2020 in Review: Corporates Adapt Their IoT Business Models

This review of 2020 corporate initiatives in the IoT market builds on a history of tracking strategic industry developments for over a decade. Two sets of corporate events that bookended the start and end of 2020 provide instructive examples of the roadmap and dead ends that characterize today’s IoT market. In the intervening months, organizations in different parts of the industry ecosystem bolstered their IoT strategies. Some developed complementary capabilities through M&A while others addressed go-to-market issues through business reorganization and product-innovation initiatives. For many organizations, however, there remain challenges in balancing short term imperatives with strategic positioning goals. There is a degree of comfort in embracing the familiar. The risk is that this leads to an under-investment in properly integrating new business approaches and complementary technologies.

2018 in Review: IoT puzzle-pieces falling into place

Compared to previous years, the pace of corporate activity in the IoT arena has settled down. This is to be expected in a maturing market cycle. This impression may be at variance with wider industry sentiment where the use of AI/Blockchain/IoT/Machine Learning labelling continues to sensationalize.

As a sign of IoT market reality, the opening event of 2018 dealt with the commercial reality. It took the form of Telefonica O2 withdrawing from the smart home market through the closure of O2 Smart Home. The year ended with a couple of more promising events for the mobile and IoT industries. I’ll touch on these later.

Most activity was concentrated among three groups: technology vendors; network operators (mobile, low-power and virtual); and, platform providers.

A change in perspective reveals new IoT strategies

My last post examined the direction that several MNOs are taking with their IoT strategies [1]. Applying these trends at an industry level, I questioned whether MNOs are approaching the commercial opportunity with a broad enough strategic perspective. Think about it from the perspective that traditional mobile connections will supposedly account for roughly 10% of all IoT connections. That proportion should rise now that low power cellular technologies (NB-IoT family) are firmly on the deployment roadmap. Since this raises the credibility of a vibrant supplier eco-system, more adopters should gravitate to mobile connectivity to take advantage of more compelling economies of scale.

Nevertheless, it’s clear that mobile connectivity will coexist as one of several IoT access technologies. However, unless MNOs find ways to stake an economic role in activities higher up the value chain they will lose out on promising commercial prospects. They will also find themselves dis-intermediated from end customers and their needs. How might this play out?

2017 in Review: Making the IoT work

Looking back over notable, M2M/IoT corporate initiatives in 2017, mobile network operators (MNOs) and technology vendors were the two most active groups in the industry eco-system.

The main feature amongst MNOs was market expansion into new geographies. Sometimes, this happened individually; more often, it took the form of partnering with other network operators. This is a classic growth model for the mobile operator community.

In the technology vendor community, leading initiatives took the form of: acquisitions/investments; partnering (with MNOs, platform providers and system integrators); and, product innovation.

In comparative terms, activity among platform organizations was subdued. And, end-users barely featured among 2017 initiatives. It is likely that these last two data points mask a higher level of internal activity targeting operational scaling and in-house developments as firms solidify their foundations in the IoT market. As an example, Altair, a provider of engineering software to enterprise customers, acquired the Carriots IoT platform. This initiative illustrates the trend to internalize IoT capabilities and has parallels with the earlier acquisition of ThingWorx by PTC [1].

AT&T and GE Digital hit IoT road bumps

Over the past few weeks, AT&T and GE have featured in the news because of issues connected to their IoT business units.

AT&T seems to be having second thoughts about its Digital Life commitments with some news reports suggesting that it might divest this business unit [1].

In GE’s case, its Digital business unit is emerging from a hard re-alignment following internal activities to stabilize its software platform and to adjust its financial targets. Now, the focus will prioritize profitability over unfettered spending [2].

So, what’s been happening to these two IoT industry pioneers and what can other companies learn from their experiences?

2016 in Review: Shift in Industry Dynamics as the IoT Enters the Mainstream

According to my records, the strength of IoT corporate initiatives witnessed over previous years weakened in 2016, somewhat in contrast to the much greater visibility of the IoT at industry events and in the marketing literature.

While the number of merger, acquisition and investment (MA&I) fell compared to 2015, as a proportion of all corporate events it increased over the prior years.

About 70% of these relate to acquisitions; the remainder correspond to fundraising or investment activities.

Now that the IoT market has become a mainstream idea across the wider economy, the MA&I dynamic reveals a stronger tendency for companies to accelerate their IoT strategies by acquiring capabilities from third parties.

Impressions from IoT Solutions World Congress 2016

While I often attend Mobile World Congress in Barcelona during February, this was my first experience of IoTSW Congress and seeing Barcelona in October. The show is growing impressively, doubling the number of exhibitors and attendees compared to 2015. If this pace holds up, IoTSWC could surpass MWC within three years, such is the growth potential for the IoT industry.

 In addition to three speaking slots – one for the Industrial Internet Consortium, another for Intel’s Corporate Strategy group and a third on main Congress track - I had several discussions with industrial businesses, investors and solution providers about the state of the market.

Here are a few observations that stood out from the event. 

Amazon or Netscape strategy?

Last week, I attended the Industrial Internet Consortium’s (IIC) member meeting in Reston, VA. This gave me an opportunity to talk to executives from several companies about their IoT market objectives. In the prior week, I interviewed a C-level executive from an IoT infrastructure services provider on the same topic.

What struck me in all these discussions was the competitive tension between short-term and strategic IoT planning. The C-level executive put it best when he described how many of his clients’ sales plans for the coming year are based on implementing bespoke solutions; it’s a quick way to get to market. Where this model breaks down is when companies are implementing their third or fourth IoT applications.

IoT Roaming

The mobile industry and users of its services are very familiar with the concept of roaming. Roaming allows users to access mobile services outside their home-operator’s footprint. Most users are familiar with roaming in the context of foreign travel. Roaming also occurs when users cannot access their service provider network at home and need to ‘roam’ onto other, local service-provider networks.

M2M service providers and IoT technology developers are now beginning to think about new service scenarios where ‘foreign’ devices enter a local operating environment; I have been using the term ‘IoT roaming’ to describe this situation. There are several reasons why IoT roaming is important, and different compared to traditional ‘roaming’. This is because IoT applications need the ability to recognize and inter-operate with roaming devices. There are knock-on implications for service provider business models and the platform capabilities needed to support IoT applications.

2014 Corporate Initiatives; market rules are changing

Following several years of rapid growth, the 141 corporate initiatives in 2014 almost matched the 147 events that occurred in 2013.

In 2014, companies in the M2M eco-system were less active in several areas. As illustrated below, there were fewer recorded events of companies either: expanding into new market segments; promoting new technology; and, entering into partnering agreements. Product innovation saw a rise in activity as companies launched new products and services. In general, these addressed the needs for specific customer applications.

IoT Product Development - Planning Strategically

The IoT (Internet of Things) has been hugely popularized by companies, such as ARM, Bosch, Cisco, GE and Intel. Their marketing campaigns speak of new and massive business opportunities along with their respective IoT market offers. So what do users of such offers need to know in order to manage their IoT product development plans strategically?

PTC-ThingWorx dual-aggregation business model

I was recently in discussion with an executive from an M2M service provider who was marveling at the sizable sum - $112m plus a possible earn-out of $18m - for which ThingWorx was acquired by PTC.

By way of context, PTC supplies software and service solutions to discrete manufacturing organizations to help them create and service their products; example products include heavy machinery, medical devices, air-handling and fire-protection systems. While PTC has been in business for over 25 years, ThingWorx was established as recently as 2010. Its aim was to create a platform to speed up the process of developing applications for smart, connected services involving people, systems and devices.

The acquisition should not come as a surprise to readers of this site. The pattern of corporate initiatives in the connected devices market and the rising role of end-user companies were anticipated at the end of 2012.

Review of M2M Corporate Events in 2013

2013 as a whole was another year of strong corporate activity in the M2M market. A total of 147 events easily surpassed the 115 events that were recorded in 2012. These events include: announcement of an industry changing technology breakthrough; market entry/expansion initiatives; strategic partnering; investment-related acquisitions or divestitures; distribution agreements along the value chain; product innovation and outsourcing of key service delivery capabilities.

While 2013 saw many more companies taking to the press wires to publicize their sales wins, these are not recorded here as corporate initiatives. If anything, sales wins are the consequence of one or more corporate strategy commitments made in prior years.

An important development that occurred over the course of 2013 was a shift in sentiment to promote IoT in preference to M2M. This began with a raft of announcements at the Consumer Electronics Show (CES) in January 2013. Momentum continued to build around the IoT theme due to significant publicity drives and business commitments by large organizations such as ARM, Bosch, Cisco, GE and Intel.

Verticals, Horizontal- and IoT-Platforms

One of the implementation challenges that historically acted to restrain the M2M market is the issue of vertical-specific requirements. Each solution necessitated a new and/or tailored IT development effort; this had an impact on solution development costs and constrained the opportunity to realise meaningful economies of scale.

Over the past few years, the M2M industry has expanded in potential scale and scope. It is now interlinked with high volume, consumer oriented application opportunities and, more recently, with an extremely broad scope of connected devices under the Internet of Things/Internet of Everything/Industrial Internet umbrella. Most recently, this evolution has spawned a number of platform announcements from M2M market research firms and also from businesses, such as Aeris, GE and Wind River, many of which are recasting M2M capabilities in an IoT light. Was any of this predictable?