Monetising IoT: Four steps for success

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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Edge computing: Five viable telco business models

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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

The IoT money problem: 3 options

Introduction

IoT has been a hot topic since 2010, but despite countless IoT initiatives being launched questions remain about how to monetise the opportunity.

This report presents:

A top-level summary of our thinking on IoT so far
Examples of 12 IoT verticals and over 40 use-cases
Case-studies of four telcos’ experimentation in IoT
Three potential roles that could help telcos monetise IoT

Overview

In the early days of the IoT (about five years ago) cellular connectivity was expected to play a major role – Ericsson predicted 50 billion connected devices by 2020, 20 billion of which would be cellular.

However, many IoT products have evolved without cellular connectivity, and lower cost connectivity solutions – such as SIGFOX – have had a considerable impact on the market.

Ericsson now forecasts that, although the headline number of around 50 billion connected devices by 2020 will remain the same, just over 1 billion will use cellular.

Despite these changes IoT is still a significant opportunity for telcos, but they need to change their IoT strategy to become more than connectivity providers as the value of this role in the ecosystem is likely to be modest.

Mapping the IoT ecosystem

The term IoT describes a diverse ecosystem covering a wide range of different connectivity types and use-cases. Therefore, to understand IoT better it is necessary to break it down into horizontal layers and vertical segments (see Figure 1).

Figure 1: A simplified map of the IoT ecosystem

Source: STL Partners

We are seeking input from our clients to shape our IoT research and have put together a short survey asking for your thoughts on:

What role telcos can play in the IoT ecosystem
Which verticals telcos can be successful in
What challenges telcos facing in IoT
How can STL support telcos developing their IoT strategy

To thank you for your time we will send you a summary of the survey results at the end of June 2017.

…to access the other 28 pages of this 31 page Telco 2.0 Report, including…

Introduction
Mapping the IoT ecosystem
Overview
Mapping the IoT ecosystem
IoT: A complicated and evolving market
Telcos are moving beyond connectivity
And use cases are increasing in complexity
IoT verticals – different end-customers with different needs
12 examples of IoT verticals
What connectivity should telcos provide?
Four examples of IoT experimentation
Case study 1: AT&T: Vertically-integrated ecosystem architect
Case study 2: Vodafone: a ‘connectivity plus’ approach
Case study 3: SK Telecom: ecnouraging innovation through interoperability
Case study 4: Deutsche Telekom AG: the open platform integrator
Three potential monetisation strategies
Ecosystem orchestrator
Vertical champion
Trust broker
Conclusions

…and the following figures…

Figure 1: A simplified map of the IoT ecosystem
Figure 2: Telcos moving beyond connectivity
Figure 3: IoT use cases are increasing in complexity
Figure 4: Use cases in manufacturing
Figure 5: Use cases in transportation
Figure 6: Use cases in utilities
Figure 7: Use cases in surveillance
Figure 8: Use cases in smart cities
Figure 9: Use cases in health & care
Figure 10: Use cases in agriculture
Figure 11: Use cases in extractive industries
Figure 12: Use cases in retail
Figure 13: Use cases in finance
Figure 14: Use cases in logistics
Figure 15: Use cases in smart home / building
Figure 16: Connectivity complexity profile for pay-as-you-drive insurance and rental services
Figure 17: Telco opportunity for deep learning pay-as-you-drive insurance and rental services

Tag: IoT verticals

Monetising IoT: Four steps for success

Introduction

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Figure 1: Telcos are moving beyond IoT connectivity

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The IoT money problem: 3 options

Introduction

Overview

Mapping the IoT ecosystem

Figure 1: A simplified map of the IoT ecosystem

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