Partner ecosystems are key to untangling CSPs’ IoT trilemma update from May 2021

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Angus Ward, CEO, Beyond by BearingPoint, looks at how to tackle the challenges faced by CSPs trying to get into IoT.

As the number of connected things continues to proliferate, CSPs and enterprises alike are focused on generating value from a wealth of new IoT enabled use cases. Coupled with 5G’s enhanced speeds and low latency communications, the two technologies will see the realization of critical new applications in the realms of all verticals including manufacturing, robotics, utilities, and automotive. As infrastructure becomes increasingly distributed, pushed out to the edge of the network, IoT has the potential to propel businesses into fully autonomous futures.

However, despite all of this promise, CSPs eager to push ahead with their IoT strategies face what appears to be an almost inescapable reality. CSPs’ IoT leaders lack the knowledge, resources, and avenues to engage with the IoT opportunity. Ultimately, it’s a challenge of three parts, an IoT trilemma.

A need to go beyond connectivity

The first challenge for CSPs in navigating this trilemma is representative of their need to be recognized for more than just connectivity, particularly if CSPs are to generate a share of the new revenue streams that will be generated from IoT and 5G. According to the GSMA, the global IoT market represents a $1.1 trillion revenue opportunity, while connectivity pales in comparison at a mere 4% of that. Most of the value within that significant IoT opportunity has been attributed to applications, solutions and data. It’s critical, therefore, that CSPs shake the notion that they are simply the dumb pipes, providing necessary network capacity and bandwidth.

CSPs do understand this need to grow beyond connectivity, but at the same time, lack the relevant knowledge, unsure of the use cases, and how and who to sell into. As with many of the use cases that a combination of IoT, 5G and edge environments promise, it’s all about the data. Take drone management, smart factory robotics or even IoT in agriculture, the data generated from the IoT sensors is where the real value lies. From that data, enterprises can understand more about the end users and build their solutions around their dynamic requirements.

Enterprises are themselves still learning how to approach this, and in many cases, they will look to CSPs to help them define their “killer” IoT application. However, there will never be one “killer” use case, and each enterprise within each sector will determine their own IoT value propositions. CSPs can surmount the challenge and grow beyond connectivity by partnering with these enterprises on their IoT and 5G enabled projects, facilitating continuous service experimentation within a broader ecosystem. Equally, CSPs can act as the lead partner to trial, test and rollout solutions that meet the unique needs of their enterprise customers.

CSPs lack the investment and avenues to grow with the right customers

The second challenge CSPs are faced with stems from a lack of organizational buy in. CSPs’ IoT leaders are stuck in a vicious cycle of under investment based on current performance. IoT revenues are low, in fact, just 0.5% of CSP revenue is attributed to IoT according to Analysys Mason. As a result, CSPs’ IoT leaders struggle to demonstrate ROI, thus hampering investment in R&D for the development of new IoT solutions.

The third challenge only exacerbates the previous two, and points to CSPs lacking the necessary customer relationships. The issue here is that the customer relationships with large enterprises and SMEs sit with the individuals leading connectivity, demonstrating the struggle to be recognized for more than just connectivity continues.

The real problem with accessing the right customers is that IoT has become strategic, it’s a C-level conversation. Along with its capabilities to maximize operational capacity, increase revenues, reduce costs, and improve the customer experience, IoT solutions provide rich data on end users for more informed strategic decision making. Unfortunately, many CSPs don’t have the relationships with the C-level IT decision makers, nor the vertical industry understanding to discuss and demonstrate the value of IoT in informing business strategy. The harsh reality is that CSPs are stuck. It’s not that they lack the knowledge or the capabilities, but the avenues to reach and engage the right stakeholders. What this brings CSPs closer to, is the need to engage with partner ecosystems.

The power of the partner ecosystem

Partner ecosystems have received some attention recently due to early 5G partnerships. But CSPs aren’t giving it enough attention, and due to the trilemma, many are still focused on selling connectivity. Building a solution within an ecosystem means the CSP doesn’t need to be the expert in a particular industry or vertical. Rather the CSP must model itself as the ecosystem enabler, a master of orchestration that combines all the pieces to derive the most value from the IoT solution for each partner involved.

CSPs can use different ecosystem plays to maximize their value in IoT. Collaboration and co-creation of joint IoT solutions within the ecosystem can help CSPs close innovation, technology and vertical knowledge gaps, lower upfront costs, accelerate time to market and expand customer reach. It presents an opportunity for IoT teams, however small, to grow with success, supported by the ecosystem that offers benefits in filling skills gaps where large amounts of investment would otherwise need to be made. Each challenge of the trilemma can be undone by clever partnerships with partners that have complete solutions and skin in the game.

Ultimately, enterprise and SMB customers want to buy complete solutions to their problems from a single source. They are looking for solutions that are easy to try, buy and consume. In order to succeed, CSPs and Service Providers must build marketplaces within these partner ecosystems that connect telco assets, customer needs and partner capabilities.

The next 12-18 months will be a defining period for CSPs. Enterprise customers are tuned in to the benefits that IoT coupled with the enhanced network capabilities of 5G, can bring. However, the IoT trilemma leaves CSPs at a crossroads, where they must make a crucial decision on whether they continue to go it alone or engage with the ecosystem. With IoT’s maturity will come an explosion of use cases and CSPs will need to rely on ecosystems for collaboration and shared expertise. Co-creation of joint IoT solutions through ecosystems of partners will be fundamental in CSPs cementing their position in the IoT value proposition.

Angus Ward

Angus is the CEO of BearingPoint’s digital platform solutions arm, Beyond by BearingPoint, appointed in September 2017. Angus brings 30 years of consulting and solutions experience to his role, supporting organisations across multiple industries in shaping strategies and adopting platform-based business and operating models with differentiating partner ecosystems.