The Internet of Things (IoT) is on a crucial cusp. It’s past being just a trend, nudging into consumer consciousness with brands like Canary and Philips’ Hue, and predicted to be worth $7tr by 2020. There are many business models, too.
Utilities companies are installing smart meters across whole communities, says Andy Peers of MDS. Families are investing in remote monitoring of their loved ones. And production lines are being optimised with data connected in real time to enterprise resource planning. Plus, a raft of additional new business models specifically predicated on these technologies is emerging; for example, the ability to price car insurance or hire fees on the basis of the customer’s driving.
The operators’ role in IoT
The role of operators in this new world is challenging; not only because they must jostle for position with technology businesses and marketers/owners of the customer relationship, but also because mobile connectivity is a requirement for only part of the market. Many connected factories, for example, will require nothing more than Wi-Fi. Operators will be frozen out of part of the IoT market – even though they may well be responsible for the control device we will all own: our mobile phones.
They must therefore vigorously defend their territory in markets where they do participate by becoming the platform of choice for mobile-enabled IoT delivery, particularly to enterprise. This comes with plenty of advantages. Telcos already understand many of the key mechanics, for example, delivery of GSM services at scale, and with QoS built into the channel.
A service-agnostic platform approach is low-risk: the resellers and systems integrators with vertical specialisms (at the very least, consumer vs. B2B) take all the commercial risk of marketing and delivery. These service creators, meanwhile, get the cloud-style ‘IoT as a service’ benefits from their operator partner: scalability of service, resilience and reliability.
Maintaining market position
That said, smart operators will still have to augment their IoT service layer. To maintain market position as the IoT sector explodes will require more innovation than can be accommodated in the legacy infrastructure – and corresponding legacy governance architecture – burdening most operators today.
These new platforms will need value-add elements applicable across the IoT service delivery cycle, from management and analytics dashboards to infrastructure prioritisation and ‘fast lanes’, and the ability to ‘bill on behalf of’ with smart options like subscriptions, extras-onto-bills, real-time variable pricing etc. Achieving this while there are so many unknowns in the sector demands a partner ecosystem in which operators must work with enterprise to refine needs and opportunities, and with managed services partners to maximise the offer and build in agility to reduce operational risk.
The alternative to developing a platform is to go one step further with the moonshot of offering services direct to the customer; after all, many operators have plenty of consumer-facing experience. They own a billing relationship with, in some cases, millions of customers.
Partner network support
Whilst this may seem an attractive proposition of virtually unlimited opportunity, the risks are much greater too. IoT is an emerging industry in which participants have not found their niches. Products and services are not well validated by hard experience. And this is also, crucially, a business in which devices will be critical – and that demands deep pockets.
It’s no surprise that Nest required a piggyback from Google to truly get off the ground. Operators seeking direct engagement will need the same accelerated development support from a partner network; not only horizontally via managed services providers but also the bespoke vertical integrations required to meet target sector needs.
As the market settles, specific areas of interest will no doubt become apparent, particularly in the consumer space. It is well within an operator’s abilities to badge up a bundle of services and sell them directly. We should expect, for example, to see a complete ‘Smart Home’ (security, utilities optimisation, pet monitoring etc.) package on offer by 2020.
Where to reap the rewards
Until then, however, operators must back many horses – and those which do so successfully will be rewarded. Particularly in the early years, operators have a key role in stepping up to support the ecosystem where it is weak; rating and billing being good examples. Supporting start-ups with a resilient platform will yield commercial benefits for years to come and protect the operator’s position and investment as the IoT sector develops.
The author of this blog is Andy Peers, director of Services Strategy at MDS.
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