This review of 2020 corporate initiatives in the IoT market builds on a history of tracking strategic industry developments for over a decade. Two sets of corporate events that bookended the start and end of 2020 provide instructive examples of the roadmap and dead ends that characterize today’s IoT market. In the intervening months, organizations in different parts of the industry ecosystem bolstered their IoT strategies. Some developed complementary capabilities through M&A while others addressed go-to-market issues through business reorganization and product-innovation initiatives. For many organizations, however, there remain challenges in balancing short term imperatives with strategic positioning goals. There is a degree of comfort in embracing the familiar. The risk is that this leads to an under-investment in properly integrating new business approaches and complementary technologies.
IoT Roadmap Concepts from January
The Chinese electronics supplier, Xiaomi, opened 2020 with a $7bn AI and IoT plan focusing on the convergence of 5G, AI and IoT. From its consumer electronics base, Xiaomi’s ‘AIoT’ proposition attempts to move the organization into new, ‘software and services’ market segments. This shift from hardware to services is a perennial issue, presenting new organizational, competency and revenue-stream challenges. January also witnessed a merger of two industry alliances, bringing together the Trusted IoT Alliance and the Industrial Internet Consortium. One other notable development announced at CES2020 was a linkup that brought together Sprint’s Curiosity IoT platform with Wirecard’s unified commerce solutions to deliver the Internet of Payments for enterprise clients.
These examples illustrate the blending of IoT technologies and solutions into services that address commercial needs. As the industry has matured, IoT is no longer a standalone technology. The message for the supply side of the IoT industry is not to focus exclusively on IoT components. Instead, there is a need to combine different elements and to work across disciplines. Some of these elements are obvious as evidenced by example applications of AI and IoT or, Blockchain and IoT. Less obvious but still important over the longer term are elements related to cross-boundary data sharing, trustworthy IoT, and explainable AI.
Making Partnering Work
The idea of combining different elements in the IoT solution stack is nothing new, although the elements in the recipe for an IoT system have evolved over time. In the early days of the M2M/IoT market, several mobile network operators launched initiatives to make implementation easy. They established partner ecosystems that brought together module providers, connectivity, connectivity management platforms and some vertical-sector expertise. Users were supposed to pick and choose from an approved list of suppliers whose hardware had been certified for use on the coordinating operator’s network.
Having a directory of approved partners to work with does not translate into large-scale, commercial success. Adopters become wary of committing to a closed or heavily directed ecosystem due to the underlying issues of supplier lock in and long-term dependability. In taking on these new activities, partner managers benefitted from the forced need to innovate and adapt their channel strategies. The need for organizational restructuring resulted in divestments and the creation of IoT-focused business units. As the IoT market has matured and grown in size, product innovation and restructuring have taken precedence over partnering as a lead strategy. This is evident from the accompanying illustration which categorizes corporate IoT initiatives for the years 2010, 2015 and 2020 into different types of strategic activity.
Value Chain shift
In addition to a shift in the types of corporate initiatives over time, another recurring topic came to the fore during 2020. This deals with the issue of a shift in value chain economics. A decade ago, there was a heavy emphasis on connectivity. However, competition and the evolution of low-power connectivity technologies squeezed the pricing connectivity. Now, it accounts for considerably less than 5% of the IoT value chain. I spoke about these issues at the Managed Services Live conference in October. Drawing on the GSMA’s market research, this presentation described the predicament that mobile network operators find themselves. It also covered the potential for them to share in the market upside through opportunities higher up the value chain. A summary of the market, competitive context and strategic implications is available in my November post .
Mobile network operators can at least count on Ericsson to help them. Around December, Ericsson advertised the position of Vice President and General Manager for IoT within its ‘Business Area Technologies and New Businesses’. The mandate for this unit is to venture well beyond the traditional boundaries of Ericsson’s core business. According to the recruitment information, Ericsson’s strategic intent with IoT is to secure the relevance of 3GPP and operators in IoT and provide a key success factor for 5G. It also aims to become the #1 third party trusted global connectivity management platform. This statement of intent demonstrates one of the dilemmas for established IoT organizations and the difficulties in moving beyond their areas of core competence. Specifically, while Ericsson has ambitions beyond its core business, the measure of its primary aim is to become the #1 connectivity management platform provider. This focus risks overlooking opportunities related to other platform categories, end-user applications and, outcome- or performance-based solutions which represent the overwhelming bulk of the IoT market opportunity .
To get a sense of how industry dynamics are forcing the pace of change consider two other corporate developments of 2020. One involves Twilio, a cloud communications company. It illustrates how cloud service providers are tackling the IoT opportunity. In July, Twilio acquired the long established IoT company, Electric Imp, to in-source valuable IoT expertise and Electric Imp’s IoT connectivity platform. This acquisition builds on earlier stages of Twilio’s IoT journey, beginning with an IoT business partnership involving T-Mobile in 2016 and a subsequent acquisition of Core Network Dynamics in 2018 to help IoT developers overcome difficulties in connecting their IoT devices. Twilio’s in-sourcing strategy mimics past moves by Amazon (e.g., 2lemetry acquisition on 2015) and Microsoft (e.g., Solair acquisition in 2016) to build out their IoT service-enabler platform capabilities.
The second informative development involves the evolution in SigFox’s strategy. SigFox, it should be remembered, is the company that pioneered the idea of small data payloads and low-cost, wide-area access for connected devices. According to its VP of business development, Ajay Rane, Sigfox rebooted its business model to focus less on IoT infrastructure and more on industrial data; it took a couple of turbulent ears and some critical lessons-learned for the company to get on the right path. Earlier this year, the company began selling several of the networks it had built, including one in Germany, with plans to offload its U.S. and French networks in 2021. This is another reminder of the tendency for organizations to look for value higher up the value stack.
The year ended with a degree of realism hitting the smart cities sector and a reminder for IoT users about technology dependency issues. On 28 December, Cisco announced its intention to stop sales and eventually support for its Kinetic for City product line. This had been a CEO-supported initiative to help Cisco evolve from a hardware vendor into a company more closely associated with the sale of software services. This decision was made in response to the challenges that vendors face in selling to financially constrained municipalities. The smart city withdrawal theme is part of a trend. It follows a trade press article from March 2020 which reported that AT&T and Verizon were withdrawing from their smart city efforts and folding these activities into other business units . And again, during May, another large corporate, GE Current, offloaded its CityIQ smart streetlights service to Ubicquia.
One positive for municipal buyers was the move by Qualcomm, which launched a ‘plug-and-play IoT suite’, claiming to have cracked the code in smart cities. Here is an example of a technology vendor expanding its business model to offer a variety of “as-a-service” solutions to support the digitization of smart cities and connected spaces, including hospitals, campuses, and factories. Qualcomm’s idea of “bringing a solution right out of the box, to be plugged-and-played and monetized” is likely to need other support and change-management elements to make its offering easier to implement in already complicated municipal environments. As example of what might be required comes from Verizon. It closed the year with the launch of its IoT Managed Services offering to help enterprise customers smooth their IoT adoption journey.
Apart from these organizational changes, one other issue to highlight from the close of 2020 was the shutting down of Google’s Android Things operating system for IoT devices. It is a reminder of the business risks that adopters face as they plan their IoT device strategies. This might not be an issue for short service-life devices. Other devices that are expected to remain operational for far longer period of time need to factor support and field-support issues (if replacement ends up being the only option) and whether an open standard framework, as works for the mobile industry through 3GPP, is a fundamental business requirement.
The global pandemic is accelerating the adoption of digital technologies and driving rapid change in operational processes. Many organizations are viewing their operations in a new light and one that highlights inefficiencies and the opportunity to drive significant productivity gains. IoT and associated technologies will play an important role in remote monitoring and intervention processes. There may even be a pricing uplift where deployments are business critical and require better engineered and redundant IoT systems.
Many of the corporate events of 2020 highlight the ever-present tension of balancing investment in near term sales vs. strategic roadmap issues raised by the expected inclusion of complementary technologies (e.g., AI/ML and explainability, supply-chain ledgers, trustworthiness). Strategic considerations also extend to governance and operational models to enable an open IoT ecosystem that has minimal barriers to entry and exit. There continues to be an imperative to look for opportunities higher up the value chain, as exemplified by SigFox’s corporate journey, and to build robust foundations lower down the IoT stack, as illustrated by the cloud service provider acquisitions. These are reminders of the need to construct durable ecosystems. Integrated IoT stacks will grow in importance because of emerging requirements around the handling of data, which is at the embryonic stage of market development. Over the coming decade, an important strategic focus for the IoT community is the concept of equitable data sharing. This has several implications for making communications easy while including policy safeguards and standardization of data models which enable discovery, interoperability, and usability.
 GSMA Intelligence: Operators Need to Up Their Game in the IoT Market https://www.telecomtv.com/content/access-evolution/operators-need-to-up-their-game-in-the-iot-market-39470/
 Verizon, AT&T withdraw from smart city efforts https://urgentcomm.com/2020/03/10/verizon-att-withdraw-from-smart-city-efforts/