I just returned from an incredibly active trip to Mobile World Congress in Barcelona where the two biggest headlines involved snowy weather and the marketing pitch that 5G is here and will cure everything from snoring to burnt toast.
There is no question that 5G will provide many benefits to both consumers and operators (especially in 2020), but we are asking the wrong question. Connectivity is just a small part of the cost of any IoT solution, and with LPWAN and NB-IoT, connectivity can be as little as 5% of the total cost of the solution.
The battle over “naked” or standalone connectivity reminds me of the “Pig War” of 1859. The US and the United Kingdom almost went to war when a pig from the British side of a disputed territory near Vancouver ate some potatoes from the American side of the area. Luckily, the militaries of both sides quickly realized how dumb it would be to fight over a meaningless objective, in this case a pig and potato dispute!
Many IoT suppliers have yet to learn the simple lesson of the Pig War – do not spend your time fighting over something that is not worth much. The ugly truth is that most naked IoT connectivity is not viable as a stand-alone business. I suspect that the platform space is coming to the same conclusion, but this wisdom has not yet been fully embraced by the industry. AT&T and Verizon offer select solutions and even some professional services. KORE Telematics has quickly been transitioning to becoming a full solutions provider from being a pure IoT MVNO play. It is hard and getting harder to make money by focusing on just one layer of the IoT solution stack.
The supplier side of the industry thinks of IoT as a homogeneous market, but very, very few have been successful with a horizontal approach (ARM). The market is too immature and fragmented for a horizontal approach today. IoT is really a collection of thousands of use cases spread across almost as many industries and sub-verticals. Many of these end customers do not even think of their problem as an IoT issue.
Customers are not interested in selecting and buying a pile of parts that they then need to assemble and operate. Remember the old joke about Ikea buying GM? Some assembly required!
That is what the customer worries about when they hear a pitch from an IoT vendor that only addresses part of the total solution.
The answer is simple in theory but tough to execute – a service offering that includes the device, connectivity and the software platform with associated applications. Rather than selling from the perspective of a supplier, how about providing a complete solution to a specific business problem? Make it as easy as possible for a customer to solve a problem and take the burden of figuring out the details away from them. Note to investors – the big winners here will be solutions focused on very specific vertical industry problems.
One last thought on connectivity. Imagine if a grocery store only sold one item and you had to travel to one store to buy chicken, another to buy bread, and a third to purchase bananas. This is the situation today with most traditional cellular operators. If cellular connectivity is not the answer, they cannot offer another form of connectivity. They will then lose the most valuable part of the sale, recurring solution revenue. Doesn’t it make more sense to have a complete set of connectivity offerings, including unlicensed spectrum/LPWAN in order to capture the largest, most profitable part of the business?
Connectivity in IoT is necessary but not sufficient. It is an enabler to capture 95% of the potential solution revenue. Look for companies offering a package price for the device, connectivity and software solution in return for a multi-year, recurring revenue contract. In the consumer market, it may even be worth doing just for the rights to monetize the data!