general description of telecom operators approach to m2m and ito

1. TELECOMS OPERATORS’
APPROACHES TO M2M
AND IOT
Operators should consider providing a platform of
capabilities to support the M2M/IoT opportunity
Celebrating 30 years as global specialist advisers on telecoms, media and technology (TMT)30years 30ans 30años
Tom Rebbeck
WHITE PAPER

2. WHITE PAPER
The opportunity for the Internet of Things (IoT) is extremely large with
device connections globally forecast to reach billions and touching most,
if not all, vertical markets. Telecoms operators should be at the heart of
this change as many of these services will rely on networks they provide.
To date though, operator strategies for IoT have tended to be, or at least
to appear, tactical and ad hoc. Telecoms operators need to develop a
sustainable long-term position with regard to the M2M market and the
broader IoT opportunity. We believe that telecoms operators can do this
by developing a flexible platform which will act as an enabler for IoT
opportunities by providing a ‘menu’ of services to customers.
Introduction
“
”
Operator strategies for
IoT tend to be tactical and
ad hoc. Telecoms operators
need to develop a long-term
sustainable position.

3. The idea of providing a platform is not
new and has been implemented both by
telecoms companies and others. Perhaps
the best example is that of Amazon,
illustrated in Figure 1. Amazon has a mix
of revenue streams selling its own
products to direct customers (e.g. selling
a book on Amazon.com), selling third-
party products (e.g. selling a product on
Amazon Marketplace), and even selling
full e-commerce solutions to others (e.g.
Marks & Spencer’s entire e-commerce
operation was outsourced to Amazon
until 2014). Unlike Google, all products
that Amazon creates must use the same
platform.1
Over time, Amazon has opened
up each of the elements of its platform to
be sold as a service, Amazon Web
Services (AWS) being the best example.
The same basic model can be applied to M2M and IoT, as we will see in the following section.
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1 Amazon and others have
successfully built platform models
FIGURE 1: SIMPLIFIED VIEW OF THE AMAZON PLATFORM/MODEL
[SOURCE: ANALYSYS MASON, 2015]
6.8 6.5 6.1 6.0
8.0 8.2 8.4 8.3 8.3 8.0
21.9
21.8
21.8
19.9
24.1 25.0 25.9
28.7
31.1 30.2
0
5
10
15
20
25
30
35
20% 25% 30% 35% 40%
Voiceminutes(bn) Smartphone Penetration
Maxis Digi DTAC - Thai TIM - Brazil
Direct customers
Own products
(e.g. books)
Amazon’s platform
(e.g. fulfilment, AWS, payments, customer care)
Third-party products
(e.g. Amazon Marketplace)
Other customers
(e.g. Marks & Spencer)
Amazon-controlled Third party-controlledKEY:
Direct customers
Own products
Operator’s platform
(connectivity)
Third-party products
Operator-controlled Third party-controlledKEY:
Other customers
Direct customers
Operator’s platform
Other customers
3
1
In part, this is why Amazon has been less
acquisitive than other companies as any acquisition
would involve migration to this platform.

4. Approach 2: Selling third-party products
In this approach, the operator partners
with a provider of IoT/M2M solutions
(solutions that typically comprise
hardware and software), reselling the
solution, often under its own brand to its
own customers. Example applications in
this category are fleet management or
ePOS systems. Illustrations include
Masternaut’s partnerships with
Telefonica, Swisscom and KPN. In each
case, the Masternaut application and
device is sold and supported by the telecoms
operator, which uses its own brand.
This position provides the operator with
more benefit than connectivity alone as it is
adding value and leveraging other strengths
(e.g. ability to bill and support, sales
channel), but is heavily reliant on partners
and the partnerships themselves can be
difficult to develop and to maintain.
Telecoms operators have typically
phased2
their involvement in M2M and IoT,
starting with connectivity before adding
more complete solutions.
Approach 1: Selling connectivity only
In the first approach, an operator puts
together a basic cellular connectivity
package of pricing and service. This
connectivity is sold to other companies
that use the operator’s SIM card in their
device and application. For the operator,
these SIMs generate some additional
revenue for a limited investment, but this
model puts the operator in a weak position
as differentiation on connectivity alone is
typically small. As a commodity product,
pressure on connectivity prices will also
be high.
2 Telecoms operators typically add
capabilities in phases
ne 032
237/41/57
Direct customers
Own products
(e.g. books)
Amazon’s platform
(e.g. fulfilment, AWS, payments, customer care)
Third-party products
(e.g. Amazon Marketplace)
Third-party products
(e.g. fleet tracking)
Other customers
(e.g. Marks & Spencer)
Amazon-controlled Third party-controlledKEY:
Direct customers
Own products
Operator’s platform
(connectivity)
Third-party products
Operator-controlled Third party-controlledKEY:
Other customers
Direct customers
Own products
Operator’s platform
(connectivity, support, billing)
Operator-controlled Third party-controlledKEY:
Other customers
FIGURE 3: TELECOMS OPERATORS SELLING THIRD-PARTY PRODUCTS
[SOURCE: ANALYSYS MASON, 2015]
2
The approaches outlined here are not necessarily
chronological. For example, AT&T offered hosting
(i.e. an element of Approach 4) before offering its
own services (Approach 3). However, operators
typically graduate from selling connectivity only to
more complex solutions.
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4
“
”
Selling third-party
products makes the
operator heavily reliant
on partners and these
partnerships can be
difficult to develop and
maintain.
“
”
Selling connectivity
only puts the operator
in a weak position.
FIGURE 2: TELECOMS OPERATORS SELLING CONNECTIVITY SERVICES ONLY
[SOURCE: ANALYSYS MASON, 2015]
ne 032
237/41/57
Own products
(e.g. books)
Amazon’s platform
(e.g. fulfilment, AWS, payments, customer care)
Third-party products
(e.g. Amazon Marketplace)
Third-party products
(e.g. fleet tracking)
(e.g. Marks & Spencer)
Amazon-controlled Third party-controlledKEY:
Direct customers
Own products
Operator’s platform
(connectivity)
Third-party products
Operator-controlled Third party-controlledKEY:
Other customers
Direct customers
Own products
Operator’s platform
(connectivity, support, billing)
Operator-controlled Third party-controlledKEY:
Other customers

5. Approach 3: Selling internal products
The third approach is for an operator to
sell its own solution in selected vertical
markets, either developed internally or
gained through acquisition and to control
the service end to end. Vodafone and
Verizon have followed this approach
through acquisition (of Cobra and Hughes
Telematics respectively) and a number of
operators have also developed small,
often bespoke, products internally.
In this model the operator wins a greater
share of revenues, which puts it in a
stronger position, for example to
determine the product roadmap.
However, there are many downsides to
this approach:
• The operator needs to pick winners;
that is the operator needs to invest in a
product and market segment where it
will be sufficiently strong against
competition.
• The product’s potential is likely to be
limited by the operator’s footprint. At a
later stage, the product could be sold
through partners in other territories,
but this is unlikely to be an early focus.
• The operator may not have the internal
expertise or vertical market knowledge
to develop a solution and, given the
number of vertical markets to
potentially address, acquisition is
unlikely to be a realistic option. Any
operator is likely to have to combine
selling internally developed solutions in
some vertical markets with selling
third-party products (Approach 2) and
simple connectivity (Approach 1)
in others.
• Finally, operators are not always a
welcoming environment for the
development of products, each of which
may generate only millions of dollars of
revenues (and not hundreds of millions
or billions like the core voice and
messaging products). Additionally,
operators typically like to see rapid
growth in revenues and often do not
have patience for services that may
take many quarters to be adopted, or
that may need many tweaks and
developments to meet the market
need. A service that does not see fast
growth is in danger of being withdrawn.
We believe that the key for operators is
not to simply follow one of these models
but to have a more flexible approach in
which the operator is opening up
capabilities to different partners, as
described below.
WHITE PAPER
FIGURE 4: TELECOMS OPERATORS SELLING INTERNAL PRODUCTS
[SOURCE: ANALYSYS MASON, 2015]
stomer care)
ird-party products
Amazon Marketplace)
ird-party products
e.g. fleet tracking)
g. Marks & Spencer)
y-controlled
ird-party products
y-controlled
Other customers
ng)
y-controlled
Other customers
Third-party products
(e.g. fleet tracking)
Own products
(e.g. vehicle tracking)
Direct customers
Operator’s platform
(connectivity, support, billing, hosting)
Operator-controlled Third party-controlledKEY:
Other customers
Direct customers
Operator’s platform
(connectivity, support, billing, hosting, application enablement, etc.)
Operator-controlled Third party-controlledKEY:
Other customers
Own products
(e.g. vehicle tracking)
Third-party products
(e.g. fleet tracking)
5
“
”
Selling internally
developed products
needs the operator to
pick winners.

6. Approach 4: Providing a broad menu of
M2M services
Rather than focusing all of its attention
on the end-user vertical markets, an
operator could concentrate on what
common elements it can provide for
multiple vertical markets. These could
include traditional operator strengths,
such as connectivity, but also reach into
different areas, such as hosting, support
and application enablement.
Approach 4 does not preclude approaches
2 or 3; the operator can provide complete
solutions to the most attractive targeted
vertical markets. Approach 4, providing a
menu of services, expands an operator’s
role where it does not want to provide the
complete solution.
We already see many examples of these
individual elements being sold as part of
an operator’s M2M deal, but not of
operators packaging together these items
as a menu of services that could be
provided to customers.
We list below examples of operators
providing more than connectivity:
• Deutsche Telekom, through T-Systems,
is providing a fleet management system
to MAN Trucks. Deutsche Telekom
provides the fleet management
application, as well as first-line
customer support, but the service is
sold and branded by MAN. Rather than
providing an end-to-end solution,
Deutsche Telekom is essentially
wholesaling its fleet management
solution. This approach gives Deutsche
Telekom access to a customer it could
not reach if it only targeted direct
customers.
• AT&T has an agreement with GE to
support the Industrial Internet. The
October 2013 agreement between the
two US companies covered connectivity
of multiple types (e.g. mobile, fixed and
satellite) and also included some
hosting. The end user of the GE
services may be unaware of AT&T’s role
but it gives AT&T access to a customer
it otherwise could not reach.
The benefits of this model are that the
operator:
• Does not face an either/or choice. It
can provide end-to-end solutions in
some verticals (Approach 3) and
enabling capabilities in others.
• Gains access to customers that are not
interested in an end-to-end solution
but want a white-label offering.
• Can build on its scale and strength. The
operator can focus on the aspects
where scale matters (e.g. hosting)
without getting into the detail of
specific niche vertical market solutions.
• Moves the focus away from vertical
market solutions to common elements.
This moves it to areas closer to an
operator’s traditional strengths.
The downsides of this model are that:
• Operators will need to think differently.
Historically, operators have been used
to providing end-to-end solutions, and
with M2M the trend is to also think that
end-to-end is the best model.
Operators have multiple elements that
could be included in a broader platform
Ideally, components of a platform should
be scalable and reusable.3
The following
elements could form part of an operator’s
broad ‘menu’ of IoT capabilities:
• Connectivity: an operator should
provide customers with connectivity,
even if this connectivity is not using its
own network. This will involve roaming
agreements for other countries, fixed
connectivity, satellite connectivity and
may even involve taking connectivity
from other wireless networks (e.g. from
a third party’s LPWA network).
• Billing and support: few other
organisations have the mechanisms to
bill and support millions of customers.
Telecoms operators do, and can provide
it as a service to others.
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FIGURE 5: TELECOMS OPERATORS PROVIDING A BROAD MENU OF M2M SERVICES
[SOURCE: ANALYSYS MASON, 2015]
ird-party products
e.g. fleet tracking)
ird-party products
y-controlled
Other customers
ng)
y-controlled
Other customers
Third-party products
(e.g. fleet tracking)
Own products
(e.g. vehicle tracking)
Direct customers
Operator’s platform
(connectivity, support, billing, hosting)
Operator-controlled Third party-controlledKEY:
Other customers
Direct customers
Operator’s platform
(connectivity, support, billing, hosting, application enablement, etc.)
Operator-controlled Third party-controlledKEY:
Other customers
Own products
(e.g. vehicle tracking)
Third-party products
(e.g. fleet tracking)
6
3
See http://www.gereports.com/
post/99494485070/everything-you-always-wanted-
to-know-about-predix for discussion about GE’s
definition of a platform for Predix.
“
”
To provide a broad
menu of M2M
services, operators
will need to think
differently.

7. • Hosting: for supporting internal
products, but also for IT services for
external clients, telecoms operators
typically have environments suitable for
hosting applications, including IoT/M2M
applications. The operator’s hosting
environment may be especially
important for applications that require
data to be stored locally (e.g. for legal
reasons), or where latency could be
an issue.
• Application enablement: many
operators are assessing application
enablement providers, some already
have deals (e.g. Elisa with ThingWorx,
Deutsche Telekom with Cumulocity) or
have developed platforms internally.
Essentially, this fits with the model of
strengthening the platform – using the
operator’s scale to provide a more
complete solution.
• Professional services: these are not
scalable and reusable, and so do not
formally qualify as a platform capability.
However, for those with professional
services, typically large operators with
a strong enterprise focus (e.g. AT&T,
Deutsche Telekom, Orange Business
Services), systems integration and even
managed services could be included as
part of the list of capabilities to be
offered to potential M2M clients.
7
WHITE PAPER
We should not underestimate the
challenges facing IoT and M2M teams
within telecoms operators. On the one
hand, these teams are confronted by the
enormous expectations surrounding IoT.
On the other hand, the near-term impact
on the operators’ business is limited as
most provide M2M connectivity for just a
few hundred thousand M2M-enabled
devices, and these are often in low profile
vertical markets (e.g. fleet management)
rather than consumer IoT gadgets (e.g.
smart watches). That said, growth rates
are high (typically 20–30% year on year)
and are expected to keep growing.
To position themselves for long-term
growth, telecoms operators need to
develop a more mature, sustainable
positioning. We believe this can be
achieved by bringing together existing
capabilities (e.g. cellular connectivity,
sales, support, hosting), adding some
new ones (e.g. LPWA, application
enablement platforms) and providing a
horizontal menu of capabilities for their
own and partner solutions.
3 Telecoms operators already have the
capabilities to play a major role in IoT

8. Through our client projects and published
research, Analysys Mason has
considerable experience of M2M and IoT.
Our first M2M client project was over a
decade ago and we have been publishing
on M2M since mid-2011. In the past three
years, we have done over 30 M2M related
projects, including market sizing projects,
strategic advisory work and white papers.
Recent project performed by Analysys
Mason include:
• A series of workshops for an operator
group to develop its strategy across a
number of areas (e.g. product,
marketing, partnerships)
• A discussion paper to help a client
decide on its approach to low-power,
wide area (LPWA) networks
• An assessment of different vertical
markets, including market sizing, to
help our client select which to enter
and with which partners
If you would like to discuss further how
Analysys Mason can help you with M2M
and IoT please contact Tom Rebbeck on
tom.rebbeck@analysysmason.com
How Analysys Mason can help with
your M2M and IoT strategy
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8
About the author
Tom Rebbeck, Research
Director, leads Analysys Mason’s
client work on M2M and IoT.
He has worked continuously on
M2M and IoT projects since 2012
with clients including telecoms
operators, equipment vendors,
industry bodies and regulators.
TOM REBBECK
Research Director

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