The hype is over. Now it’s time to make money. This will be the mindset adopted by mobile operators far and wide when considering the Internet of Things (IoT) in 2023 and beyond.
Every technology comes with its own set of promises — some are realistic and achievable, and others are more hype over substance. The Gartner Hype Cycle is one of the industry’s best tools to make informed bets on which technologies will move from hype to substance and when. These technologies move through five distinct phases: Technology Trigger, Peak of Inflated Expectations, Trough of Disillusionment, Slope of Enlightenment, and Plateau of Productivity. The beginning of 2023 saw IoT slip firmly onto the Slope of Enlightenment, and operators are taking note.
Gone are the days of placing bets on IoT, making wild and uncalculated investments in the hope of some kind of financial return. Now is the time for more targeted investments, with operators jostling to secure their own slice of the IoT pie — and they’ll be looking to do that in a way that guarantees and maintains profitability. That all starts in-house.
No more investing for the sake of innovation
Many IoT connectivity providers are now in the process of re-organizing and refocusing their IoT product teams with more defined business targets and a renewed ambition to monetize. Where providers used to be looking for a seat at the table by investing for the sake of innovation, they’re now identifying specific use cases and setting achievable business goals around them. That’s put in-house developed solutions under greater cost pressure, driving operators to the lower operational costs associated with off-the-shelf product and service alternatives. As a result, vendors, software specialists and SaaS providers are restructuring to meet a more streamlined and business-focused customer.
We can see this happening in real-time. In 2022, Ericsson announced that it had divested its IoT Accelerator business to Aeris Communications. In 2023, IBM announced the retirement of its Watson IoT platform. Even Google made a surprise announcement that it would discontinue its IoT core service in August last year.
We’re seeing a need for more focused IoT requirements, with “dumb pipe” offerings that offer basic connectivity abandoned. Operators and IoT providers are no longer interested in a “race to the bottom” in terms of cost-per-megabyte as the only way of delivering value for customers. More value-based strategies are now being preferred that unlock new features and functions.
Now is the center ground’s chance to shine
Many mid-size enterprises are now seeking a dependable and secure service, making them a prime target for vendors and operators in 2023 and beyond. They may require additional features such as Enterprise Virtual Private Networks (VPNs), private IP pools, firewalls and other security features, which they are willing to pay for, provided that they are not bespoke developments reserved for large, prestigious clients.
The challenge lies in meeting these diverse IoT customer requirements, which can be cumbersome and expensive using the existing mobile core, operations support systems (OSS) and business support systems (BSS). Therefore, operations teams prioritize stability over agility and simply cannot respond promptly to every change requested by each IoT customer. As a result, tailored solutions were often created outside of the mobile core and existing OSS/BSS as “special projects” to address the needs of large customers. Treating every IoT customer as a “special project” is unsustainable, which is why we’re now seeing new operator solutions evolve from the center ground.
Balancing cost with profit
None of this makes any sense unless operators and IoT providers can maintain a profitable business model. Moving from hype to business mode, the flexibility to provide customer adaptations and meet various market needs now must be coupled with achieving economies of scale, enabling automation and allowing for efficient operations.
Scales are now falling from the eyes of mobile operators. They know that they must unchain themselves from their current mobile core limitations if they are to pursue IoT in a sustainable and profitable way. In other words, they need the freedom to innovate IoT services cost-effectively.
For their IoT services to scale with profit, they also need to increase automation, such as setting up enterprise VPNs and applying full customer self-service. In that way, IoT connectivity will have to become more self-sufficient if operators want to go beyond basic SIM management features and offer more advanced security and policy control features.
Some operators might achieve this by adding a programmable layer of automation, policy control and security on top of their existing mobile core. This layer will likely be hosted with hyper scalers like Amazon Web Services (AWS) to achieve maximum flexibility and add value-added functions such as next-generation firewalls. Other operators, however, might try to meet this need by building a fully separate mobile core specifically for IoT. Both options — or a combination of the two — are perfectly viable, providing that operators tread carefully and select the right partners and technologies for the path they choose.
IoT has long since been on the path to enlightenment. Now it’s there, it’s time for vendors and operators to regroup, restructure and start thinking more carefully about what enterprise customers need.
