Two investment themes bookended 2023. In January, the European Union backed a $100m venture capital fund, managed by Momenta Partners. In December, Softbank announced its EUR473m ($514m) investment for a 51% stake in Cubic Telecom. This development more than drew the eye as exemplified by the analyst commentary around the high (16x) revenue to implied enterprise value multiple.

In between, the level of corporate activity in the IoT sector continued at roughly the same pace in prior years, albeit down on the years of heightened activity going back five or so years ago. There were several developments among the vendor and network operator communities, but less so among the IoT platform providers. Governments became more active with an emphasis on security and protections for the consumer sector.

Against the backdrop of 5G developments and 6G pathfinding, IoT is becoming a part of the fabric of enterprise operations and national infrastructure. Established players continue to emphasize connectivity, a relatively small portion of IoT value chains, while enterprises focus on quick-to-market solutions enabled by cloud providers and systems integrators. Both approaches risk leaving ‘system of systems’ issues for later consideration.

Investment Splash

As announced, the European Union’s VC funding effort targets Industry 5.0 or, “Industry 4.0 with-a-conscience” prospects because the Industry 4.0 movement is perceived to be overly tech-focused, and one that has failed to prioritise people and the planet. Consumer protection and sustainability are themes that reappear in other developments covered by this review.

SoftBank’s stake in Cubic Telecom drew attention for its high multiples and am implied valuation of over EUR900m for Cubic Telecom. This is a business that raised $124m over a period of some ten years. After beginning life as a company offering an over-the-air software management for M2M applications, it switched to explore the connected car space (working with Tele2) around 2014. An EUR18m investment from Audi and Qualcomm followed in 2015. SoftBank’s investment rationale into Cubic Telecom is to pioneer the future of software-defined connected vehicles. This does not look like an IoT connectivity deal given SoftBank’s 2022 equity investment into 1NCE, the latter being characterised as “the only company that can deliver global IoT”.

One insight on SoftBank’s investment can be gleaned from an even larger IoT investment from several years ago. In 2016, Cisco invested US1.4bn to acquire Jasper Wireless. Compared to Cubic Telecom, Jasper had raised a cumulative investment of $205 million over seven rounds. At the time, Cisco’s acquisition provided it with an entry point into the IoT sector as well as a channel comprising some 3,500 customers including big names such as Ford, GM, Heineken, and Boston Scientific. The acquisition seems to have helped Cisco over subsequent months as it brokered IoT deals with SalesForce.com, IBM and several mobile network operators internationally. Whether SoftBank can achieve the same market gains with Cubic Telecom remains to be seen.

With over 90% of Cubic Telecom’s revenues concentrated in Volkswagen Group, there remains a challenge to diversify the customer base. Of course, SoftBank’s relationships might help with Japanese vehicle manufacturers. This will take time and a greater investment in resources and coalition building. There should also be scope for product and service innovation involving connected car, intelligent transport, and electric vehicle charging systems. It’s worth noting that several months after its Jasper Wireless acquisition, Cisco’s continued foray into the IoT sector led to an additional $3.7bn acquisition of AppDynamics which was active in application performance monitoring, end-user monitoring and infrastructure visibility. Expanding the addressable market might be one factor in SoftBank’s investment calculus.

Incumbents’ Dynamics

Across network operators, connectivity platforms and vendors, the sharpest rise in corporate initiatives points to the ways in which vendors are trying to ease adoption and reduce the friction of developing solutions. For example, ST Microelectronics wants to make it easier to connect devices to cloud providers. It now offers microcontroller software and developer tools targeting Microsoft’s Azure IoT Hub and AWS cloud. ST Microelectronics also partnered with CommScope to integrate the latter’s PKIWorks IoT security platforms to align with align with the Connectivity Standards Alliance’s Matter standard. Making adoption easy applies to another strategic incumbent, Qualcomm. It launched a new platform called Qualcomm Aware comprising Qualcomm silicon and an ecosystem of hardware and software partners all wrapped in a cloud-friendly bundle to simplify the process of “getting into the IoT game”.

Mobile and low-power network operators continued at about the same level of corporate activity as 2022 with two themes apparent. One involved the launch of solutions for distinct verticals. In the utilities sector, for example, Vodafone launched its Water Metering solution for water management companies. Also targeting the water sector, UnaBiz (formerly SigFox) entered into a strategic partnership with KAIFA, a utility sector business digitalisation solution provider. In Australia, Telstra launched an end-to-end industrial automation capability, following its acquisition of industrial IoT providers Aqura Technologies and Alliance Automation. AT&T, one of the forerunners of the IoT industry even decided to relaunch its old “Connected Solutions” business unit. Beginning with connected cars, it wants to help customers navigate the 5G and IoT, by putting dedicated technology and sales executives alongside each other instead of separating them across different AT&T units.

The other theme involved horizontal, or extended connectivity, initiatives. Some of these combined licensed and unlicensed terrestrial network providers (e.g., Bouygues with Netmore Group, UnaBiz with The Things Industries to interwork SigFox and LoRa technologies). Others involved the combination of terrestrial and satellite communications means (e.g., Sateliot with Transatel, Skylo with Telefonica, EchoStar with the Things Industries and, Intelsat with Deutsche Telekom).

Platform providers were less in evidence as far as corporate initiatives are concerned. A marketing report by Analysys Mason for floLive, one of several to publish on eSIM and iSIM developments, suggested industry motivations are driven by a strategy of embedding connectivity earlier in the IoT value chain. For 2023, the requirements associated with this industry change, focused on flexible connectivity, outweighed M&A and platform innovation developments.

Government’s Growing Role

As the sector grows, IoT offerings are starting to expose externalities that purely market-based systems are not geared up to address. That is one explanation for the EU getting involved in VC funding for people and planet issues as noted earlier. In Scotland, the government sees the nation as expanding in a global market valued at $600bn. The country is investing in an innovation hub targeting IoT and related technologies such as sensing and imaging to help Scottish businesses explore opportunities “presented through advanced digital technologies”.

Cybersecurity and consumer protection are other areas where governments can address adverse externalities and set a positive path forward through regulatory and certification measures. For example, the UK government is enacting regulations for Security Requirements for Relevant Connectable Products targeting password management, vulnerability disclosures and software update support. In the USA, the Biden-Harris Administration announced a cybersecurity certification and labelling program via a “U.S. Cyber Trust Mark” to help consumers choose among smart devices that are safer and less vulnerable to cyberattacks. In Asia, the governments of Singapore and South Korea launched an initiative to develop a mutual recognition of IoT security certification schemes. These developments expose market gaps that individual companies and industry alliances are ill-positioned or unwilling to address.

Watching the Horizon

Whether they are labelled opportunities or challenges, other market gaps will shape the IoT industry over 2024 and beyond. Professional media sites such as LinkedIn and Medium are starting to fill up with individuals offering their IoT implementation services, a sure sign that supply and demand are rising up a notch.

Connectivity continues to dominate. To borrow a 1990’s marketing phrase that was commonly applied to sell the commercial Internet, connectivity is analogous to the ‘on-ramp’ for the IoT. However, connectivity represents one of a growing number of elements that contribute to an IoT solution. As the population of connected devices grows it will require both a structured framework and a suite of management services to interoperate at scale. This might emerge as the communications and cloud industries converge on 3GPP planning and a shift in emphasis to massive machine type (mMTC) use cases.

Governments and society are coming to terms that easy access to the Internet results in an asymmetric relationship between users and infrastructure and application providers. As an illustration of the challenges ahead, the Matter protocol set out to make connectivity simple and straightforward for consumers. While homeowners can mix and match devices from a growing ecosystem of suppliers, they still have to choose a home platform for management functions. This element, sitting above the connectivity layer seems to be dysfunctional and not just in a technical sense. As one reviewer put it, “now that Matter is here, these companies are wholly unmotivated to ensure their platforms work well with their direct competitors”. This is an appealing business scenario for system integrators and large platform (or ‘gatekeepers’ in competition law terminology) providers. The supply side of the industry will need to address issues of security, interoperability, certification and possibly data rights now that the wheels of government are rolling.

Another facet of the connectivity discussion is about interworking. How will deployments in large spaces function when they combine wide-area (cellular, satellite) and short-range devices (Bluetooth, Wi-Fi, Zigbee)? Edge computing concepts are applicable so that gateways aggregate short-range connectivity devices, for example. However, there is still a need for additional functionality to provide oversight and management functions and to make these capabilities appealing to developer communities. This dynamic will persist as the number of connected devices grows because many of these will be constrained by factors such as their energy envelope, power budget and sleep-modes of operation. Expect to see an extension of GSMA and TMForum efforts to define APIs that make intelligent management functions accessible to IoT system operators and developers.

A final observation relates to the scope of IoT. Many associate the term with connectivity and connected devices, as if connectivity is the biggest hurdle to overcome. Business users have progressed beyond connectivity and are increasingly adding IoT data management and remote-control capabilities as they deploy solutions for priority or business-critical use cases. Over the longer term, however, users will need to view IoT through a ‘system of systems’ lens. There will be situations that require cross-silo interoperability involving multiple IoT solutions and service providers working together. In addition to business model innovation, the technical challenges associated with improved decision-making will rely on making IoT work with digital twins as well as AI and ML algorithms in a systematic way. Today’s quick and easy solution is to concentrate IoT data in a cloud environment where all processing, intelligence and reporting are centralized. However, quite apart from ceding value to the cloud provider, there will be longer-term requirements for data provenance tracking and causal reasoning that call for bi-directional data flows. The proliferation of constrained IoT devices will call for edge processing and the coordination of distributed information processing and intelligence. These are reasons why notions of IoT connectivity and solutions, in multi-stakeholder settings, need to embrace system of systems approaches.

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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.

Several other corporate developments over the course of 2022 point to a growing sense of commercial and strategic realism. Many of the underlying issues involve individual organizations confronting their lack of market scale. Alternatively, they are dealing with the fact that their offering is either not unique or targets a limited portion of what is required to support a full IoT system. I highlighted the consequences of these supply-side characteristics in my closing comments of 2021. The growing band of IoT adopters require greater awareness of the risks of tying their businesses to a single vendor, a single solution-provider, or a proprietary technology. It seems that several providers grasped the commercial costs and long-term commitments associated with narrow strategies and responded with an exit manoeuvre.

Multi-strand Strategies

The decision to stay or exit the IoT market is an increasingly real challenge for large and vested players. They can see the large opportunity that IoT enables even if the pathway to large-scale and long-term commercial success is not entirely clear. How do they grasp the opportunities and stain the market for long enough to make solid commercial returns?

Amazon is one organization that is playing on multiple strands spanning connectivity, cloud infrastructure, developers and IoT data. Over the course of 2022, it launched initiatives in support of the Matter protocol and the smart home opportunity. Another initiative involved Amazon Sidewalk which operates a long-range, low-power IoT network using Bluetooth and LoRa radios built into Echo and Ring devices. The network connects devices to Amazon’s cloud when they are beyond the reach of traditional homes. To partner with industries and organizations beyond the reach of the current network, Amazon added a new gadget to fill coverage gaps seeking to reach farms, factories and other non residential settings. Paralleling its own low-power network service, Amazon Web Services (AWS) entered into a strategic agreement with Semtech for asset tracking and monitoring solutions. The goal is to make Semtech’s LoRa Cloud global navigation satellite system (GNSS) geolocation services accessible to the AWS global developer community. In yet another initiative, AWS is also helping 1NCE to expand the global reach of its IoT platform by co-developing software that speeds up global deployment of IoT projects.

A second large organization is Vodafone. It focuses on cellular connected IoT devices, offering customers a global network supported over its home-grown IoT platform. One of Vodafone’s initiatives was an extension into the farming sector. Its MyFarmWeb service which is used by 7,200 farmers in other continents is being piloted across several European countries. Farmers can use a mobile app linked to agricultural IoT sensors and a cloud-based platform to store, visualize, and view information gathered via IoT sensors and other data sources in the field. They can then make informed decisions about soil and crop health, water use, and the application of fertilizers and pesticides. Vodafone also added to its healthcare sector activities. It partnered with Proximie to ‘digitise operating and diagnostic rooms’ through 5G, IoT and edge computing infrastructure provided by Vodafone Business.

In addition to its vertical sector initiatives, Vodafone seems to be experimenting in other directions to move up the IoT value chain into the new “Economy of Things.” Early in 2022, Vodafone launched a new platform, called Digital Asset Broker (DAB) to help businesses across multiple industry sectors to transform physical goods into tradable digital assets. The service allows verified connected devices, vehicles, smart street furniture and machines to transact seamlessly and securely without human intervention, but with full owner control. Vodafone intends to provide secure links to many other third-party platforms and their associated device eco-systems. This is presumably to create a horizontal capability for cross-silo interactions across industries. It remains to be seen whether this is a form of Blockchain experimentation or a long-term commitment to highly automated, low human-touch data sharing. The recent experience of Maersk, the shipping company, and IBM with their TradeLens offering illustrates the challenges Vodafone can expect to encounter. TradeLens was founded on a bold vision to digitize global supply chains via an open and neutral industry platform. While Maersk and IBM developed a viable platform, they did not secure global industry collaboration which led them to discontinue TradeLens for commercial viability reasons.

Competitiveness, Concentration and Market Exits

The IoT industry’s ever positive narrative of vertical-sector entry and market expansion experienced several major setbacks over 2022 in another sign of growing commercial reality. The long talked about consolidation in the cellular modules sector saw Thales selling its unit to Telit to create a new entity, Telit Cinterion. For relative newcomers to the industry, the M2M modules business was dominated by the likes of Cinterion (acquired by Gemalto and then folded into Thales), Wavecom (acquired by Sierra Wireless) and Telit. Soon after Telit’s gain Semtech, the LoRa proponent, launched discussions to acquire Sierra Wireless.

Economies of scale can explain consolidation in the modules market. Two other developments that surprised the IoT industry involved organizations in platform and services parts of the value chain. First came Google’s decision to exit the IoT platform business and withdraw customer support from August 2023. Later in the year, Google’s Cloud unit established a go to market alliance with KORE to provide a rich set of ‘one stop shop’ services to orchestrate IoT devices, global connectivity, services, data handling and analytics. Google’s initiatives suggest that a withdrawal from the Platform as a Service (PaaS) segment to focus on its strengths as an Infrastructure as a Service (IaaS) provider.

Ericsson’s December decision to transfer its IoT Accelerator and Connected Vehicle Cloud activities to Aeris was a second market surprise. Prior to this announcement, Ericsson’s corporate initiatives suggested continued commitment to the IoT market. In February, it launched IoT Accelerator Connect, a plug and play solution for connectivity, aiming to make IoT connectivity easier than ever for enterprises. During September, KORE joined Ericsson’s IoT Accelerator ecosystem, apparently filling in a North American role that Sprint previously occupied until the latter’s acquisition by T-Mobile USA. Ericsson explained its exit to Aeris by reference to the need for consolidation in a fragmented market and the unsustainable financial losses associated with its IoT business model.

Finally, there is a not fully substantiated story that IBM plans to retire its Watson IoT platform service.

Missed Opportunities and User-led Market Development

Might the realism and shake out of the supply side of the industry be signalling a shift to demand-side initiatives? Attempts to tie users to a particular technology or partner ecosystem might solve narrow use-case opportunities. As systems evolve and new requirements arise, the next stage of development calls for investment in customization or systems integration activities. Difficulties also arise when businesses want to innovate beyond the capabilities and expertise of what one or a small group of providers can offer. This is a throwback to more than a decade when the GSMA launched its market development initiative to expand the M2M market. Still today, organizations complain about fragmentation and complexity.

The IoT market continues to be associated with significant economic value creation. The fact that so many established players – from module makers to platform providers – are exiting this market suggests a missed opportunity, or one where incumbents could not adjust their traditional business models to the characteristics of the IoT sector. The pendulum might be shifting to the demand side of the industry now that IoT technologies are mature and better understood. Specialist users might be taking matters into their own hands as in the case of Siemens acquiring Senseye a specialist IoT solution provider to capitalize on industrial IoT opportunities. For mobile network operators, this dynamic has a parallel with enterprises getting into the business of running private communications networks.

Developments To Watch

The arrival of 5G networks and technology is providing impetus to the market for private mobile networks. 5G is also associated with enhanced mobile broadband (eMBB) and ultra-reliable low latency communications (URLLC) use cases. Now, there is growing activity in the less well addressed area of massive machine type communications (mMTC). Among other research avenues, this takes the form of technologies for low-power devices that communicate intermittently and over long service lives thereby providing the foundation for massive IoT and copious data sets.

Early attention on 6G, other than for technology reasons, is directing industry efforts into geo-political, societal, vertical sector and, environmental needs. The latter few topics are closely intertwined with IoT technologies that enable remote monitoring, data sourcing, analytics and digital twins. Consequently, IoT will not disappear off the agenda of incumbents that exited or scaled back their IoT initiatives. To succeed, however, will call for difficult decisions on interoperability and genuine attempts at long-term partnering.

Overcoming fragmentation and complexity is essential for affordability and market scale. Organizations will also need to adjust their business models, allowing for value to be shared more widely and based on more cost-effective resource accounting and settlement mechanisms. That is a reality borne out of the idea that IoT need not be a zero-sum game.

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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 reorganisation 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 centred on mobile operator initiatives, driven by leading operators and supported by GSMA efforts to develop a new market for the mobile ecosystem.

In looking at 2019 initiatives, the biggest change is the higher number of references to entities across different sections of the IoT value chain. In other words, organizations in other segments of the value-chain were visibly more active with their corporate initiatives. Within any given segment, the three groups stand out. These were the hardware vendor segment (covering network hardware, modules and end-use device providers), IoT platform service providers and the mobile network operators (MNOs).

Vendors were involved in initiatives with other organizations in different parts of the value chain. Examples include ARM’s partnering agreements with China Mobile and Vodafone. The network equipment vendor, Nokia, was active through its Nokia WING business unit. This unit targeted key industry verticals through off-the-shelf solutions for agriculture, livestock management, logistics and asset management applications. Nokia WING also expanded its distribution channel capabilities and geographic reach through agreements with AT&T, Microsoft and TIM-Brazil.

Platform providers play an important role, acting like glue to bring segments of the value chain together. Their involvement spanned initiatives with MNOs, solution providers, users and vendors. Microsoft’s Azure platform featured in initiatives with Eurotech, ExpressLogic and Nokia. It also partnered with BMW while Schneider’s platform capabilities featured in a partnership with BP in the user category of the value chain.

MNO initiatives involved partnering arrangements with large and established integrator businesses such as IBM, Microsoft and Software AG. 5G, AI and automotive sector initiatives also featured in corporate announcements. There were also several interesting channel extension initiatives including announcements from Deutsche Telekom (co-creation toolbox for smart cities), Vodafone (launch of an IoT-focused app development platform), Telus (launch of an IoT Shop for businesses) and AT&T (launch of an IoT Studio in Munich with Nokia).

In comparison with 2009, the picture for 2019 features many more corporate initiatives across neighbouring segments in the IoT value chain. There was also a larger ecosystem in the sense of visible activity in new segments of the value chain.

Relative to 2009, the active segments include investor, solution provider and systems integrator corporate initiatives. The appearance of the latter two types of organisation characterises a maturing industry where the focus continues to shift up the value chain. In the past, technology and connectivity elements were important. Now, users of IoT technologies care more about operational solutions that are properly supported. That requires technology vendors to make their hardware easier to improve their channels to end-users (by partnering with solution providers) and to integrate with IoT platforms to ensure a higher quality of operational support.

Active players and disappearing names

Vodafone, Microsoft and ARM accounted for the most appearances over 2019. Vodafone focused on large-corporate partnering (with America Movil, ARM, AT&T and IBM) in addition to working with AT&T to target automotive sector opportunities. A noteworthy development was its launch of an IoT app development platform in Ireland.

Microsoft looked to expand its distribution channels through agreements with BMW, to build an Open Manufacturing Platform for the industrial sector on top of Microsoft’s Azure offering. Microsoft entered into agreements with BT, Eurotech, Nokia and Telstra as well as acquiring Express Logic, a provider of real-time operating systems for microcontroller units. A stated objective of this acquisition is to enable devices to connect seamlessly to its Azure platform. This is an example of the integration theme, this time between hardware and platform segments of the value-chain.

ARM’s initiatives included partnering with China Unicom (geographic expansion into China) and Vodafone (strategic partnership to enable open, remote provisioning of IoT devices). One attempt to expand up the value chain involved a partnership with Reflexis, a provider of retail software, to enable sales associates to make decisions based on access to real-time IoT data. Another initiative involved partnering with NOS, a Portuguese communications and entertainment group, which plans to migrate its IoT subscriber base to ARM’s Pelion connectivity management platform and to expand operations outside of Portugal.

Wireless Logic has been a dynamic operator in the IoT platform segment since its acquisition by an investment firm in 2011 and subsequent backing from private equity groups. Over the course of 2019, Wireless Logic made three acquisitions across Europe (Netherlands-based M2MBlue and SIMPoint as well as Matooma in France). Its continued growth stands in contrast to many smaller organizations with established names and M2M pedigree from a decade ago (e.g. Cinterion, Jasper, nPhase, Numerex). Many analysts touted these candidates as possessing the right expertise to play a role in corporate roll-ups of smaller platform and service providers.

Where next?

In 2009, mobile network operators (MNOs), through the GSMA, were central to the development of an emerging market and the opportunities from scaling up M2M approaches to address the needs and economics of the wider market. During the latter stages of 2019, the GSMA made a fresh push to promote the potential of the IoT and associated opportunities for mobile operators.

Ten years on, mobile operators continue to have an important role, but their influence is not as powerful. This is due to several factors. One of these is that the opportunity to capture value lies towards the upper layers of the IoT solution stack. Connectivity (a lower layer capability) continues to dominate the MNO proposition and there is no industry-wide attempt to create common (i.e. standardization for global scale) solutions higher up the stack. Instead, efforts to standardize IoT platforms and common data models tend to be driven in industry groups with little or no MNO representation. Even within 3GPP, the home of mobile standardisation, anecdotal information indicates that industrial organisations outnumber mobile operator delegates. The licensing regime for 5G spectrum allied to 5G technology capabilities gives industrials good reason to targets industrial and IoT applications related to 5G standardisation.

A second consideration is that IoT technologies represent one of several interrelated elements required to deliver viable IoT solutions. Artificial Intelligence, Big Data, Machine Learning, Digital Orchestration and Platform business models are some of the technical elements in the mix. Others deal with commercial and operational support factors. What that means is that it won’t be enough to promote IoT technologies in isolation. That is because adoptive industries and end-users care about business solutions. This will favour solution providers that know how to orchestrate the appropriate mix of technologies and delivery partners. A handful of the large MNOs might achieve this in a few verticals. However, this won’t be enough to constitute an industry-wide solution that delivers scale, trust and, most importantly, affordability from scale economies.

The change from 2009 to 2019 reveals a more detailed and a more active value-chain. It highlights an ever more dynamic eco-system, brought about by new entrants and collaborative strategies. Collaboration and partnering in the form of vertical integration are important strategies for the delivery of higher quality and value-added IoT solutions. Over the coming decade, this trend will continue. Advances in IoT technologies will become special as they commoditise and blend into the infrastructure required to support data-driven solutions, at scale.

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Corporate activity in the M2M/IoT market continues to grow in line with the roughly 30% growth rate that many market analysts forecast for connected devices. Acquisition and investment activity grew at a much faster rate over the past few years and reflects a positive corporate attitude to this important market.

Mobile network operators (MNOs) were very active especially in the low-power, wide-area networking (LPWAN) arena which is positive in terms of driving industry scale. Companies in the platform services segment were even more active highlighting the scope for value creation higher up the industry value chain. The industry dynamics between MNOs and platform service providers will set up an interesting strategic challenge – that of scale vs. value – which will affect all market participants over the coming years.

Following on from an industry strategy project in 2008, I began to monitor corporate initiatives in the M2M/IoT market. I wanted to gauge how companies were responding to the new commercial opportunities through business (as distinct from technology) actions. The different approaches that companies employ provide evidence of corporate priorities. The end of 2015 showed no abatement in corporate activity and a steady growth rate of 33% (over the prior 3-years).

Acquisition and investment activity, very much a case of hard financial outlays, grew at 53% over the same period. Notable investments include IBM’s $2bn acquisition of the WeatherChannel which will develop into a key data feed for IoT applications, especially in the agri-business arena. PTC continues to build out its industry position and IoT platform capabilities through two $100m-plus acquisitions in the areas of analytics (ColdLight) and industrial automation (Kepware).

The network segment, below the platform layer in the M2M value chain, was another area of investment activity as low-power wide-area networking providers gained market traction. SigFox and LoRA Alliance companies engaged with go-to-market partners to expand their presence and operational footprint in new geographical markets. This prompted a reaction from the open-standards, mobile industry in the form of a 3GPP standardization push for low-powered wide-area networking initiative, via the GSMA.

The strategies of platform service providers and network operators epitomises the dynamic between growth through scale and growth from climbing up the value chain through application enablers (e.g. analytics, inter-operable data exchanges etc.) and platform services. The following comparison of different strategic approaches employed by MNOs and platform service providers illustrates how the latter group of companies is expanding its strategic role in the IoT market.

Platform service providers were more active in partnering, investing and product innovation compared to MNOs. Many of the partnering activities involved mobile and low-power, wide area network operators to deliver connectivity management services. There were early signs of partnering deals at the application enablement layer and, in a few cases, these involved systems integrators who are clearly looking for packaged solutions to expand their role in the IoT market. IBM’s WeatherChannel acquisition typifies this class of initiative where companies are looking for capabilities and assets to gain a foothold in the IoT market. As far as investment and product innovation activities are concerned, these involved investments to enhance platform capabilities and cross-investments in partners with complementary capabilities.

Partnering in the MNO segment involved arrangements with technology vendors and the emerging breed of (proprietary) LPWA network operators. In some cases, this was backed up by cross investments. Several of the product innovation initiatives related to MNO entries into the M2M market (in less sophisticated telecoms markets). Among different MNOs, AT&T looks to be a harbinger of the IoT future with its innovation in the connected home (through AT&T Digital Life) as well as its forays into data exchanges (AT&T M2X) and experiments aimed at delivering end-to-end IoT applications.

MNO support for LPWA and connected home markets place them on a high-volume market expansion trajectory. In evolving from tradition mobile to low-power mobile, they will soon have to cross the boundary into managing mixed-population devices i.e. mobile and non-mobile devices (Wi-Fi, Bluetooth etc.) in order to play a part in the full end-user service experience. The challenge they will have to overcome is one of massive ‘ARPU’ dilution. To put this into perspective, market pricing of connectivity for LPWA devices is roughly one-tenth of most mobile M2M devices (excluding high-throughput devices using video for security monitoring, for example). Data pricing for non-mobile devices (short-range wireless) is effectively zero. This is the point at which a scale-based strategy needs a value-driven complement.

One conclusion is that many network operators will become active in the platform-services and IoT applications segments over the coming years as they seek new sources of value and the revenue streams necessary to offset the diluted contribution from connectivity services.

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Strategy and business model innovation in M2M, IoT and IoM markets.

I have recently been consulting on the topic of IoT Platform strategy with a particular focus on the recently issued oneM2MTM standard. As part of this work, I researched the activities of different IoT alliances and industry groups because there is a lot of industry discussion about competing standards.

In discussions with company executives, a recurring theme is that nobody wants to take a bet on any single ‘standards’ approach. As a result, many companies choose to hedge their bets and participate in multiple initiatives. Having examined several of the leading initiatives from different dimensions, it’s debatable whether companies are getting a strategic, product-development return on their participation (setting aside brand-building and personal networking benefits).

There are many different ways to look at each of initiatives. For this post, let’s begin by concentrating on their mission and primary objectives. The following list paraphrases information from the different initiative websites:

From these statements, it should be clear that some of these alliances are not in the standards business at all.

All of these initiatives are striving for inter-operability with a domain focus. That is to say, they may focus on inter-operability within a portion of the technology stack (e.g. networking, data exchange etc.) or a class of IoT applications, such as the connected home (see one of my older articles [1] on ‘Place as an IoT strategy’).

Setting aside the technical merits of the different alliances, one informative way to compare them is in terms of the life-cycle to commercial standards. It is one thing to have a ‘standard’ but what is the alignment of eco-system, implementation and commercialisation factors necessary to create a mass market?

The following view of the different initiatives maps out a simplified ‘go-to-market’ process. It begins with requirements and the specifications that lead to a standard which can then be tested and certified before eventually being brought to commercial fruition via market-development and commercial-incubation activities. The illustration also maps the different initiatives along a basic applications stack formed of four components: networking; connectivity management; M2M/IoT application enablers (i.e. horizontal platforms); and, IoT applications.

Source: More With Mobile – click to enlarge

This depiction shows that some alliances (left-hand side of graphic) focus on the early-stage process of specifying IoT-application enablement requirements. The IIC, for example, began by developing a set of requirements which have led to a reference architecture while also launching test beds for its initial use cases.

Others alliances (right-hand side of graphic) are building off existing standards, such as HTTPS, JSON, REST, 802.15.2 and LoRAWAN, and prioritizing evangelization and market-development activities. The European Union supported initiative, FiWARE, stands out because it plans to seed the market via a EUR80m commercial incubation fund targeted at start-ups and small businesses.

Within this context, the issue for companies is not so much a matter of picking the ‘winning’ standard as much leveraging the largest interoperability footprint. The Korea Electronics Technology Institute [2], for example, recently demonstrated a oneM2M platform that allowed Alljoyn, Google Nest (Thread Group), Philips Hue and Jawbone platforms to communication with one another. This is a milestone accomplishment from a country at the forefront of mobile innovation and services.

It puts a new complexion on the kind of interoperability that will underpin affordable solutions (via economies of scale) and innovation (by exposing new application and revenue-generating opportunities from cross-silo application and data sharing).

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2013 as a whole was another year of strong corporate activity in the M2M market. A total of 147 events easily surpassed the 115 events that were recorded in 2012.

These events include: announcement of an industry changing technology breakthrough; market entry/expansion initiatives; strategic partnering; investment-related acquisitions or divestitures; distribution agreements along the value chain; product innovation and outsourcing of key service delivery capabilities.

While 2013 saw many more companies taking to the press wires to publicize their sales wins, these are not recorded here as corporate initiatives. If anything, sales wins are the consequence of one or more corporate strategy commitments made in prior years.

An important development that occurred over the course of 2013 was a shift in sentiment to promote IoT in preference to M2M. This began with a raft of announcements at the Consumer Electronics Show (CES) in January 2013. Momentum continued to build around the IoT theme due to significant publicity drives and business commitments by large organizations such as ARM, Bosch, Cisco, GE and Intel.

From a value-chain perspective, corporate initiatives remained strong amongst product/technology vendors, mobile operators and enabling-platform service providers. As anticipated in my 2012 review, there was a growth in activity involving users of M2M and IoT solutions; users in this case applies to companies that are offering connected-devices and –services to consumer and enterprise customers.

The distribution of 271 companies and organizations involved in the 147 corporate events of 2013 are mapped along the value-chain below.

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There were 90 instances of mobile operators being involved in corporate initiatives; of these 90 instances, 10 involved Telefónica, 8 involved Deutsche Telekom and Verizon Wireless took third rank with 7 appearances.

Outside the strict boundary of the M2M service delivery value chain, there were 4 instances of investors getting involved in the market.

Companies using M2M/IoT – referred to as ‘Users’ in the value chain – accounted for 30 corporate initiatives as illustrated below. These initiatives took the form of a strategic collaboration with other organizations along the value chain e.g. ‘MNO + User’ or ‘Vendor + User’ etc.

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By far the most frequent approach involved some form of collaboration with an MNO i.e. an ‘MNO + User’ business arrangement; specifically, there were 15 cases where Users of M2M technologies partnered with MNOs to create a connected device or service.

Taking Vodafone as an example, it accounted for 3 of these 15 cases. These initiatives included Towers Watson (development of a usage based telematics proposition), Mahindra (integration of M2M services in Mahindra’s e2o electric vehicle), Globe Tracker International (collaboration to integrate Vodafone’s global SIM services in GTI’s smart autonomous asset solution).

Across all ‘MNO + User’ initiatives, 9 out of 15 were in the transportation (enterprise and consumer vehicles) segment. This is not surprising in light of the many connected car campaigns that have featured throughout 2013.

These examples reveal an interesting development for the future. Specifically, some companies are acting on the strategic potential that M2M has to offer and taking primary responsibility for creating new product and service concepts. In the past, this type of activity would have been outsourced to a systems integrator or a capable MNO partner, for example.

Perhaps the boldest moves are those where ‘User’ organizations took principal responsibility for new M2M concepts. The two examples if this in 2013 were:

• The RAC (UK-based roadside assistance, repair and recovery services) which launched ‘RAC Advance’. In addition to providing accurate location information, this service uses diagnostic software tools to try and identify vehicle faults so that the RAC is able to dispatch patrols pre-armed with the right repair solution or part.
• Tesco Bank (the retail financial services arm of the UK retailer) launched Box Insurance which uses remote monitoring techniques to deliver affordable insurance offerings to drivers in the 17-25 age range.

As the M2M market has matured it is quite possible that 2014 will see fewer corporate initiatives and more in the way of sales announcements. Activity in the IoT segment is certain to have a higher profile because it is being backed by several large organizations. Beyond the marketing hype, it will be important for companies to understand the differences between M2M and IoT and to plan their product development road maps accordingly.

It is also likely that there will be more development connected with the ‘User’ segment of the value chain not only because corporations are now beginning to believe in the benefits of embedding connectivity but also because of the proliferation of companies focusing on consumer connected-devices.

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Over the first half of 2013, there has been strong evidence that companies in the M2M market are continuing to implement a range of business strategies to capture new M2M service and revenue opportunities.

Specifically:

• the number of corporate initiatives is more than double that for the corresponding period in 2012
• the market is no longer entirely driven by supply-side companies; several enterprises have strategically embraced M2M connectivity and have either partnered with mobile network operators or they are taking the lead role in developing new services

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The timing of many announcements coincided with key industry events – the U.S. Consumer Electronics Show (for consumer oriented applications) in January, Mobile World Congress in February and the CTIA’s main industry gathering in May.

As is typical for industry events, some caution is warranted in terms of marketing running ahead of product development.

Mobile network operators continued to be central to many of the initiatives. A simplified value-chain assessment, as shown below, reveals many instances of partnering across different segments of the value-chain. For example, 17% of initiatives involved mobile operators working more closely with M2M platform service providers and a further 13% with wireless module or technology vendors.

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Other similar initiatives demonstrate that companies are becoming more confident about embracing connectivity as part of their business strategy to innovate and exploit new markets. These developments also indicate that some mobile operators are creating M2M offerings that encompass service elements for intermediate steps in the value-chain. This strategy of getting close to the end customer is a notable departure from the past where operators typically employed simpler business models that focused on connectivity subscriptions.

Reinforcing the emergence of M2M users as entities that are driving the market are two UK examples. The first involves the RAC (a provider of emergency, road-side assistance) which has launched its ‘RAC Advance’ service. This employs remote monitoring techniques to deliver an improved breakdown service to its members. The second example involves Tesco which recently launched a usage-based insurance offering targeting young drivers.

At the vendor and mobile network operator end of the value-chain there continues to be a measurable degree of activity involving companies in the same segment of the value chain. Amongst mobile network operators, distinct operator alliances are emerging to offer M2M customers a coherent footprint for multi-national deployments. Cooperation amongst vendors involves combining technologies through partnerships or acquisition.

Across all value-chain segments, individual mobile operators have been the most active with Telefónica and Deutsche Telekom leading the pack followed by the three US operators, AT&T, Sprint and Verizon.

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An article by Ken Figueredo @ More With Mobile

2012 proved to be another strong year for the M2M/Connected Devices market with a significant rise in corporate business ventures. A total of 114 corporate events represents a nearly 100% increase in activity compared to 2011 according to our database tracking M2M corporate ventures globally.

The two business strategies showing the greatest amount of activity during 2012 were:

• The creation of commercial partnerships across different elements of the M2M value chain to supply integrated M2M offerings to the market,

• Market entry and expansion initiatives by companies targeting new and different M2M segments.

Several of the corporate initiatives had more than one objective. Partnering, for example, was used as a means of entering new market verticals or geographies. In several cases, however, it simultaneously provided a means for companies to acquire new technical capabilities. Of the total of 114 corporate events, 62% involved some element of partnering with other companies in the M2M eco-system. In 35% of all cases, market entry was a principal feature while 23% of the cases involved technology innovation. Access to markets through new distribution channels accounted for 11% of the cases while investment stakes and acquisitions featured in 9% of the cases.

Commercial partnering across the M2M value chain

Our analysis of commercial partnerships employs a simplified, five-element industry value chain. This progresses from: technology vendors, to MNOs (mobile network operators), to platform providers, to users of M2M solutions who then supply connected devices and services to enterprises and consumers. Across this value chain, the top two areas for corporate initiatives were as follows:

• Vertical-integration initiatives spanning the MNO and platform provider segments of the value chain. In many cases, MNOs partnered with M2M connectivity platform providers notably Ericsson and Jasper Wireless. Verizon was notable in employing an acquisitions strategy. Early in 2012 it announced that it had taken control over a remaining 50% stake in nPhase, a platform provider. Later in 2012, Verizon also acquired Hughes Telematics for over $600m.

• Initiatives concentrated within the MNO segment of the value chain – most of these initiatives involved the creation of dedicated business units to focus on M2M market opportunities. Several of these involved MNOs – e.g. Etisalat, Swisscom, Telkom Austria, Vodacom – following in the trail of market leaders that seized the initiative in 2010 and 2011. A second category of activity took the form of horizontal consolidation. These involved alliances amongst MNOs to extend their global footprints. Examples include Orange and Sprint as well as a group of seven operators comprising KPN, NTT DOCOMO, Rogers, SingTel, Telefónica Digital, Telstra and Vimpelcom.

Across the full set of corporate initiatives, the companies that ramped up their initiatives in 2012 compared to 2011 were Deutsche Telekom and Telefónica amongst the MNOs and Ericsson and Jasper Wireless among the platform providers.

Deutsche Telekom’s initiatives suggest that its International M2M Competence Centre and focus on ‘Digital Life’ opportunities are having an impact in terms of corporate venturing. For its part, Telefónica has been active on multiple fronts, building on its longstanding M2M expertise in O2, through its Group-level M2M efforts and through the prioritisation of M2M in the Telefónica Digital portfolio where it has set a revenue target of €0.5-0.8Bn to be achieved by 2015.

Ericsson and Jasper Wireless appear to be reaping the benefits of MNOs choosing to partner and in-source M2M platform expertise in areas such as scalable provisioning and remote management of M2M devices. While Jasper Wireless is building on MNO wins from prior years, Ericsson seems to be building on its acquisition of the Telenor Connexion platform business in 2011.

For the coming year, even more MNOs will commit business unit resources to M2M as this market continues to expand. Formalised strategies will become a necessity to put in place commercial models and strategies that are different from the traditional ‘handset’ business.

One challenge companies will have to address is the growing “consumerisation” of M2M because of home-automation, health care and remotely managed applications, for example. An indication of how the market is developing can be seen from the following historical comparison. The table below highlights those segments of the M2M value chain that exhibited the highest levels of corporate activity during 2011 and 2012. For example, platform providers were most active in 2011 whereas 2012 saw the greatest amount of activity in partnerships between MNOs and platform providers.

Table 1 Top Areas of M2M Corporate Activity in 2011 and 2012

The top two items for 2012 have been discussed above. The third item indicates that MNOs are becoming more involved with users of M2M technologies i.e. the companies that are integrating M2M capabilities in the products and services they offer to enterprise and consumer users. What this means is new business model innovation; specifically, MNOs are becoming more closely integrated, commercially and strategically, with non-mobile businesses as they seek to apply M2M solutions in delivering new services. In 2012, the two sectors where this was most apparent were consumer automotive and health care.

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