2015/01/13 Telecoms operators need to maintain relevance in M2M/IoT by building on their strengths

Telecoms operators could find their role in the Internet of Things (IoT) reduced to that of a managed connectivity provider because they lack expertise in the 'things' – that is, products. In this article, Tom Rebbeck looks at how operators can fill this knowledge gap and build on their own unique strengths to maintain relevance.

Telecoms operators could be marginalised in the IoT market if the 'things' are more critical than the Internet

"What makes smart, connected products fundamentally different is not the Internet, but the changing nature of the 'things,'" claim Michael Porter and James E. Heppelmann in a recent article for Harvard Business Review (HBR).1 Telecoms operators face a significant challenge if the Internet of Things (IoT) is more about the 'thing' than the Internet. They may aspire to increase machine-to-machine (M2M) and IoT revenue – particularly by selling more than just connectivity – but they know and understand the Internet, and not 'things'.

The risk for telecoms operators is that companies with a background in 'things' will marginalise their role in the IoT market to little more than the provision of managed connectivity. They will be competing with companies like PTC, whose CEO co-authored the HBR article with Porter. PTC develops product design and product lifecycle software, and has spent about USD300 million since 2013 acquiring two IoT platform companies – Axeda and ThingWorx. Other than Verizon, and possibly Vodafone, no telecoms operator has spent more on IoT acquisitions.

To play more than a peripheral role, operators need to focus on their unique strengths

First and foremost, operators need to decide and articulate what role they aim to play in IoT. Many are unable to articulate their aims in this market clearly, other than the generic ambition of increasing revenue. They have two broad choices, outlined below. Operators should be clear about which choice they have selected and communicate this choice clearly both to the market and internally.

• Become a 'thing' company, at least in certain vertical markets: Operators can opt to provide an end-to-end solution to customers. For example, they could provide a fleet tracking solution that includes the device, application, connectivity and ongoing support for small and medium-sized enterprises (SMEs) that run a small vehicle fleet. The operator would need to have specific knowledge of a vertical – either internally (typically through acquisitions, as Verizon and Vodafone have done) or through a partner (as Telefónica is doing for fleet management with Geotab and Masternaut).
• Provide 'horizontal' solutions for IoT to support a range of vertical markets: Operators can provide the supporting capabilities for IoT, such as offering an application platform that can be applied to multiple industrial sectors. For example, the operator could provide the tools with which a partner or reseller could create a fleet tracking tool, but the operator would not sell or support this tool. Many operators are selling managed connectivity as a horizontal tool, but few are doing more than this (few are providing application support, for example). Again, this route can be taken through partners – PTC is one of several application platform providers2 – or through acquisition (Telenor Connexion bought a small integrator, iOWA, to build its horizontal capabilities).

Operators also need to invest in networks that are fit for the IoT. Cellular operators have focused on building networks for smartphones – that is, devices that demand ever higher bandwidths and whose batteries can be recharged daily. Many, if not most, IoT devices need only very low-speed connections (1Kbps is often acceptable), but need the battery to last a year or more. Operators in all countries (and not just developed countries) should look at investing in low-power, wide-area networks, such as Sigfox, Semtech, Weightless or LTE-MTC, that cater for the specific needs of IoT devices.3 If they do not, operators risk losing the connectivity revenue and, in so doing, possibly lose the opportunity to gain other IoT revenue.

Telecoms operators have extremely strong assets beyond networks that can be applied to M2M and IoT, as we argued in a recent article. Few other organisations can complete with a typical operator's networks of stores, 24/7 support capabilities and the ability to bill millions of customers. These assets may be more valuable than network ownership because many IoT devices need little more than a Wi-Fi connection and no quality of service guarantee for some IoT services.

Telecoms operators may not have the same background expertise in products as some other organisations involved in IoT, but they can gain these capabilities – either through partnership or acquisition – and have other unique strengths on which to build.


Source: Analysys Mason