The Internet of Things (IoT) is one of the most talked-about topics in the technology industry, and yet the provider landscape is immature and fragmented, says Ericsson. So what strategies are service providers adopting to unlock the IoT’s business potential and help the market mature?
The networking and communications company has produced a new report, ‘Exploring IoT Strategies: Insights on IoT value chain positioning from leading telecom service providers‘. The 12-page document (downloadable from the link above) analyses the different ways in which 20 leading companies – unnamed in the report – are vying to capture the commercial potential of a predicted 20 billion connected devices by 2023.
To create the report, Ericsson asked 10 of the world’s fastest-growing mobile broadband providers, and 10 leading IoT service providers (by connections, offerings, and ambitions to scale), how they are addressing the nascent market, which most define as “a completely new type of business”.
It found that while revenue growth is by far the biggest driver for telecom service providers entering the IoT space, they are pursuing a variety of different paths to achieve it, with 70 percent of the interviewees having “no well-defined strategy” for capturing the IoT’s business potential. Instead, “they are testing and taking on different roles within the IoT value chain”, says the report.
Ericsson identified four key roles that mobile and specialist IoT companies might take on: network provider, connectivity provider, service enabler, and service creator.
Most of the 20 companies interviewed are pursuing the network or connectivity provider roles. However, 80 percent of the interviewees expressed an ambition to move up the value chain and become service creators or service enablers in select areas, says Ericsson.
In other words, the network and connectivity provider roles are seen as foundational, and yet provide the majority of IoT revenues at present. The rest of the market appears to be up for grabs, as providers look for the closest fit with their existing corporate strategies.
IoT role vs strategy
There is a relationship between the initial role that a service provider might play in the IoT value chain and their overall strategy as a company, observes Ericsson.
Quality-led service providers are often strong across areas such as system integration, analytics, and existing end-to-end solutions, says the report. This has enabled some to develop the necessary skills to act as service creators in select areas.
On the other hand, offering-led operators are typically challengers with slim organisations and limited resources, suggests Ericsson. These will naturally take on the network provider role. “Moving up the value chain calls for capabilities which they may not yet possess,” it warns.
Within most of the surveyed companies, the IoT business tends to be run by a dedicated start-up unit, with success measured by a variety of key performance indicators (KPIs), including IoT-connected device and app download numbers, as well as IoT revenue market share.
This suggests that many providers view the market as primarily a numbers game. “We found that a service provider’s network capabilities are central to its IoT ambition,” adds Ericsson, “and, when aligned with its IoT strategy, this will have the greatest impact.”
Market manoeuvres
The B2B market emerged as the prime end-user focus for all of the companies interviewed by Ericsson, with fleets and logistics, connected cars, smart cities, and industrial automation being the most common sectors targeted by service providers.
By contrast, the consumer IoT market is relatively immature, with limited uptake due to unclear value propositions and competition from over-the-top players, says Ericsson.
All of the interviewed companies believe that new cellular IoT technologies, such as Cat-M1 and NB-IoT, will be game changers, improving battery life, reducing device costs, and enabling new use cases, adds Ericsson. Seventy percent of the companies interviewed are focusing on cellular IoT.
“Creating new services and the simplicity of introducing these devices will be an important ability for service providers to harness in their provision of IoT services,” the report explains.
Most of the providers also believe that 5G will have a significant impact on the IoT in the future, although few yet have a clear view of specific 5G use cases. “Most of them [80 percent] are also relying on standards and open Application Programming Interfaces (APIs) to enable third-party development,” adds the report.
“Generally, as-a-service delivery channels and innovation labs were also found to be critical capabilities, irrespective of the IoT roles that service providers would like to take.”
Sector knowledge and experience are the two essential capabilities for understanding customers, especially in industry verticals. “This also applies to the service provider’s ability to select customers that have a clear view of their own needs,” adds Ericsson.
The company’s head of IoT, Jeff Travers, hailed the research, saying: “The report confirms the importance of IoT to the current and future business of leading service providers, no matter where they operate in the world.
“Regarding IoT as a new type of business, service providers are investing in new technologies and establishing new business models for revenue sharing and increased use of indirect channels. They are also creating new delivery models for as-a-service and online services and driving innovation with partners and customers.”
Internet of Business says
An intriguing report that sends out mixed messages to potential customers. On the one hand, it finds that providers are experimenting with the market and its enormous potential, vying for dominance and looking for the best match with their business. But on the other hand, some appear to be incentivising numbers over quality, with most lacking a clear and overarching strategy and roadmap for the journey ahead.
All of this suggests that the market is waiting for someone to lead it and set clear directions – especially when it comes to value-added services.
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