Many hyped technologies and business concepts suffer from overblown expectations. IoT is not an exception. The last years have seen a maturing in the estimated overall size and growth rate of IoT market revenues. Specifically, forecasts of IoT connections, i.e. number of connected IoT devices, have been dampened as business challenges in digitalization continue to overwhelm business leaders and engineers. Of course, it can seem dramatic when forecasted numbers of connected devices shrink from tens of billions to single billions.
However, when looking at current growth rates it is clear that the market growth is robust. Tele2 IoT and other communication service providers deliver solid double-digit percentage connections growth, outpacing traditional mobile communication services, e.g. Tele2 IoT grew 56% in terms of IoT connections in 2017. And, since only 14% of enterprises in Western Europe have an operational IoT solution, according to Analysys Mason, a large opportunity remains!
The overall IoT market fragmentation is proof of this attractive opportunity. Companies with core capabilities in different parts of the IoT value chain, such as hardware, system integration, platforms or application development are increasing their potential share of value creation by addition functionalities and services from other parts of the value chain.
From the perspective of IoT connectivity provisioning, we see many different providers. Next to the traditional Communication Service Providers/Mobile Network Operators (MNOs), we see dedicated IoT Mobile Virtual Network Operators (MVNOs) who aggregate and manage connectivity from multiple MNOs, often toward a specific industry vertical. We also see IT outsourcers and integrators who take on an MVNO role to complement their IT service offering with connectivity. Finally, we see suppliers of Operational Technology (OT) or IT complementing their technology offerings with reselling IoT connectivity sourced from MNOs. In spite of selected continued consolidation in the market, e.g. Sierra Wireless buying Numerex, IoT connectivity is still a fragmented market where choice is plenty and prices are falling.
Beyond addressing the overall challenges of understanding how to create business value through IoT, how to handle security, how to manage data privacy and how to make the best technology choices, companies will scrutinize their connectivity needs, navigate the IoT connectivity suppliers and make more nuanced decisions that consider global coverage, intelligent-switching capabilities, service delivery, pricing, security, and IoT expertise. This can be a bewildering task for most companies. As IoT connectivity requirements increase in complexity, and as options continue to multiply, companies will need providers who can advise them about the best solutions and potential partnerships. Luckily, help is at hand. Beside general and specialized consultancies, such as system integrators and strategic advisors, research companies provide extensive benchmarking support.
Gartner publishes one such instrument: The “Magic Quadrant for Managed M2M Services, Worldwide”. For many companies launching IoT projects or IoT connectivity procurement this is a valuable tool when analyzing supplier alternatives. The Magic Quadrant compares supplier capabilities in two dimensions; Completeness of vision – market understanding, marketing strategy, sales strategy, product strategy, business model, vertical/industry strategy, innovation and geographic strategy, and Ability to execute – product/service offering, overall viability, sales execution/pricing, market responsiveness/record, marketing execution, customer experience and operations.
Tele2 IoT was proud to be included in the Magic Quadrant last year, and we are even prouder to defend our position this year! The competition has increased and the qualification criteria has been narrowed – both reflecting that customer expectations and requirements on service providers have grown.