Friday, June 1, 2018

Where are "Up the Stack" IoT Opportunities for Mobile Operators?

No matter how many billions of  internet of things sensors you believe will be in service by 2025, a great proportion are likely to generate zero direct revenue, as they will use Wi-Fi or some other short-range communications network.

That suggests the business model for most mobile service providers, though including connections revenue, is likely to spur thinking about other roles in the IoT ecosystem. Many of those roles require global scale, and so will not be realistic possibilities for smaller mobile operators and their retail distribution partners.

That means the roles of device supplier, vertical market platform or solution provider are unlikely roles for most, if possibilities for some tier-one global operators.

That is going to leave system integration and installation as the most-logical way to enter other segments of the business.

Those of you with long memories know just how hard that is going to be. Simply put, most telcos have struggled to develop system integration businesses and scale them, for many decades. System integration, almost by definition, is a fragmented business.

And fragmented businesses are hard to scale.

Obviously, the greatest area of use case suitability for mobile operators are those applications where sensors must communicate from moving vehicles.

Where connections to mobile or other IoT-specific networks are used, the annual revenue could be as little as US$1 a year. Even in volume, that will not drive a lot of incremental service provider revenue.

Also, note that early and perhaps wild estimates of IoT revenues now are being pulled back down, as often is the case for brand new and big markets.

Although IoT connectivity revenue will grow, it will only account for five percent of the total IoT revenue opportunity by 2025, GSMA has said.

Platforms, applications and services segment will represent 68 percent of total revenue by 2025.

This category spans multiple IoT layers such as platforms; application services; cloud; data analytics; and security. IoT professional services such as system integration also are included in that 68 percent.  

Managed services and consulting will account for the remaining 27 per cent share of total IoT revenue by 2025.

Keep in mind that much of that spending will come in the form of IoT devices and installation services, as well.

So even if the global Internet of Things (IoT) market is  worth $1.1 trillion in revenue by 2025, most of the money will be made elsewhere, when there are more than 25 billion IoT connections (connected using mobile and other networks). The GSMA forecast, unlike some others, is based on growth lead by industrial IoT apps.

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