on the
attention they’ve paid to the needs of small and medium-sized
businesses (SMBs), while exhibiting the flexibility and
expertise required to serve the needs of smaller deployments.
Today, the cellular M2M connectivity market is served by two
camps: MVNO specialist providers such as KORE Telematics,
RACO Wireless, Aeris Communications, Numerex and Wyless,
and their large network operator “frenemies” (AT&T, Sprint,
Telefónica, Vodafone, Verizon and T-Mobile) that on one
hand are quite happy to sell MVNOs wholesale connectivity
but on the other wish to compete with them for larger
deals via dedicated enterprise sales units (see the May 2013
Yankee Group report “Handicapping the Battle for End-to-
End M2M Market Supremacy”).

While the massive device volumes associated with
government-mandated smart meter deployments and
rollouts of connectivity-enabled vehicles from major
automakers such as Audi, BMW, GM, Honda and Mercedes
grab news headlines based on deal size, device volumes and
fanfare, smaller deployments for specific vertical use cases
remain the bread and butter of today’s M2M marketplace.
In 2014, Tier 1 MNOs with global operations will compete
aggressively for an overall minority of large-scale projects
while smaller deployments fly below their collective radars
and into the arms of appreciative MVNOs.
Yankee Group’s 2013 US Mobile and Connected Devices
Survey, September, reveals that for those IT decision-makers
with plans to deploy M2M solutions, 66 percent plan for
those projects to have fewer than 499 total devices. On the
flip side, only 8 percent are planning deployments with more
than 5,000 devices (see Exhibit 8).
Exhibit 8: Majority of IT Decision-Makers Plan for Small-Scale
M2M Deployments
Source: Yankee Group’s 2013 US Mobile and Connected Devices Survey,
September
The M2M market isn’t mature enough for Tier 1 operators
to expect to bring small deployments on board without
a high-touch sales engagement strategy and a great deal
of flexibility to ensure the ROI works for its downstream
customers. These are the very attributes that the MVNOs
have honed during several years of operation and will
continue to do so through the next several years of market
maturity. In the meantime, there are several areas where
MNOs can focus to ensure maximum market coverage.
Recommendations
• Operators should take a decidedly holistic approach
to M2M business planning. They must take into
consideration a go-to-market approach that maximizes
direct opportunities while also ensuring that wholesale
partners are trained and ready to pursue and capture
smaller deployments. A strong spirit of collaboration
between enterprise business units and wholesale
operators should be encouraged. Rather than competing
with their MVNO partners, a “divide and conquer” mindset
should prevail.
• M2M MVNOs should position themselves aggressively to
their cellular network suppliers as friendly and preferred
channel partners to address smaller implementations.
That consideration may come at a price of deferring to
their downstream network partners for high volume M2M
deals. For their part, MVNOs must recognize the pricing
sensitivities of SMBs and offer innovations that reduce
capital expense for connected devices either on their own
or with the support of their upstream network partners or
downstream device suppliers.
Winners: M2M MVNOs such as Aeris Communications,
KORE Telematics, Numerex, RACO Wireless and Wyless,
which have shown strong growth by maintaining focus and
flexibility while meeting the needs of smaller customers
(see the August 2013 Yankee Group reports “RACO Wireless
Drives Growth by Offering M2M ‘Easy’ Button,” “Aeris
Communications Looks to Europe and Cloud Services To Drive
Growth” and “KORE Telematics Relies on M2M Experience
and Flexibility To Fight Off Larger Competitors,” and the
November 2013 report “Wyless Champions Partnership and
M&A Opportunities To Fuel International Expansion”).
Losers: Tier 1 service providers that fail to capitalize on the
opportunity to attract smaller M2M deployments to their
networks through a strong focus on indirect channels and
wholesale operations.
How many total connected M2M devices do you plan to deploy over the
course of your entire planned project? (n=871)
2 to 49
50 to 99
100 to 499
500 to 999
1,000 to 4,999
5,000 to 9,999
10,000+
Unsure/Don’t know
18%
23%
25%
14%
9%
4%
4%
4%
While some Tier 1 MNOs such as Verizon have made overtures
in offering solutions downmarket, the reality is they are
operating in a world ruled by very large numbers: To move the
needle, they need big deals and their sales investments and
go-to-market structures must be aligned accordingly. M2M
MVNOs, on the other hand, have a vastly different business
profile. These players are often delivering recurring revenues
of less than US$100 million per year and have fewer than
100 employees, yet have experience and domain expertise in
deploying M2M projects. These players have both the financial
incentive and the experience required to do the difficult work
to make small deployment customers happy.

Prediction 10: An Influx of Wearable Tech Entrants Will
Open the Door for Downward Price Pressures To Divide
the Market by Device, Use Case
The Upshot: Consumers will champion smart watches and
wrist-based applications; enterprises will gravitate toward
heads up displays (HUDs) and smart glasses-type solutions.
Wearable tech currently lives in the accessory/companion
category, with no one device taking the market by storm
(see the October 2013 Yankee Group Perspective “Wearable
Tech Readies for Takeoff” and October 2013 report
“Samsung Galaxy Gear: Still Just an Expensive Accessory”).
But as advancements in OS interoperability, plug-and-play
functionality and stand-alone connectivity approach fruition,
the market will embark on an iterative journey destined for
lateral sprawl—including considerable division by:
• Device type. While Google Glass-type HUDs put wearables
on the map, consumers haven’t expressed a willingness
to pay the technology’s hefty price tag (US$1,500 for
Google Glass, for example). As shown in Exhibit 9, fewer
than 10 percent of respondents to Yankee Group’s 2013 US
Consumer Survey, September, state they plan to pay more
than US$200 for a connected fitness/wellness device;
more than 90 percent plan to pay less than US$200. This is
why companies such as Fitbit, Jawbone, Misfit Wearables,
Nike and Pebble have been able to commercialize their
respective smart watch- or dongle-based products, while
others, such as Google, Motorola and Vuzix, have not.
• Use case. Wearable tech is as much about a device’s
capabilities as it is about how, when, where and by whom
the device is used. Consumer-focused fitness tracking
companies such as Fitbit have really dialed in on this
notion by creating a platform upon which real-time data
collection, analytical tools and results-driven metrics are
unified for easy access on either a mobile device or a PC.
For those focused on the enterprise, HUD companies
such as Vuzix have found partnerships with augmented
reality (AR) software makers such as Metaio and
systems integrators such as SAP to be among their most
complementary assets. And while fitness tracking products
are often designed with subtlety top of mind, more robust,
productivity-focused wearable solutions—such as HUD-type
devices—demand that aesthetics be compromised.
• Operating system (OS). Consumers and enterprises alike
have become accustomed to siloed software architecture,
and today’s wearable technologies follow suit. But this
doesn’t mean hardware-agnostic solutions will reign
supreme; whether it’s battery life, price or form factor,
today’s wearable tech hardware plays a zero-sum game
in which software innovations hold the key to success.
The challenge moving forward will be for developers
to expand device capabilities via over-the-air (OTA)
updates without overburdening the hardware ecosystem.
Companies looking to get an early jump on wearable
tech OS interoperability might execute such a strategy by
supporting “co-opetion” and co-creation initiatives, as
evidenced by Pebble, Plantronics, Recon (an Intel Capital
portfolio company), Sony and Vuzix (see the August 2013
Yankee Group report “Wearable Tech Conference & Expo
Shows Early Innovation, Serious Promise”).
Exhibit 9: Price Will Determine Wearable Tech Adoption, Perceived Value
Source: Yankee Group’s 2013 US Consumer Survey, September
Price Planned To Pay for
Connected Fitness/Wellness Device
73.6%
16.9% $0-$100
$100-$199
9.5%
$200+
Recommendations
• Operators must adhere to consumers’ sensitivity to price.
Given that most of today’s solutions can’t connect directly
to the network, operators should be cognizant of the fact
that costs passed through to consumers will compromise a
device’s perceived value. For this reason, wearables that lean
toward the stand-alone device side of the equation will serve
as a better target—these are the more industrial, enterprise-focused
solutions tooled to improve worker productivity.

• Wearable tech solutions providers must understand the eye of the end-user.
Creating a winning wearable tech value proposition requires that a solution’s target
audience be clearly defined: Although the addressable market for enterprise use
cases is smaller than that of the consumer category, it’s a hopeful first foray for
MNOs to get some skin in the game. When courting the enterprise, MNOs must be
mindful of the fact that such customers are often challenged to balance fiduciary
requirements with active, strategic investments. Since productivity-enhancing
wearables will deliver a clear ROI—and therefore a certain stickiness factor—MNOs’
competitive advantage will be derived from the proper identification of early entry
points to enterprise-grade wearable tech connectivity.
Winners: Companies such as Fitbit, Misfit and Pebble will lead consumer markets if
they stay true to their competitively priced fitness tracking or smart watch-based
products—though we expect scope creep will be a challenge moving forward.
Companies with enterprise-focused wearable tech solutions—such as Epson, Motorola
and Vuzix—will move the HUD needle by drawing from their vast resources, including
capital, partners/alliances and supply chain management.
Losers: Operators that turn a blind eye to the wearable tech market, regardless of
whether or not today’s offerings support direct network connectivity, will struggle in
2014. The fact that wearables predominantly rely on their companion counterparts
means that end-users will start to find more value in non-networked devices. Other
losers include companies that confuse the match between form factor and use case (as
demonstrated by Google Glass).
Further Reading
Yankee Group Perspectives and Daily Insights
“New Technology for New Immersive Experiences,” November 2013
“Wearable Tech Readies for Takeoff,” October 2013
“When the Wind Blows: Stepping Up to Resilient Mobile Broadband Networks,”
August 2013
“The mPoS Bubble Shows Signs of a Slow Leak,” January 2013
Yankee Group Research
“Wyless Champions Partnership and M&A Opportunities To Fuel International
Expansion,” November 2013
“AnyPresence Set to Increase Footprint in a Crowded Space With Meta-Platform,”
November 2013
“Probing the Network: An Essential Tool for Driving Customer Experience,” November 2013
“Samsung Galaxy Gear: Still Just an Expensive Accessory,” October 2013
“Kinvey Creates Competitive Advantage as BaaS Provider With Best Practices in Sales
and Marketing,” October 2013
“Kineto Wireless Enables MNOs To Blend RCS With Telco Services,” October 2013
“StreamWIDE Bridges Telco and OTT Worlds With SmartMS,” October 2013

Corporate
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HEADQUARTERS
© Copyright 2013. Yankee 451 Group, LLC. Yankee Group published this content for the sole use of Yankee Group subscribers.
It may not be duplicated, reproduced or retransmitted in whole or in part without the express permission of Yankee Group,
One Liberty Square, 6th Floor, Boston, MA 02109. All rights reserved. All opinions and estimates herein constitute our judgment
as of this date and are subject to change without notice.
About the Authors
The following Yankee Group analysts contributed to this report: Declan Lonergan,
Raúl Castañón, Rich Karpinski, Sheryl Kingstone, Chris Marsh, Ryan Martin, Jordan
McKee, Brian Partridge, Jennifer Pigg, and Ken Rehbehn.
“GENBAND Helps Service Providers Address OTT Challenges,” September 2013
“Scoring Today’s Return on Mobility for Mobile Application Platforms,” September 2013
“Mobile Application Platforms: A Blueprint for Future RoM Success,” September 2013
“RACO Wireless Drives Growth by Offering M2M ‘Easy’ Button,” August 2013
“Aeris Communications Looks to Europe and Cloud Services To Drive Growth,”
August 2013
“KORE Telematics Relies on M2M Experience and Flexibility To Fight Off Larger
Competitors,” August 2013
“Wearable Tech Conference & Expo Shows Early Innovation, Serious Promise,”
August 2013
“Revolutionizing Retail With mPoS,” June 2013
“Handicapping the Battle for End-to-End M2M Market Supremacy,” May 2013
“Learning To Live With OTT,” April 2013
“2013 Mobility Predictions: Time to Place Your Bets,” December 2012
Yankee Group Data
2013 US Consumer Survey, September
2013 US Enterprise Mobility: IT Decision-Maker Survey, September
2013 US Enterprise Mobility: Employee Survey, September
Global Mobile Forecast, September 2013
2012 European Consumer Survey

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