Jan 7, 2024

2023 in Review: Connectivity Dominates but IoT-system Gaps Remain

Two investment themes bookended 2023. In January, the European Union backed a $100m venture capital fund, managed by Momenta Partners. In December, Softbank announced its EUR473m ($514m) investment for a 51% stake in Cubic Telecom. This development more than drew the eye as
exemplified by the analyst commentary around the high (16x) revenue to implied enterprise value multiple. 

In between, the level of corporate activity in the IoT sector continued at roughly the same pace in prior years, albeit down on the years of heightened activity going back five or so years ago. There were several developments among the vendor and network operator communities, but less so among the IoT platform providers. Governments became more active with an emphasis on security and protections for the consumer sector. 

Against the backdrop of 5G developments and 6G pathfinding, IoT is becoming a part of the fabric of enterprise operations and national infrastructure. Established players continue to emphasize connectivity, a relatively small portion of IoT value chains, while enterprises focus on quick-to-market solutions enabled by cloud providers and systems integrators. Both approaches risk leaving ‘system of systems’ issues for later consideration. 

Investment Splash 

As announced, the European Union’s VC funding effort targets Industry 5.0 or, “Industry 4.0 with-a-conscience” prospects because the Industry 4.0 movement is perceived to be overly tech-focused, and one that has failed to prioritise people and the planet. Consumer protection and sustainability are themes that reappear in other developments covered by this review. 

SoftBank’s stake in Cubic Telecom drew attention for its high multiples and am implied valuation of over EUR900m for Cubic Telecom. This is a business that raised $124m over a period of some ten years. After beginning life as a company offering an over-the-air software management for M2M applications, it switched to explore the connected car space (working with Tele2) around 2014. An EUR18m investment from Audi and Qualcomm followed in 2015. SoftBank’s investment rationale into Cubic Telecom is to pioneer the future of software-defined connected vehicles. This does not look like an IoT connectivity deal given SoftBank’s 2022 equity investment into 1NCE, the latter being characterized as “the only company that can deliver global IoT”. 

One insight on SoftBank’s investment can be gleaned from an even larger IoT investment from several years ago. In 2016, Cisco invested US1.4bn to acquire Jasper Wireless. Compared to Cubic Telecom, Jasper had raised a cumulative investment of $205 million over seven rounds. At the time, Cisco’s acquisition provided it with an entry point into the IoT sector as well as a channel comprising some 3,500 customers including big names such as Ford, GM, Heineken, and Boston Scientific. The acquisition seems to have helped Cisco over subsequent months as it brokered IoT deals with SalesForce.com, IBM and several mobile network operators internationally. Whether SoftBank can achieve the same market gains with Cubic Telecom remains to be seen. 

With over 90% of Cubic Telecom’s revenues concentrated in Volkswagen Group, there remains a challenge to diversify the customer base. Of course, SoftBank’s relationships might help with Japanese vehicle manufacturers. This will take time and a greater investment in resources and coalition building. There should also be scope for product and service innovation involving connected car, intelligent transport, and electric vehicle charging systems. It’s worth noting that several months after its Jasper Wireless acquisition, Cisco’s continued foray into the IoT sector led to an additional $3.7bn acquisition of AppDynamics which was active in application performance monitoring, end-user monitoring and infrastructure visibility. Expanding the addressable market might be one factor in SoftBank’s investment calculus. 

Incumbents’ Dynamics 

Across network operators, connectivity platforms and vendors, the sharpest rise in corporate initiatives points to the ways in which vendors are trying to ease adoption and reduce the friction of developing solutions. For example, ST Microelectronics wants to make it easier to connect devices to cloud providers. It now offers microcontroller software and developer tools targeting Microsoft’s Azure IoT Hub and AWS cloud. ST Microelectronics also partnered with CommScope to integrate the latter’s PKIWorks IoT security platforms to align with align with the Connectivity Standards Alliance’s Matter standard. Making adoption easy applies to another strategic incumbent, Qualcomm. It launched a new platform called Qualcomm Aware comprising Qualcomm silicon and an ecosystem of hardware and software partners all wrapped in a cloud-friendly bundle to simplify the process of “getting into the IoT game”

Mobile and low-power network operators continued at about the same level of corporate activity as 2022 with two themes apparent. One involved the launch of solutions for distinct verticals. In the utilities sector, for example, Vodafone launched its Water Metering solution for water management companies. Also targeting the water sector, UnaBiz (formerly SigFox) entered into a strategic partnership with KAIFA, a utility sector business digitalisation solution provider. In Australia, Telstra launched an end-to-end industrial automation capability, following its acquisition of industrial IoT providers Aqura Technologies and Alliance Automation. AT&T, one of the forerunners of the IoT industry even decided to relaunch its old "Connected Solutions" business unit. Beginning with connected cars, it wants to help customers navigate the 5G and IoT, by putting dedicated technology and sales executives alongside each other instead of separating them across different AT&T units. 

The other theme involved horizontal, or extended connectivity, initiatives. Some of these combined licensed and unlicensed terrestrial network providers (e.g., Bouygues with Netmore Group, UnaBiz with The Things Industries to interwork SigFox and LoRa technologies). Others involved the combination of terrestrial and satellite communications means (e.g., Sateliot with Transatel, Skylo with Telefonica, EchoStar with the Things Industries and, Intelsat with Deutsche Telekom). 

Platform providers were less in evidence as far as corporate initiatives are concerned. A marketing report by Analysys Mason for floLive, one of several to publish on eSIM and iSIM developments, suggested industry motivations are driven by a strategy of embedding connectivity earlier in the IoT value chain. For 2023, the requirements associated with this industry change, focused on flexible connectivity, outweighed M&A and platform innovation developments. 

Government’s Growing Role 

As the sector grows, IoT offerings are starting to expose externalities that purely market-based systems are not geared up to address. That is one explanation for the EU getting involved in VC funding for people and planet issues as noted earlier. In Scotland, the government sees the nation as expanding in a global market valued at $600bn. The country is investing in an innovation hub targeting IoT and related technologies such as sensing and imaging to help Scottish businesses explore opportunities “presented through advanced digital technologies”. 

Cybersecurity and consumer protection are other areas where governments can address adverse externalities and set a positive path forward through regulatory and certification measures. For example, the UK government is enacting regulations for Security Requirements for Relevant Connectable Products targeting password management, vulnerability disclosures and software update support. In the USA, the Biden-Harris Administration announced a cybersecurity certification and labelling program via a “U.S. Cyber Trust Mark” to help consumers choose among smart devices that are safer and less vulnerable to cyberattacks. In Asia, the governments of Singapore and South Korea launched an initiative to develop a mutual recognition of IoT security certification schemes. These developments expose market gaps that individual companies and industry alliances are ill-positioned or unwilling to address. 

Watching the Horizon 

Whether they are labelled opportunities or challenges, other market gaps will shape the IoT industry over 2024 and beyond. Professional media sites such as LinkedIn and Medium are starting to fill up with individuals offering their IoT implementation services, a sure sign that supply and demand are rising up a notch. 

Connectivity continues to dominate. To borrow a 1990’s marketing phrase that was commonly applied to sell the commercial Internet, connectivity is analogous to the ‘on-ramp’ for the IoT. However, connectivity represents one of a growing number of elements that contribute to an IoT solution. As the population of connected devices grows it will require both a structured framework and a suite of management services to interoperate at scale. This might emerge as the communications and cloud industries converge on 3GPP planning and a shift in emphasis to massive machine type (mMTC) use cases. 

Governments and society are coming to terms that easy access to the Internet results in an asymmetric relationship between users and infrastructure and application providers. As an illustration of the challenges ahead, the Matter protocol set out to make connectivity simple and straightforward for consumers. While homeowners can mix and match devices from a growing ecosystem of suppliers, they still have to choose a home platform for management functions. This element, sitting above the connectivity layer seems to be dysfunctional and not just in a technical sense. As one reviewer put it, “now that Matter is here, these companies are wholly unmotivated to ensure their platforms work well with their direct competitors”. This is an appealing business scenario for system integrators and large platform (or ‘gatekeepers’ in competition law terminology) providers. The supply side of the industry will need to address issues of security, interoperability, certification and possibly data rights now that the wheels of government are rolling. 

Another facet of the connectivity discussion is about interworking. How will deployments in large spaces function when they combine wide-area (cellular, satellite) and short-range devices (Bluetooth, Wi-Fi, Zigbee)? Edge computing concepts are applicable so that gateways aggregate short-range connectivity devices, for example. However, there is still a need for additional functionality to provide oversight and management functions and to make these capabilities appealing to developer communities. This dynamic will persist as the number of connected devices grows because many of these will be constrained by factors such as their energy envelope, power budget and sleep-modes of operation. Expect to see an extension of GSMA and TMForum efforts to define APIs that make intelligent management functions accessible to IoT system operators and developers

A final observation relates to the scope of IoT. Many associate the term with connectivity and connected devices, as if connectivity is the biggest hurdle to overcome. Business users have progressed beyond connectivity and are increasingly adding IoT data management and remote-control capabilities as they deploy solutions for priority or business-critical use cases. Over the longer term, however, users will need to view IoT through a ‘system of systems’ lens. There will be situations that require cross-silo interoperability involving multiple IoT solutions and service providers working together. In addition to business model innovation, the technical challenges associated with improved decision-making will rely on making IoT work with digital twins as well as AI and ML algorithms in a systematic way. Today’s quick and easy solution is to concentrate IoT data in a cloud environment where all processing, intelligence and reporting are centralized. However, quite apart from ceding value to the cloud provider, there will be longer-term requirements for data provenance tracking and causal reasoning that call for bi-directional data flows. The proliferation of constrained IoT devices will call for edge processing and the coordination of distributed information processing and intelligence. These are reasons why notions of IoT connectivity and solutions, in multi-stakeholder settings, need to embrace system of systems approaches.

Image Credit: Alex Jones via unsplash.com


  1. 9 Jan 2024 update

    The EU Data Act, an IoT and Cloud Sector Paradigm Shift, Becomes Reality

    The EU’s Data Act will enter into force on 11 January 2024. With the stated goal of ‘unlocking’ the EU’s data economy, the Data Act imposes a set of wide-ranging data sharing, product design and contractual obligations on providers of Internet of Things (‘IoT’) devices and related services, and on cloud computing providers. The obligations under the Data Act apply to all sectors of the economy, and to businesses of all sizes. The obligations under the Act will start applying from the second half of 2025 so there is little time to prepare effective compliance strategies.


  2. 10 Jan 2024 update

    Simplifying IoT: Innovative eSIM specification takes center stage

    GSMA's recent release of an eSIM specification for constrained IoT devices revolutionizes remote SIM provisioning. Addressing challenges in managing smaller sensors, this innovation simplifies the process. Device owners order profiles from a mobile service provider, enabling the eSIM IoT Remote Manager to facilitate secure, encrypted profile downloads to the eUICC. Anticipated to streamline eSIM adoption for IoT, this advancement promises easier connectivity management that integrates well with different device management solutions.


  3. 11 Jan 2024 update

    Appetite for disruption – 1NCE looks to turn IoT software market on its head

    Germany-headquartered IoT MVNO 1NCE has announced a series of software plugins in its cloud-based connectivity management platform to accelerate IoT development projects, and spearhead its development as an open software system for global IoT connectivity. It claims to have posted a 33 percent jump in connection volumes in 2023, adding five million cellular IoT connections in the period to finish the year with around 20 million devices under management.

    The firm, with major backing from Deutsche Telekom and Softbank, added 1.2 million in December alone – which would have been an annual total, give or take, a couple of years back, it said. It is showing its new plugin partners at the Consumer Electronics Show (CES) in Las Vegas this week (January 9-12), integrated and tested to enable new firmware over-the-air (FOTA) management, data visualisation, and cloud integration within the 1NCE platform.

    1NCE will assess takeup through 2023 with a view to bring “around 10” additional IoT providers into the fold during the course of the year, and an ambition to set itself eventually as a community-led open-source standard for global IoT. It will have an even more robust showing at Mobile World Congress (MWC) in Barcelona in six weeks (February 26-29), it said. The point, now, is to ram home that it is more than just an MVNO for connectivity, it suggested.

    In a way, the new technical integration of software plugins – from Mender (for low-power FOTA management), Datacake (low-code visualisation dashboards), and Tartabit (alternative cloud integration, most significantly with Azure) – takes its proposed disruption of the software market to a new level by undercutting the standard cloud model, which requires IoT firms to subscribe to a whole package, and not just to cherry-pick the apps they want.

    That’s the theory, anyway, even as 1NCE launches its new plugin offer with only three partners, and nothing yet in the way of choice in their various disciplines. But it has already opened-up positional data, for example, to developers to monetise as they see fit, and is providing free tools to further help with service authentication, protocol translation, device localisation, and energy optimisation, plus a ‘freedom-to-switch’ promise to move SIMs between carriers.

    All of 1NCE’s software gadgetry is available with its definitive 10-for-10 flat-rate airtime fee ($/€10 for 10 years), which is a marketing hook, to an extent, that does not reflect the real flexibility of its billing portfolio, but is also commonly regarded by the industry as seminal tactic to make the IoT business case digestible to enterprises. Rook, once of Vodafone and T-Mobile, remarks: “We have disrupted the operator world – which we don’t think is so complex.

    “We’ve turned connectivity into a component that can be built as a standard into connected products. Operators monetize complexity rather than selling simplicity. Whereas we have broken down the supply chain, rebuilt it, and made it very simple. And the next step is to do the same with software, which we have made strides with already in 2023. We have always said we are hungry, not greedy – that we want to offer everything, but not by ourselves.

  4. 11 Jan 2024 update

    Cloud switching just got easier: Removing data transfer fees when moving off Google Cloud

    Certain legacy providers leverage their on-premises software monopolies to create cloud monopolies, using restrictive licensing practices that lock in customers and warp competition.

    The complex web of licensing restrictions includes picking and choosing who their customers can work with and how; charging 5x the cost if customers decide to use certain competitors’ clouds; and limiting interoperability of must-have software with competitors’ cloud infrastructure. These and other restrictions have no technical basis and may impose a 300% cost increase to customers. In contrast, the cost for customers to migrate data out of a cloud provider is minimal.

    Making it easier for customers to move from one provider to another does little to improve choice if customers remain locked in with restrictive licenses. Customers should choose a cloud provider because it makes sense for their business, not because their legacy provider has locked them in with overly restrictive contracting terms or punitive licensing practices.



  5. 15 Jan 2024 update

    10 most relevant IoT developments in 2023


  6. 18 January 2024 update

    AT&T talks IoT strategy and focus areas - The new AT&T Connected Solutions group incorporates connected vehicles into larger IoT business

    Coursey said the company is currently “building…the 5G [Standalone] capabilities that will launch in cars in the 2025 timeframe.” This year, he said, the focus will be on testing and working with automotive OEMs on things like on-demand quality of service, bandwidth calendaring and other capabilities that facilitate the transition to software-defined vehicles—something of a buzzword at CES this year. The big picture is that the shift to electrification has prompted a larger re-architecture of vehicles that is brining in more and more connectivity and compute. This also supports automakers’ initiatives to deliver in-vehicle functionality via over the air software updates and foster as-a-service-type feature options.

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    Looking at the fragmented world of IoT, including fragmentation down to the connectivity medium, Coursey said his view, AT&T’s view, is that cellular IoT connectivity offers better security protocols than LoRa-type wide-area networks. As to the longstanding projections of tens of billions connected devices that haven’t (yet) materialized, he said AT&T is focused on “simplifying our IoT cellular solutions to make it less complex for customers. A customer that has to understand what module do I buy for Verizon vs. AT&T, and then how do I get it put in a device, and how do I get it certified…for a company that doesn’t do cellular for a living, that’s hard.”

    Back to those focus areas around connected assets, health, infrastructure and spaces, Coursey said, “You’ve got to have some focus and AT&T is very focused these days on connectivity and connectivity services that we can put on top of that connectivity.” He gave healthcare examples around remote patient monitoring, fall detection and response, and predictive diagnostics.