CSPs should take a closer look at their own businesses before jumping into the IoT fray.
December 1, 2015
As Communications Service Providers (CSPs) continue to look for new lines of business and revenue streams and improved relevance in light of decreasing voice and video business and an increasingly tough competitive landscape, one area getting massive attention at the moment is the Internet of Things (IoT).
IoT is still a relatively nebulous topic that will eventually touch most aspects of everyday life, from connected cars to smart watches to the ships, containers, planes and trucks that bring these goods to market. Cities are connecting, agriculture is connecting – including the much anticipated connected health that involves health sensors and devices or various other tracking tools to monitor and gather data on a multitude of events. And these billions of devices – up to 50 billion by 2020 – will need to communicate with other devices as well as other parts of the network and the wider Internet in order to truly provide a web of always-on services and capabilities.
These billions of devices will generate trillions of transactions and huge volumes of data that will need to be processed, understood and acted upon in some way, which fits extremely well into the wheelhouse of today’s CSPs. However, jumping straight into the IoT and hoping to find success is a sure recipe for disaster. Instead, CSPs should take a closer look at the opportunities before deciding how to tackle this market, which Machina Research recently characterized as having potential total revenue of $1.3 trillion.
Where to Play in the IoT
Developing an IoT strategy and deciding where to play in the IoT ecosystem should not be a quick process or an easy decision. CSPs should instead take a measured approach that takes into consideration their brand and market resonance, level of experience, distribution channels and what goals they hope to realize.
The IoT ecosystem can be thought of as a pyramid, with the most competition at the bottom of the pyramid with solution plays, including those covering traffic management, smart cars, smart cities, agricultural applications, home security, healthcare and more.
Click and Drag to Move
Above this are platform enablers, where cloud service providers, BSS/OSS software providers, start-ups and others have built their own platforms to support solutions in the lower layer. Most platforms are built for a specific solution, for example AT&T’s investment in the connected car opportunity. The concept of a horizontal or cross-industry IoT platform fits in here, which would put CSPs in the enviable position of pulling together a partner-oriented IoT ecosystem that other players can simply plug into.
Then at the top of the pyramid are the connectivity plays where most CSPs reside today, delivering the bandwidth and capacity for devices to communicate with the network and beyond. Though many would argue against being a dumb pipe, being the smartest and best pipe has great value to the rest of the ecosystem. Those service providers who also succeed in attracting most of the data traffic would in the future find themselves holding key network and traffic data. This data could be leveraged by the IoT connectivity giants for security and big data analytics plays down the line.
A basic consideration for a company is to consider and leverage their strengths. Are they primarily a consumer brand? Is their strength in large enterprise? Do they have certain network or coverage strengths that apply to specific solution areas? For example, video analytics required for many police, security and public service applications may require more bandwidth and traffic optimization than their network can provide. Fleet and tracking services may only need occasional and mobile network traffic.
But no matter where they play, CSPs will need to build strong partner management systems that support all aspects of IoT transactions, including compensation and settlement.
Making the Right Decision
Deciding where to play in the IoT should not be taken lightly. Instead, CSPs should consider four critical areas to help them reach a consensus on their future strategy:
- Investment capacity: CSPs should consider whether they have the significant level of resources to develop an entire IoT solution as well as the time and effort required to deliver it. Or, do they fit into the mold of an operator that’s taking the creative, fast and low cost route to market?
- Make sure the solution fits the brand: Some CSPs have the broad name recognition to justify becoming a major IoT solution player and providing the entire connect car ecosystem, for example. Others may not have the high profile that appeals to cost conscious consumers and businesses so may choose instead to provide aftermarket solutions that support existing IoT deployments.
- Platform capability: This relates to a CSP’s network, IT infrastructure (or ability to outsource and manage that infrastructure), ability to create products and services, bring them to market and create the appropriate interfaces for third-party partners.
- Distribution channel: CSPs need to evaluate whether they have a strong path to distribution of IoT solutions or whether they would need to partner to gain this channel. For example, a CSP with a strong connectivity angle may not have a solid distribution channel for enterprises and instead would need to partner for that capability. Many have a strong retail network which would dictate a different set of solutions for market.
Going Down the Connected Path
Most CSPs will not be able to play in every IoT segment, but the beauty of this market is that participating in just one segment or area can be a very successful venture. The trick is for CSPs to know their own business well enough to identify these areas.
As CSPs look for opportunities to enter the digital domain and go beyond pure connectivity players, the IoT provides the perfect opportunity for new business models, new sources of revenue and ultimately new ways to attract and keep customers.
Photo by Ruben Schade with Creative Commons License