Introduction
The internet of things (IoT) will revolutionise all industries, not just TMT. In addition to the benefits of connecting previously unconnected objects to monitor and control them, the data that IoT will make available could play a pivotal role in other major technological developments, such as big data analytics and autonomous vehicles.
It seems logical that, because IoT relies on connectivity, this will be a new growth opportunity for telcos. And indeed, as anyone who has attended MWC in the last few years can testify, most if not all major telcos are providing some kind of IoT service.
But IoT is not a quick win for telcos. The value of IoT connectivity is only a small portion of the total estimated value of the IoT ecosystem, and therefore telcos seeking to grow greater value in this area are actively moving into other layers, such as platforms and vertical end solutions.
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Figure 1: Telcos are moving beyond IoT connectivity
Source: STL Partners
Although telco IoT strategies have evolved significantly over the past five years, this is a complicated and competitive area that people are still figuring out how to monetise. To help our clients overcome this challenge we are publishing a series of reports and best practice case studies over the next 12 months designed to help individual operators define their approach to IoT according to their size, market position, geographic footprint and other key characteristics such as appetite for innovation.
This report is the first in this series. The findings it presents are based upon primary and secondary research conducted between May and September 2017 which included:
- A series of anonymous interviews with operators, vendors and other key players in the IoT ecosystem
- A brainstorming session held with senior members from telco strategy teams at our European event in June 2017
- An online survey about telcos’ role in IoT, which ran from May to June 2017
Contents:
- Executive Summary
- Introduction
- A four-step process to monetise IoT
- Step 1: Look beyond connected device forecasts
- Step 2: Map out your IoT strategy
- Step 3: Be brave and commit
- Step 4: Develop horizontal capabilities to serve your non-core verticals
- Result: The T-shaped IoT business model
- IoT data is a secondary opportunity
- Conclusion
Figures:
- Figure 1: Telcos are moving beyond IoT connectivity
- Figure 2: IoT verticals and use-cases
- Figure 3: Four possible roles within the IoT ecosystem
- Figure 4: Telcos can play different roles in different verticals
- Figure 5: IoT connectivity can be simplified into four broad categories
- Figure 6: As the IoT field matures, use-cases become more complex
- Figure 7: The technical components of an IoT platform
- Figure 8: The T-shaped IoT business model
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This report has been produced independently by STL Partners, in co-operation with Hewlett Packard Enterprise and Intel.
Introduction
The idea behind Multi-Access Edge Computing (MEC) is to make compute and storage capabilities available to customers at the edge of communications networks. This will mean that workloads and applications are closer to customers, potentially enhancing experiences and enabling new services and offers. As we have discussed in our recent report, there is much excitement within telcos around this concept:
- MEC promises to enable a plethora of vertical and horizontal use cases (e.g. leveraging lowlatency) implying significant commercial opportunities. This is critical as the whole industry is trying to uncover new sources of revenue, ideally where operators may be able to build a sustainable advantage.
- MEC should also theoretically fit with telcos’ 5G and SDN/NFV deployments, which will run certain virtualised network functions in a distributed way, including at the edge of networks. In turn, MEC potentially benefits from the capabilities of a virtualised network to extract the full potential of distributed computing.
Figure 1: Defining MEC
Source: STL Partners
However, despite the excitement around the potentially transformative impact of MEC on telcos,viable commercial models that leverage MEC are still unclear and undefined. As an added complication, a diverse ecosystem around edge computing is emerging – of which telcos’ MEC is only one part.
From this, the following key questions emerge:
- Which business models will allow telcos to realise the various potential MEC use cases in a commercially viable way?
- What are the right MEC business models for which telco?
- What is needed for success? What are the challenges?
Contents:
- Preface
- Introduction
- The emerging edge computing ecosystem
- Telcos’ MEC opportunity
- Hyperscale cloud providers are an added complication for telcos
- How should telcos position themselves?
- 5 telco business models for MEC
- Business model 1: Dedicated edge hosting
- Business model 2: Edge IaaS/PaaS/NaaS
- Business model 3: Systems integration
- Business model 4: B2B2X solutions
- Business model 5: End-to-end consumer retail applications
- Mapping use cases to business models
- Some business models will require a long-term view on the investment
- Which business models are right for which operator and which operator division?
- Conclusion
Figures:
- Figure 1: Defining MEC
- Figure 2: MEC potential benefits
- Figure 3: Microsoft’s new mantra – “Intelligent Cloud, Intelligent Edge”
- Figure 4: STL Partners has identified 5 telco business models for MEC
- Figure 5: The dedicated edge hosting value
- Figure 6: Quantified example – Dedicated edge hosting
- Figure 7: The Edge IaaS/PaaS/NaaS value chain
- Figure 8: Quantified example – Edge IaaS/PaaS/NaaS
- Figure 9: The SI value chain
- Figure 10: Quantified example – Systems integration
- Figure 11: The B2B2X solutions value chain
- Figure 12: Quantified example – B2B2x solutions
- Figure 13: Graphical representation of the end-to-end consumer retail applications business model
- Figure 14: Quantified example – End-to-end consumer retail applications
- Figure 15: Mapping MEC business models to possible use cases
- Figure 16: High IRR correlates with low terminal value
- Figure 17: Telcos need patience for edge-enabled consumer applications to become profitable (breakeven only in year 5)
- Figure 18: The characteristics and skills required of the MEC operator depend on the business models
