5 Ways Telcos Can Cash In On IoT
IoT/M2M Breathing New Life Into Telco Services
Sales for traditional telecommunications services, such as voice and messaging, are on the decline. But that doesn't mean telecom operators are taking a back seat when it comes to capitalizing on new technologies. Research firm IDC forecasts the global installed base of Internet of Things (IoT) to hit 28.1 billion devices in 2020, generating revenue of $1.7 trillion. Carriers are jumping on the IoT and machine-to-machine (M2M) communications bandwagons as they hunt for new services and revenue opportunities, according to IDC in a new report.
The report by IDC analyst Ina Malatinska concluded that telcos will play a critical role in building up the M2M/IoT market. Here are some excerpts from IDC's report that highlight where the opportunities lie in the IoT/M2M space that carriers should take advantage of, if they haven't already.
Customers Want End-To-End Solutions
Telcos might be in the perfect place to tie the moving parts together for end-to-end solutions. The leading telcos are working to expand beyond selling SIM cards to capitalize on the M2M opportunity. These providers are getting into end-to-end solutions such as fleet management, according to the IDC report. End-to-end services also generate higher margins.
"With the telecommunications services revenues from core voice and messaging services declining, telcos are on the lookout for new growth opportunities. M2M is certainly one of them," said IDC analyst Ina Malatinska. "Connectivity represents only about 10 [percent] to 15 percent of the total M2M revenue pie. It has become a commodity and we expect connectivity ARPUs [Average Revenue Per User] to continue falling dramatically.β
Big Data Analytics Is A Big Opportunity
One area in which carriers can shine is in big data analytics. Because traffic is flowing over their networks -- including the traffic generated by machines -- it only makes sense that telcos help businesses with the influx of new data. According to the report, businesses will need a way to extract relevant information from large data sets.
Telcos will be putting more emphasis on developing critical data analytics capabilities, the report said. "As market demand is shifting from simple remote monitoring and control to business processes optimization and identification of new business models, data analytics will become essential to success," Malatinska said.
Acquisitions Helping Carriers Get There
Some telcos are scooping up other vendors and service providers to help them tap into the IoT and M2M markets.
The IDC report noted British telecommunication provider Vodafone's acquisition of Cobra Automotive Technologies last year as an example. According to Vodaphone, the acquisition will help them become a global provider of connected car services for automotive and insurance customers.
βIn a nutshell, telecom operators want to be key players in the M2M/IoT game. Whenever you see high-end cars streaming entertainment content on the road or a remote patient monitoring solution, you can be sure that a telecom operator is involved,β Malatinska said.
Telcos Leading The IoT Charge
The IDC report said that telcos can play an important role in clarifying the business case for M2M/IoT solutions across different verticals for customers. Carriers will also be crucial in building strong partnerships between vendors and enabling application development.
Some carriers are jumping into the IoT space headfirst. For example, AT&T Foundry was launched in 2011. AT&T Foundry is a series of innovation centers started by the carrier, with sponsors that include Ericsson, Cisco and Microsoft. Since its inception, AT&T Foundry has worked on more than 200 projects -- from temperature alerting systems for connected cars, to smart trash cans and refrigerators, to wheelchair sensors that monitor seat cushion pressure and battery levels.
Carriers As IoT 'Innovation Hubs'
AT&T isn't the only telco with an eye toward innovation. Carriers are emphasizing in-house R&D to work toward IoT/M2M innovations, the report said.
German telecommunications carrier Deutsche Telekom has T-Labs, a unit within the carrier's organization that conducts projects for all areas in the Deutsche Telekom Group. T-Systems, a German global IT services and consulting company and subsidiary of Deutsche Telekom, also boasts a T-Systems Innovation Center. French telecommunications provider Orange has Orange Labs for innovation and R&D.
"Telcos should act as hubs for innovation and keep educating the market about the benefits of M2M solutions. This is most essential in markets that are still in the early stages of maturity, such as those in the CEE [Central and Eastern Europe] region," Malatinska said.