Communication service providers (CSPs) are capitalizing on enterprises’ seemingly insatiable demand for Internet of Things (IoT) solutions. Achieving their lofty IoT business objectives is often another story.
To plug and play in — and profit from — an increasingly Industry 4.0 world, CSPs must harness the vast amounts of Internet of Things (IoT) data generated by clients in industries spanning entertainment and healthcare to manufacturing and logistics — and convert this insight into highly verticalized solutions. Importantly, they must accomplish this with user consent upper most in their minds — and within the bounds of an increasingly stringent regulatory environment that protects consumers’ privacy, including General Data Protection Regulation (GDPR).
The risk could be worth the reward. IoT is poised to be a form of savior for businesses of all stripes and sizes and is expected to generate over $1.5 trillion annual revenue by 2030. And according to Gartner, by next year, one in four large organizations will either buy or sell aggregated data on formal online data marketplaces. CSPs have a unique opportunity to monetize their access to vast volumes of data flowing through their infrastructure. All of this is welcome news to CSPs, many of whom face increased competition and downward revenue pressure on their traditional voice and data services. AT&T and others are already marking their territory in this area.
In addition, investor expectations are higher than ever. The loss of short message service (SMS) and voice services revenue over the last decade has been offset by growth in fixed and mobile broadband revenue. Shareholders expect CSPs to continue to invest in next-generation networks (5G and IoT) without increasing their CapEx-to-sales ratios, to continue their expansion beyond traditional telephony services.
The fast-expanding IoT services market is one way that CSPs can further accelerate their growth trajectory.
A recent study by TMforum reveals that CSPs see IoT platforms as new revenue streams that do not compete with or undermine traditional connectivity services. But building a platform business architecture requires fundamental changes in thinking and a very different way of operating. CSPs’ IT infrastructures, systems, functions and features will all need to:
After watching over-the-top (OTT) content players, messaging and even voice services claim CSPs’ potential revenues, CSPs have a chance to recover lost ground via vertically focused IoT offerings. New revenue-building opportunities are underway, motivating CSPs to rethink their strategies and embed digital into their core business models. This is especially true in the B2B2X market, where IoT will drive efficiency, create value, unlock insights, unleash innovation and enable new business models.
This means that CSPs must create innovative services and applications in vertical markets where there are high-value use cases. Adopting models such as software as a service (SaaS), backend as a service (BaaS) and platform as a service (PaaS) for these 5G/IoT offerings will help improve business processes and deliver better services to consumers. Every CSP must effectively determine which set of IoT applications present the greatest potential benefit within the specific markets in which they operate and focus intently on them.
With revenue for pure connectivity services under increasing pressure, CSPs need to embrace ways of delivering new types of services to customers in specific vertical markets such as agriculture, energy, healthcare, logistics, smart meters and smart homes and the like. Many CSPs have already started this journey. Until recently, operators had been limited in their ability to segment network capabilities to serve specific verticals, but this is changing with the deployment of low-power, wide-area (LPWA) networks including LoRA, Sigfox and NB-IoT. LPWA networks are ideally suited to low-bandwidth access applications such as asset tracking and remote operations/surveillance. For agricultural applications, LPWA networks could deliver cost-effective solutions that are simply not feasible with today’s cellular networks.
5G and IoT increase the opportunities for CSPs to create network “slices” that support use cases with varying requirements for latency, throughput, coverage, etc. CSPs envision offering fine-tuned vertical slices sold in SaaS and PaaS models. For example, a connected vehicle likely would require guarantees of latency, throughput, coverage and security.
To succeed with network slices, CSPs must map them against the products that they bring to market (either directly or via partnerships) and the market segments they target. In the IoT space, product categories are classified as “application verticals” and market segments as “industry verticals.” Industry verticalization represents a new approach to market segmentation. Rather than segmenting the enterprise market based on the size of the company, CSPs must segment opportunities based on the particular vertical or sub-vertical that a prospect belongs to, regardless of size.
Network slicing will eventually do away with bandwidth sharing and the unpredictability of existing networks and has the long-term potential to turn such things as real-time analytics, remote surgery and autonomous cars into reality. The same network will be able to run the 5G trump card, Narrowband IoT (NB-IoT) – the cellular answer to low bitrate, low-power wide area networks – thus providing interoperability between zero latency and low-power massive machine-type communication (MTC ) use cases in the long run.
Adopting this approach allows CSPs to build a clearer picture of how they can exploit network slicing. Application verticals and sub-verticals can have very different requirements for latency, throughput and coverage. By matching capabilities against different application verticals and analyzing which industry verticals offer the most attractive prospects, CSPs can decide where to focus their efforts and find the right balance between horizontal and vertical approaches.
Therefore, CSPs must target a specific vertical and provide 5G/IoT solutions for many different players in that ecosystem (see 10 vertical industry use cases, below). For example, in the automotive space, CSPs could offer high-bandwidth connectivity to provide a seamless and high quality of service for infotainment, navigation and other services, or explore useful partnerships to leverage specific niche capabilities in smart connected mobility. Low-latency and high-bandwidth connectivity can support “platooning,” where many vehicles with autonomous capabilities drive together in a group, improving fuel efficiency and reducing the number of vehicles on the road. In the future, low-latency, high-bandwidth connections could support remote driving and support (e.g., vehicle maintenance), which will open the possibility of new services and cost savings.
The amount of data from vehicles will grow exponentially with greater proliferation of shared mobility as an alternative to privately owned vehicles, progress in powertrain electrification driven by stricter emission regulations and increased vehicle connectivity. These trends will define new mobility models, and data-enabled services and features where car manufacturers can add data-based business models by monetizing data assets with other stakeholders, such as insurance companies and fleet managers.
CSPs are already seizing the high ground. Here’s a sampling:
We recently led a team (sponsored by Verizon and Colt) that built a conceptual IoT-based immersive fan experience powered by 5G connectivity for use in a “smart” stadium. In this case, the CSP provides dynamic 5G network slicing at stadium level, plus drones-as-a-service for aerial video feeds. We envisioned a number of “smart stadium” personas that would benefit from this experience (see below). Key partners on this project included AWS, STL, Subex and ServiceNow.
Leveraging AI, IoT, AR and VR, this experience pulls viewers into the smart stadium, enabling them to interact with the environment, allowing them to view information by persona.
To meet varying demands, CSPs must decouple and expose services to establish themselves within the IoT ecosystem. They must build platforms that connect ecosystems, or probably more accurately, a series of interlinked ecosystems from multiple CSP partners to create global scale. These platforms must support multiple business models simultaneously, with CSPs deriving revenue from other members of the ecosystem as well as end users, and enabling different charging methods for the end customer, such as connectivity sponsored by a third party.
From a technical standpoint, the prerequisites for CSP entry include:
The service opportunities across nearly every vertical business market are virtually endless. To seize the high ground, CSPs should consider the following three approaches. Although they are defined separately, they can be deployed alone or in combination. For example, a CSP might offer a connectivity platform to the entire market, develop specific tailored vertical solutions for automotive and healthcare, and create a digital ecosystem platform for connected home. Ultimately, though, both the connectivity and tailored vertical solutions can be supported through a central digital platform.
CSPs must customize their technology assets to deliver IoT-enabled connectivity platforms. They need a connectivity layer that can handle any data volume, from millions of connections that send only a few bytes a few times an hour, to a small number of connections sending hundreds of gigabytes of data per minute. This connectivity layer should also be able to accept any interaction, from billions of devices periodically connecting and “dumping” logged data into the network, to millions of end points — such as cars — that require always-on connectivity.
Different scenarios also have varying latency requirements. For instance, cars are more connected to everything — from other vehicles, to transport infrastructure, to pedestrians, and to data centers, particularly when operating in “vehicle-to-everything” (V2X) mode. This requires extremely low latency. Different use cases will have varying requirements, which the communications system must handle efficiently and cost-effectively.
Perhaps the most promising approach to IoT is for CSPs to develop a digital platform that enables many partners to add services, features and functions that all participants can use as building blocks to develop new services. These components can cover everything from connectivity to location information, rewards programs, payment processes, specific vertical applications, etc. The platform should also support many ways to share revenue. In short, to be successful, a CSP must first establish itself as a genuine IoT provider and then partner with industry experts to meet key market requirements.
CSPs need a value-added layer that provides easy-to-consume services such as software orchestration, analytics, device management, security, metering and billing that those developers can use to help build out their applications. This layer should also support cloud interoperability, so developers incorporating services from the major hyper-scalers can quickly connect to and interoperate with the CSP platform.
Being truly ready for IoT means having the right tools, processes and infrastructure to deliver services at the network’s edge. But it also means having the right workforce, resources and trust with third parties to deliver an effective customer experience. Winning at IoT requires agility in work and mindset, with faster-than-ever innovation cycles and novel ways of working. We suggest focusing on gaining the trust of one industry at a time. Allow partners to deliver enterprise-grade solutions while your organization delivers a secure and reliable IoT core network. That’s how to build trust across the ecosystem. Once a CSP has mastered connectivity, it can act as a matchmaker for industry players that want to monetize their data.
With a host of viable use cases across a variety of horizontal and vertical markets, the “IoT in 5G” realm presents CSPs with a unique opportunity to begin extracting value from their 5G investments. IoT in 5G is especially enticing since it means monetizing the enormous stores of customer and operational data that CSPs already have on hand. Concurrently, IoT points the way for CSPs to venture into new industries, offering initiatives and services beyond network connectivity.
An IoT strategy supported by a strong business case for each targeted vertical industry has the potential to share risks and rewards, optimize processes, leverage current infrastructure capabilities and generate unique insights for the business in the form of precise and highly insightful data sets. CSPs should look for service orchestrators to help them strategize and implement the ecosystem necessary to take advantage of the IoT in the context of 5G.
This article was written by Manju Kygonahally and Shubham Kochhar, a Vice President, and Senior Consultant, respectively, in Cognizant’s Communications, Media and Technology (CMT) Practice. Data analysis and client engagement inputs were provided by CMT’s Clifford Osedo and Claire Marshall, respectively.