Oct 3, 2014

Long term prospects for IoT and 'digital'

Last month, I was invited to chair a panel for the eponymously named company, Apigee. Although it was billed as an API event, Chet Kapoor (Apigee’s CEO) opened the 2-day conference by framing today’s market in terms of the transition to ‘digital’, with APIs being a key implementation enabler. His opening remarks summarised the situation as follows:

  • Every business is a digital business
  • Every business needs a digital platform
  • Every business has a Chief Digital Officer 

In the past, I have written on the topic of telecoms operators launching ‘digital’ strategies [1]. It was therefore reassuring to hear this development being so firmly validated. It was also positive to witness several enterprises discuss their digital strategies and early implementation successes.

As the market develops, enterprise demand will continue to drive demand for enabling services. These are opportunities that telecoms operators and specialist M2M/IoT platform providers can capitalise upon. There is early evidence of this trend in the recent investment activities of companies like SingTel and Telstra.

The question arises then as to whether ‘digital’ is relevant to M2M and aspiring IoT service providers (i.e. to mobile operators, technology vendors, platform providers etc.). The answer is a clear yes because many of the underlying capabilities to deliver ‘digital’ services will rely on M2M and IoT connected devices.

One consequence is that new proposition development will have to account for shifting industry dynamics. This has already begun as the M2M sector gets absorbed into the IoT category. Soon, this combined market will be characterised by greater scale (i.e. lower cost devices and lower entry-point prices) and wider scope (i.e. greater innovation for consumer-services especially, extended B2B2C business models, consumer-led ‘pull’ models etc.).

At the same time, the Smartphone- and Tablet-centred view of the world is evolving in the direction of ‘digital’ services for enterprise and consumer users. It will soon be common for API-enabled Apps to support ‘digital’ services that draw data from IoT devices. Consider a NEST thermostat interacting with a homeowner’s Tablet and a utility-provider’s enterprise process systems. Or, think about a vending machine that can inter-operate with many different consumers via their Smartphones [2]. There is an argument to be made that these cross-device interactions will lead to the marrying of ‘digital’ and IoT markets.

Service providers will have to address the business models and partnering complexities necessary to deliver cost-efficient and reliable services in multi-layer (e.g. B2B2C) business structures. While much of current day thinking centres on such ‘customer-push’ approaches, corresponding effort needs to be directed at ‘consumer-pull’ business models. This is where consumers orchestrate a service using a platform that ‘pulls’ data from several M2M/IoT devices.

SingTel [3] is tackling the digital consumer proposition through a set of lifestyle-oriented services and capabilities to support enterprise users of digital services. In 2012, it acquired Amobee, Adconion and Kontera to extend its presence in the digital mobile advertising industry. Now, Singtel has a 5-year, $500 million investment plan to build cyber security, smart cities and analytics capabilities. One of the aims of this initiative is to position Singapore and the digital innovation capital of Asia. SingTel’s corporate goals are best characterised by its intention to use digitisation as a means of becoming more than a telco. It considers the role of a communications network firm, offering dumb pipes, to be a doomed strategy.

Another telco that is diversifying beyond its traditional telecommunications business is Telstra, notably in the ‘digital’ enterprise market. It acquired Kony Solutions, a mobile enterprise application developer, and subsequently took a controlling stake in the enterprise video streaming and analytics provider Ooyala. More recently, Telstra made a strategic investment in DocuSign, a digital transaction management provider. This will help Telstra to accelerate paper-based processes for its enterprise customers.

 In light of these developments, it is fitting to close on a few remarks from Nellie Kroes, the soon to retire EU digital economy commissioner. In a recent speech [4], she warned European telecommunications operators of the need to adapt fast to the changing market to avoid being left behind. With particular reference to new developments such as the IoT, she made the following observation; “Soon we will see everything connected. Will the telecoms sector lead us there or will (it) be dragged along behind?”

It seems that a handful of operators won't wait to find out.

[1] Launch strategies for 'Digital' business units - http://www.more-with-mobile.com/2013/04/launch-strategies-for-digital-business.html

[2] The Physical Web – Walk up and use anything - http://google.github.io/physical-web/ 

[3] SingTel to invest $500m in cyber security, smart cities and data analytics - http://business.asiaone.com/news/singtel-invest-500m-cyber-security-smart-cities-and-data-analytics#sthash.ek197AvL.uKzvYv3S.dpuf 

[4] Speech to Brussels summit of industry lobby group ETNO - https://www.etouches.com/ehome/93444

1 comment:

  1. 14 Oct 2014 update

    Zain looks to M2M, enterprise in bid to avoid "dumb pipe" status

    Here is further endorsement of transition strategies from Zain's CEO, Scott Gegenheimer, who is vigilant about becoming a 'dumb pipe'. He also makes an interesting comment about mobile data pricing and the importance of balancing volume discounts against rising consumption to ensure that total revenue and profitability work in the operator's favour.