Every year, Strategy Analytics attends M2M World Congress, which in 2016 ran from April 26th and 27th in London, UK. Members of Strategy Analytics’ IOT Strategies team were not only in attendance but moderated all the panel sessions on Day 2 with leading vendors in the industry. The event itself provides a great barometer for perspectives on how IoT vendors such as Vodafone, Orange, Swisscom, Deutsche Telekom, Etisalat, Tele2, TeliaSonera, Cumulocity, Sequans, SigFox, Flexera, Nokia and others are serving their customers and adjusting their business models to meet customer needs.
Key takeaways from the event centered on changes in the low power landscape, evolving Telco business models, the importance of security to IoT and the vital role of partnerships in ensuring simplicity and effective delivery of an IoT project.
- A shift in the low power landscape: Has LPWA met its match with NB IoT? The last year has seen a move to standards in the low power area, driven by the 3GPP and by operators and the operator ecosystem in the shift to NB IoT. As a result there are clear challenges for SigFox, LoRa Alliance and other LPWA vendors operating in unlicensed spectrum. While several LPWA vendors have gained a foothold in the IoT space through “first-mover advantage”, we question the long term business models i.e. the proprietary nature of offerings (at a time when the industry is moving to eUICC and carrier switching via service platforms), building networks with venture capital funds in the hope of gaining customers and the long-term viability of customers transitioning to NB IoT. Telcos are now in pole position and the language of the LPWA pure play vendors has changed from a year ago. However, there remains a clear role for LPWA technologies from companies that do not want to wait for standards or want a cost-effective alternative that fits their needs. While working with carriers expands the channel reach, it is not the only option. Today companies opting for LPWA are ‘low hanging fruit’ that MNOs who are waiting for NB-IOT are going to miss. When a scalable NB-IOT solution is approved (and there are still disagreements over the speed of the shift to LTE-M and NB IoT), MNOs will need to either partner with, or acquire, the specialists who will have these types of networks. Orange and Swisscom are good examples of operators forging these complimentary alliances. Mobile operators have regularly missed out on getting standard-based services rolled out on schedule and at the cost/benefit threshold everyone envisions (see 2.5G, 3G, low latency 4G etc.) Delays in implementing 3GPP standards will play into the hands not only of LPWA vendors, but operators who are forging partnerships with LPWA vendors.
- Telcos adopting new business models based on customer value rather than product and cost pricing: In a world where Telcos are facing increasing bandwidth challenges, declining revenues per user and relentless competition from the OTT players (over the top segment), it is clear that the old model of billing in the IoT space is neither sustainable or viable long term, especially if they want to move up the value chain in IoT projects. In this new business model, upfront cost may be very low, possibly even zero, which lowers barriers to entry. However, the model may take longer to show a return and is dependent on a shared-risk approach, which means that customers do not feel they are embarking on a journey alone, but rather sharing the risk with a supplier. This obviously means that a Telco needs to assess the exposure to risk in a potential project, but may well end up higher in the value stack by establlishing a more trusted relationship leading to opportunities in other areas of greater value, such as cloud,, consulting and integration services, for example. Moreover, the Telco also shares a higher portion of any reward, potentially a share of additional gross profit or revenue, which may be higher than the previous approach.
- Security underpins any IoT project: There are a large, and growing number of IoT stakeholders, in the ecosystem, these include product developers, Original Equipment Manufacturers (OEMs), system integrators, cloud service providers, enterprise services, analytics and instrumentation services, carrier’s enterprise IP networks and public IP networks, among others. Can all these stakeholders converge and succeed? What is certain is that they all require a common foundation of trust. Stakeholders need an assurance that they can rely on the integrity and capabilities of other stakeholders. This ability can only be trusted if there is a robust framework that can securely connect “things” and monetize the IoT assets. In a world with billions of connected devices, privacy and data security becomes of paramount importance. Enterprises must address the crucial issues around data ownership and security if they are to capitalize on the benefits of this new connected ecosystem.
- Partnerships are vital to success, but know your role in the value chain: It is abundantly clear that partnerships are vital in the IoT Ecosystem to deliver and fulfil successfully on any given project. A number of vendors talked through their partnerships at the event. The importance of partnerships is not new, but the importance of understanding the specific role a vendor can play in any given project is vital. Good communication between partners is vital to ensure the customer’s expectations are met satisfactorily. In several examples given, such as welding company Esab, it is the system integrator that typically leads the project, coordinating with partners in order to handle the complexity of the project and integration into company systems. This tallies with Strategy Analytics’ own research into IoT Deployments, which suggests SI’s are the “go-to” partners for many companies venturing into IoT projects, although this is not exclusively the case. Understanding and fulfilling a specific role effectively, especially for Telco service providers, can still be a profitable business and good relationships with SI’s (e.g. Tele2 with WiPro in the ESAB case study) will result in successful repeat business in other projects.
Did you attend the event as well? If so, I'd love to get your thoughts. My full 25 page report (subscription required), can be found here: Low Power, New Telco Business Models, Security & Partnerships: Lessons from M2M World Congress 2016