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As the Internet of Things (IoT) takes hold, service providers are presented with new value through business model transformation and optimization.
August 14, 2018
Ten years ago, the buzz around the Internet of Things (IoT) and ubiquitous connectivity was about the anticipated new wave of revenue for service providers. This was based on the extension of the machine-to-machine (M2M) market, the explosion of connected devices, the promise of the cloud and the low cost of sensors. This was a telco-centric view of connectivity and its role in both our industrial and personal worlds. As is the case with most technology waves, it has taken about 10 years to build the basis of this new market. While IoT has yet to become the big revenue earner that was initially anticipated, it clearly indicates the role of the service provider in the broader digital economy.
The possibilities of connecting the literally trillions of devices is just one option. WiFi has, of course, grabbed the attention of the world. Newer services have brought even more low-cost, simplified options to the table. With so many technical options available to map to endpoints, it’s senseless to build an IoT strategy from the outside in. The disruption of business models from the digital world is just that: rethinking how businesses are run and how processes can be streamlined or even removed to facilitate simpler and, of course, cheaper ways of getting service to customers, optimizing business flows and breaking into new markets.
Thinking of IoT connectivity first is dangerous. Assumptions about the “needs” of, for example, the automotive sector in terms of connected vehicles or robotized campus environments misses the point; the automotive industry is looking for an edge to sell more vehicles, change their business model and automate the factories of the future. Communications is a part of the future solution, not the solution itself.
IoT is truly an ecosystem play. Activity is rife at all levels. Platforms supporting IoT are being developed by technology enablement players and network equipment providers are active in ensuring that networks are ready to support the scale needed for traffic spikes.
Communications service providers cannot compete with the scale and expertise hyperscale players. What they can do is adapt their market strategies to leverage the power and flexibility of next-generation networks and software to monitor, manage and refine business flows on a continuous basis. Does this mean owning the end-to-end process for industrial or consumer markets? On the contrary, an ecosystem play is where the real value of a company’s contribution is brought to the table and integrated into offering from other parties. On some occasions, service providers can be the lead, but identifying industries where they can either buy a presence or have close working relationships with key integrators and/or highly influential businesses is an achievable strategy. The focus should be on offering IoT-enabling connectivity and services that gather, analyze and facilitate new business models.
It is essential to understand who advises businesses around this next wave of industrial change and the extension into consumer services. A bottom-up approach based on connectivity is flawed. Service providers must adapt to companies’ advisors coming from the top down in the form of management consultants and others from global technology and integrator/aggregator players.
In short, the real value does not manifest itself as another premium. IoT indicates a shift in focus for support services, but it is in the business knowledge, software, analytics, understanding, workflow improvement and partner enablement that the real value will be created.