The opportunity for the Internet of Things (IoT) is extremely large with device connections globally forecast to reach billions and touch most, if not all, vertical markets.
Telecoms operators should be at the heart of this change as many of these services will rely on networks they provide. To date though, operator strategies for IoT tend to be, or at least to appear, tactical and ad hoc.
Telecoms operators need to develop a sustainable long-term position with regard to the M2M market and the broader IoT opportunity.
We believe that telecoms operators can do this by developing a flexible platform which will act as an enabler for IoT opportunities by providing a ‘menu’ of services to customers.
The idea of providing a platform is not new and has been implemented both by telecoms companies and others. Amazon is a good example. Amazon has a mix of revenue streams selling its own products to direct customers (Amazon.com), selling third-party products (Amazon Marketplace), and even selling full e-commerce solutions to others. Over time, Amazon has opened up each of the elements of its platform to be sold as a service, Amazon Web Services (AWS) being the best known.
The same basic model can be applied to M2M and IoT.
Telecoms operators have typically phased their involvement in M2M and IoT, starting with connectivity. As the revenue potential from connectivity alone is relatively low, operators look to add end-to-end vertical market solutions, either developed internally or with partners. With so many potential markets to address and resources limited, this can be challenging for operators.
Rather than focusing all of its attention on the end-user vertical markets, an operator could concentrate on what common elements it can provide for multiple vertical markets. These could include traditional operator strengths, such as connectivity, but also reach into different areas, such as hosting, support and application enablement.
This approach does not preclude other models; the operator can provide complete solutions to the most attractive targeted vertical markets but it expands an operator’s role where it does not want to provide the complete solution. In this way, the operator builds on its scale and strength. The operator can focus on the aspects where scale matters (e.g. hosting) without getting into the detail of specific niche vertical market solutions.
Ideally, components of a platform should be scalable and reusable. They could include connectivity, billing and support, hosting, application enablement and professional services:
We should not underestimate the challenges facing IoT and M2M teams within telecoms operators. On the one hand, these teams are confronted by the enormous expectations surrounding IoT. On the other hand, the near-term impact on the operators’ business is limited as most provide M2M connectivity for just a few hundred thousand M2M-enabled devices.
To position themselves for long-term growth, telecoms operators need to develop a more sustainable position. We believe this can be achieved by bringing together existing capabilities (e.g. cellular connectivity, sales, support, hosting), adding some new ones (e.g. LPWA, application enablement platforms) and providing a horizontal menu of capabilities for their own and partner solutions.
By Tom Rebbeck Head of Custom Research, Research Director, Analysys Mason
