A $300bn Market for Telco-APIs

How much of the opportunity will mobile network operators capture? 

The business opportunity to access mobile network capabilities via application programming interfaces (APIs was one of the top stories at MWC 2024. Valued at $300 billion by McKinsey, the management consultancy, the scale of opportunity positions APIs as a vehicle to move the industry’s revenue dial materially.

However, the opportunity will be complex to realize. From this GSMA webinar, it was evident that business model and monetization frameworks are a work in progress. In addition, market realization depends on a multi-party service delivery chain; critical elements to the telco API ecosystem reside outside of mobile network operators’ (MNOs) control. Finally, the mobile industry’s focus on API monetization and revenues puts the sector at risk of overlooking wider considerations and key market-development levers. 

Shifting Paradigms Set to Shape 6G

How is North America affecting policy change and industry competition?

The participation of White House and Congressional speakers at 6G World’s recent symposium shine a light on the strategic prioritization of next generation communications systems. Political participation matters in the context of 6G leadership ambitions, the practicalities of which I outlined in this three-part article series for 6G World - 1: Leadership, 2: Purpose, 3: Leverage. 

The event was equally important for shedding light on how industry stakeholders are approaching emerging 6G topics and market development activities. The mix of discussions spanned academic research, commercial and operational implications of 6G, industry competition, long-term Federal funding programs, policy priorities, standardization, and vertical-industry requirements. Rather than summarize each panel discussion chronologically, here are several threads that ran through the different sessions, beginning with the need to learn from the past. 

2022 in Review: A Sudden Shock of Realism

Amazon opened 2022 with announcements targeting the smart home community that is forming around the Matter protocol and opportunities for IoT in non-residential sectors. These two initiatives are examples of how some large organizations are trying to have a “finger in many pies” to make the most of the variety and scope of IoT opportunities. 

2022 closed with a flurry of Matter-compliant product launches from a range of large and small businesses. The year-long journey and commitment to an industry-alliance model point to a degree of realism about the IoT market. Behind the technology fanfare, they highlight how businesses and getting to grips with commercial market-development and the technical challenges associated with interoperability, both of which are needed for scale. Meaningful collaboration seems to be taking hold compared to “go-it-alone” strategies. 

Business Reengineering and Twitter

The recent and abrupt change in Twitter’s governance model has large businesses scaling back their advertising spend on the platform. Anecdotally, advertisers spend a small proportion of their budgets on Twitter compared to larger scale platforms such as Facebook and YouTube. As a result, advertisers can disengage gradually without completely losing touch with the public.

IoT is Dead; Long Live IoT!

Copenhagen Business School recently hosted an expert panel [1] to explore how algorithms and data shape competition in the context of platforms. These might be e-commerce or social media platforms that exploit consumer data for advertising and behavioral-nudging purposes. The dynamics of this market are changing, partly due to privacy regulations. Competitive strategies, such as Apple’s App Tracking Transparency (ATT) offering, are another factor [2]. 

Among the economic, competitive strategy and technology topics under discussion, the discussion around data seemed particularly relevant to how the Internet of Things (IoT) market is developing. 

IoT Day: Strategy and Competitive Advantage

Over the past few years, the World IoT Day movement [1] has drawn considerable attention to the opportunities presented by IoT technologies. As the industry scales up, strategists will want to study long term and structural changes that will shape the market in years to come. This is important, both for organizations intending to adopt IoT and solution providers hoping to strike it big. 

Late in 2021, the strategy consultancy McKinsey updated its 2015 study and concluded that the IoT was coming of age [2]. If nothing else, the investment in making this update sends a signal that IoT is firmly on the corporate agenda. Firms need to treat IoT as essential to future business prospects. IoT is no longer a headline grabber, a discretionary investment, or a niche application. 

2021 in Review: Competing Segments, Strategies and Time Horizons

Much has changed over the last 10 years that I have published this annual review of corporate initiatives in the IoT sector. I do not track each and every development in the way that the professional market analyst firms do in this tracker of 1200 IoT start-ups [1]. 

Instead, I focus on industry patterns and structural developments that correspond to emerging market opportunities for new and established businesses. Continuing this approach leads me to reflect on three themes in this review of 2021 activities. The first theme touches on market structure and segments that are taking shape. Such specialization is a phenomenon that occurs when a market attains scale. The second explores strategies for different strategic horizons in a couple of key segments. The third theme deals with communities of interest and how industry players are tackling issues related to wider economic benefits beyond those delivered by individual IoT solutions. 

I conclude this review by touching on some of the emerging developments that adopters should factor in their system design and IoT procurement plans. These also carry implications for product development managers on the supply-side of the industry. 

Market Structure & Segments

Looking through some fifty corporate events over 2021, the supply side market challenge is to make it as easy as possible to bring new users onboard by tailoring distinct channels to market. Roughly a third of these events involve organizations lower down the solution stack partnering with service providers that operate higher up the solution stack. This type of arrangement provides the means for packaging a vendor’s offerings (hardware components or an IoT application) to gain access to new markets or to target the service-provider partner’s customer base. 

In terms of developing such channels to market, two segments are apparent. One involves specialist service providers whose pedigree can be traced back to M2M and mobile communications roots. These include businesses such as 1NCE, Eseye, Evrynet, Kore Wireless and WirelessLogic. In addition to building up operational scale, these service providers have also been the target of investor interest. Investment initiatives represent a mix of strategic stake building (e.g., Telus investment in Eseye, SoftBank stake in 1NCE) and scale-up ambitions linked to industry consolidation (e.g., WirelessLogic acquisitions of Com4 and Things Mobile). 

The second category involves cloud service providers such as Amazon Web Services, Google Cloud and Microsoft Azure. These providers acquired M2M connectivity expertise several years ago. In addition to commercial partnerships with established M2M service providers, Amazon acquired 2elemetry in 2015 while Microsoft acquired Solair in 2016. Since then, however, the cloud service provider segment has tended to focus more on tools and developer environments for the application of analytics and visualization as the driver of value. This segment’s strategy is a race to co-opt developer communities and to tie them to the different IoT platform environments.

Segment Strategies and Timing Horizons 

Structurally, the market is segmenting into groups of service providers that are looking at different ways to build scale. While the traditionalists, comprising M2M/IoT connectivity service providers and mobile network operators, focuses on connections, new-comers in the shape of cloud service providers are building scale around the concept of ‘walled gardens’ of IoT data. 

In the case of connections, an important driver of change is the eSIM. This technology enables new operating processes which help to streamline the stock-keeping unit (SKU) complexities associated with manufacturing devices for many different geographical markets. New operating processes also extend to managing connectivity and data handling charges that arise in large or regional deployments where several mobile network operators (MNOs) might be candidates for connectivity. eSIM technology helps connectivity service providers to mask the complexity of handling contracts with multiple MNOs. To some extent, the software option to switch connectivity providers also mitigates against provider lock-in and price escalation risks. 

By contrast, the cloud service provider strategies put a greater focus on data and data applications than connectivity. These strategies also appear to target a longer time horizon. There are two aspects to how these strategies manifest themselves in the market. One involves getting users familiar with each provider’s platform tools and environments. In the process, enterprise IT/OT teams accumulate expertise and become invested in one ‘home’ environment. This applies equally to developer communities that each cloud provider is cultivating through developer outreach efforts, on-line self-help tools and application development resources. The second aspect relates to the build-up of IoT data in a single environment. For large, user organizations, there are benefits from having a common interface to access a single (logical) repository of data that might span multiple IoT applications and several business units. In theory, this makes it easier to share data and to explore operational patterns that might exist in several manufacturing plants or locations. Easy access to data and to mixing-and-matching of data opens up new innovation possibilities. There is now an option value embedded in return-on-investment calculations because users have a pathway to developing second-generation IoT applications because they can access new data sources or implement solutions that tackle cross-silo business needs. 

IoT Communities of Interest 

For a different perspective on market scale, let us is to consider IoT communities of interest. One example is the Zigbee Alliance which rebranded itself to become the Connectivity Standards Alliance (CSA) around mid-2021. It also rebranded its Connected Home over IP (CHIP) project under the ‘Matter’ marketing label. This change is a good example of the need to shift the emphasis away from a technology, that would have been ground-breaking ten or so years ago. Now, the focus is on persuading adopters that those technologies are now largely mature and usable at scale. The investment in market development is also a sign that participating members see value in a collaborative initiative and neutral brand. 

Another community example involves the Industrial Internet Consortium which rebranded itself to become the Industry IoT Consortium. By evolving beyond a generic reference to the Internet, this community is now signalling the importance of solution approach that encompasses a wider set of technologies and business approaches associated with the IoT. 

The IoT technology-push of ten years ago is evolving to a market-pull now that IoT has grown to become a mainstream market. The change is down to adopters and users, including those at the margin, acknowledging the tangible benefits and value-potential of IoT solutions. A side consequence is that different industry participants are considering the impact of IoT systems not just in industry verticals but also for their impact on the wider economy. An example that illustrates this point is Filament STAC which is an IoT industry cluster in Scotland. This multi-company initiative was launched as an industry-government partnership aimed at producing Scottish IoT companies capable of scaling rapidly. It has a three-year target to create more than 25 IoT companies supporting around 750 jobs. In December, it announced backing from several, US tech businesses including Twilio, Plexus Corp, Intel Corporation, Keysight and Arrow Electronics. While this initiative focuses on a localized, geographic cluster it illustrates the growing importance of strategic, national initiatives. 

A well-known example that began several years ago is the UK’s Catalyst program which targets promising segments. Another is the business and technology ecosystem approach promoted by Business Finland which brings together local businesses and promotes complementary expertise and technologies such as AI and IoT. These examples suggest that government and regional development agencies will play a greater role in part-funding and orchestrating strategic areas of the IoT market. 

Developments To Watch 

While the journey to implementing IoT systems looks like a well-trodden path, it is not free of risk and there are still grounds for acting with prudence. Adopters and supply-side innovators need to weigh the long-term implications of initial design decisions and the opportunities that might be sacrificed against the allure fast-to-market strategies. The first issue is the extent to which a user locks itself into a vendor, solution-provider, or technology environment. How real are the switching opportunities in the future and, what might be the associated costs? Also, as a user’s needs evolve, is the underlying technology or supplier team capable of adapting to support deployments that might operate and evolve for periods of 5 to 10 years? 

One "Pane of Glass" (source IEEE, 2021)

A second development to manage stems from the vast opportunity space for IoT applications when considering combinations of data sources and applications. This is where businesses need to focus on interoperability. Consider an example from the early days of the M2M market. Then, application enablement platform (AEP) providers would talk about a single-pane view when overseeing a handful of applications. The metaphor comes from an operator avoiding the need to swivel their chair from one display unit to the next when supervising several applications. This remains an issue in today’s IoT market to the extent that it featured in a cloud computing standard that the IEEE announced in December to facilitate intercloud interoperability and federation [2]. 

In the wider scheme of things, there are multiple facets to the concept of interoperability. It can apply to the interchangeability of components sourced from different suppliers, or to the ability to switch connectivity across different communications networks. In the future, interoperability will apply to silo-applications and IoT data with the aim of making data discoverable, recognizable, and shareable in multi-user environments. While hardware and connectivity interoperability is important today, an important topic for the future concerns data interoperability which applies to combining data hosted in different cloud-provider environments to highly automated IoT systems that depend on semantic capabilities. 

A final consideration is about anticipating and positioning for continuing evolution in the IoT market. How do hardware providers deal with the value squeeze arising from economies of scale and impact on per-unit pricing? In a different segment of the market, connectivity providers have experienced many years of per-device revenue dilution. How do they position themselves to drive revenue and profitability growth through complementary services and entry into new markets linked to the rise of AI and data management? Unlike the start-up scene from the beginning of this article, established service and solution providers companies are higher up the IoT staircase. While they are up and running, there are many more steps to climb. 

[1] The 1,200 IoT companies that are creating the connected world of the future – IoT Startup Landscape 2021 https://iot-analytics.com/iot-startup-landscape/ 

[2] IEEE Approves Cloud Computing Standard - https://www.standict.eu/news/ieee-intercloud-interoperability-standard 

IMAGE CREDITS: Jukan Tateisi and Lindsay Henwood via unsplash.com

How Outsiders are Shaping the Telecommunications Market

A few weeks ago, the editorial panel at IoT Now invited me to give a short talk about innovation in the communications sector and the implications for digital transformation. This talk was part of a series of webinars [1] on 5G promoted by Fibocom, the global supplier of wireless communication modules and IoT solutions.

The key messages from this presentation are worth repeating in light of a recent technology licensing announcement [2] involving Huawei and Volkswagen (VW). This illustrates a reversal of the mobile industry’s approach to service adjacent markets. Now, organizations in adjacent markets are entering the mobile ecosystem through initiatives that will influence mobile operator strategies and business practices.

IoT Platforms and Digital Regulation

A couple of recent and seemingly unconnected publications provide food for strategic thought on the topic of IoT platforms. 

Platforms are an important topic for the following reasons. As businesses deploy Internet of Things applications, many will turn to the service provider market for affordable, feature-rich, and well-engineered platforms. Platforms also represent an important topic for the large Cloud-providers, such as Amazon Web Services, Google Cloud and Microsoft Azure, who understand the importance of platform strategies and data. 

The first publication that caught my attention is a short article on the IoT Agenda site. It outlines that issues of IoT technology fragmentation and discusses the trend towards concentration in the IoT platform market [1]. The second is a study by a group of economists with an expertise in platform economics and competition policy. They studied the EU’s Digital Markets Act (DMA) and its regulatory implications for large and dominant digital platforms [2]. 

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.

Where the IoT Market is Heading

I delivered a presentation some weeks back at an online conference for the managed-services industry. My talk was about the implications of IoT for digital transformation [1]. To prepare for the presentation, I began by looking back over the past decade of market developments, joining a sequence of past and present developments to see into the future of IoT. This exercise provided useful insights into the evolving pattern of customer needs, consequences for where the market is heading and, implications for strategy and business innovation.

Regulation and Competitive Advantage

A couple of years ago, I was in conversation with a group of technologists and investors at the annual meeting of the Transportation Research Board. This gathering takes place every January in Washington DC. Think of it as the transportation industry's equivalent of Mobile World Congress. 

Our group was discussing the then emerging market for connected cars. I threw in a question about the impact of regulation on their business strategies. Regulation matters in relation to safety, liability and insurance solutions, and data management. Factors such as these matter more to commercial viability than technical innovations. The need to factor regulation into technology choices and business models was evident even then. The universal response I got from the group was that innovators needed to be given the leeway to develop the technology and novel services. Putting it explicitly, regulators needed to stay well out of the way.

The same issues are apparent as new markets develop on top of the foundations of mobile communications. One example is the sharing of consumer data derived from mobile phones [1]. Another is Facebook's difficulties in launching its Libra currency and payments initiative, ahead of regulatory buy-in.

2019 in Review: A changed IoT landscape

The turn of the year has triggered many people to reflect on what they were doing 10 years ago. With that in mind, I looked through my tracker of M2M and IoT corporate initiatives to see what has changed and what we might learn about the future. The main categories of initiative include the following: technology innovation, market entry/expansion, partnering, acquisitions/investments, distributor agreements, product/service innovation, business reorganization and outsourcing.

A more tightly knit IoT value-chain 

A snapshot of the 2009 industry covers a relatively well defined mobile-industry ecosystem. This largely centered on mobile operator initiatives, driven by leading operators and supported by GSMA efforts to develop a new market for the mobile ecosystem.

Privacy payoffs in smart cities

A few weeks ago, I spoke at the Connected Cities Privacy Summit (CCPS) in Washington DC. This was a 'first of a kind' event focusing on data privacy issues. Other smart city events tend to feature pilot-projects and technology demonstrators.CCPS drew speakers from Google’s Sidewalk Labs and public-sector officials from Canada. US presenters came from a range of academic, consultancy, legal and technology organizations [1].

Many of the CCPS presentations took a cautious approach to privacy protections. To some extent, this reflected the nature of the audience. Roughly half of the attendees hailed from legal, compliance and policy professions. I took a somewhat different approach. My presentation covered the opportunities arising from data sharing. This drew on some of the lessons learned from oneTRANSPORT.io, one of my consulting projects over the past few years [2].

Mobile IoT and Adjacent Industries

How time flies! Over 10 years ago, I was part of a GSMA strategy team that looked at new growth markets for the mobile industry. Our report – entitled ‘Embedded Mobile: M2M and Beyond’ – identified opportunities for growth in adjacent industries. This would need the GSMA to promote the collective interests of the mobile industry in several ways. One recommendation was to work with supply-side partners. This would lower the barriers to adoption of mobile in non-mobile industries.

A second recommendation focused on stimulating demand by fostering a dialog with non-mobile industries. Besides highlighting the value of connecting assets, it would provide a channel to feed user needs back into the mobile eco-system.

In the aftermath of the 2008 financial crash, the GSMA’s initiative survived and thrived. Soon, senior executives from the automotive and pharmaceuticals sectors became keynote speakers at Mobile World Congress (MWC). And, the composition of MWC attendees changed with an influx from non-mobile industry sectors.

Why does this history matter now?

Looking up the IoT Value Chain

People are so preoccupied with everyday tasks that they often miss out on what is around them.

Walking down the street, how often do you catch people looking up at the features of old buildings or roof-level signage? The same is true in business life. Let’s consider how this plays out in the IoT market.

Recently, I heard a telco executive explain why mobile network operators (MNOs) focus on connectivity. He pointed to two factors. One is that connections and data connectivity are straightforward things to measure, with a well-established legacy from mobile phone sales. In effect, businesses manage what they can measure. The second is that it is easy to look down at the network from the MNO’s vantage point in the IoT technology stack. It takes an effort to lift one’s head and look up. That’s much like missing out on the architectural features and art work when we walk head-down (even without the excuse of a smartphone) along a street.

Occasionally, however, it makes sense to look up, not just to appreciate your surroundings but also to get a sense of whether the world is changing and how you might need to adapt.

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.

New IoT opportunities: where's the big deal?

In a recent McKinsey article [1] entitled “What it takes to get an edge in the Internet of Things”, the management consultancy advised firms to focus on three habits:

• Habit 1: Begin with what you already do, make, or sell

• Habit 2: Climb the learning curve with multiple use cases

• Habit 3: Embrace opportunities for business-process changes

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?

A fresh look at MNOs' IoT strategy

Over the past few weeks, there have been several commentaries about IoT strategies for mobile network operators (MNOs), several of these expressed at Mobile Europe’s 2018 IoT in Telecoms conference.

Vodafone’s Director of IoT, Stefano Gastaut [1], expressed visible frustration about the ‘dumb pipe’ label attached to MNOs and the implied commoditization of connectivity. Enrico Bagnasco, Head of Innovation at TIM articulated [2] a ‘horizontal services’ view.

And, finally, Ericsson published a study [3] drawing on interviews with 20 mobile operators about the status of their IoT priorities and the strategic opportunities for growth. One highlight in Ericsson’s findings is that 70% lack a well-defined strategy. While many are testing different roles in the IoT value chain, 80% plan to move up to higher layers.

On the whole, it therefore looks as if the industry has got second wind, aiming to build on a first phase of growth, triggered by the GSMA’s ‘M2M and Beyond’ industry strategy.

So, are operators on the right track to capitalize on the opportunity or has the market passed them by?