For the last ten years I have been writing in-depth reports about how Communications Service Providers such as AT&T, Deutsche Telekom, Telefonica, Verizon and Vodafone address the IoT market. I am currently nearing the end of the research phase for the inaugural Transforma Insights ‘Communications Service Provider Internet of Things Peer Benchmarking Report’. The changes happening in the provision of connectivity are perhaps bigger now than they have ever been. In a previous article I explored how the pendulum had swung back and forth between local and global connectivity, looking at topics like roaming, eUICC and new networks like NB-IoT and 5G. In this article I will delve into organisational structure, capabilities and technology capabilities.
A lot of the recent change focuses on realigning to more appropriately address the demands of the market. The most prominent example is Deutsche Telekom, which has spun out a separate independent subsidiary Deutsche Telekom IoT GmbH which will ultimately combine the group’s IoT capability in one place, with the aspiration of being much more nimble in addressing the market. Telefonica has also created a new subsidiary, Telefonica Tech, to house its IoT, big data, cybersecurity and cloud lines of business.
It is also noticeable that alongside asserting their operational independence, the IoT lines of business are increasingly considering themselves agnostic from their parents’ connectivity. Orange’s Multisourcing Service Integration (MSI) for instance allows for the provision of connectivity from multiple other providers. Deutsche Telekom’s IoT Hub also promises a lot more agnosticism about whose capabilities are used to deliver services.
We also seem to be bidding farewell to the M2M/IoT alliances that arose in the middle of the last decade. Neither the Global M2M Association or the IoT World Alliance are really seen as strategic priorities for the organisations that are involved. They can deliver some benefits, but realistically they never delivered on the hoped-for commercial benefits. At the time we pointed out that a collaborative multilateral cross-selling model would always be challenging, and so it proved.
In parallel to the diminishing of the alliances, the old platform polarisation seems to be a thing of the past. The idea of operators focusing their IoT strategy on using Jasper, Ericsson DCP or Vodafone’s GDSP have long since passed. The market is now much more fragmented, with CSPs using multiple third-party and in-house platforms to address different use cases and client types. The new CSP platform landscape is also about much more than just connectivity, encompassing device management, data management and application enablement. Examples include AT&T’s Asset Management Operations Center, Telenor Connexion’s Managed IoT Cloud, the Telia IoT Platform, and KORE Group’s Kore One IoT. In some cases it has diversified to the point where the connectivity is almost irrelevant such as with Aeris’s Mobility Suite.
Another major evolution is that operators are becoming predominantly horizontal players that pursue vertical offerings only where they have a particular differentiator. A major discussion point over the last 10 years with CSPs has always been the extent to which they pursue vertical vs horizontal opportunities. Delivering end-user applications promises higher margins, but in a much more competitive market. Focusing on the horizontal, and particularly connectivity, gives the benefit of scale, albeit with slimmer margins. In 2020 it seems like this aspect of the market has settled down. Deutsche Telekom has more-or-less opted to pursue just the horizontal, although with such a strong professional services element to its proposition, there is still strong opportunity for cashing in on customisation. Others have largely opted, sensibly, to specialise where they have competitive differentiators. Vodafone, for instance, is focusing where it has acquired strong service providers in a space, such as IoT.nxt in mining or Cobra Automotive. Verizon is focusing on just a narrow range of logistics (where it has invested USD3 billion in acquisitions in the last few years), smart cities and factories (where it wants to make sure its heavy investment in 5G pays dividends.
Specialisation is not always vertical. Telenor is focusing on global industrial deployments, while Telia is predominantly interested in companies headquartered in the Nordic-Baltic region. Orange has blended its IoT offering with other services to focus a holistic offering to its MNC clients. This is a realistic recognition of where companies have capabilities.
Looking to the future we expect the next change will focus on private networks. There is a huge and justifiable buzz particularly in manufacturing and logistics. In part this is because of the arrival of 5G, but actually most such networks don’t require that set of capabilities. What is surprising is that very few operators have private networking as part of their IoT portfolio. They keep them as a separate part of the offering. There is clearly a strong alignment in terms of customers, project complexity, application, sales cycle, and impact. What’s more, there is a substantial opportunity for a cross-selling. We expect a more co-ordinated approach between private networks and IoT in future.
Transforma Insights is currently compiling its IoT CSP Benchmarking Report which is due to be published in August 2020. It features exploration of these and many other topics, as well as detailed profiles of all the major players.