Telcos must raise game or lose out on $1.1 trillion IoT prize – GSMA

The GSMA forecasts the IoT segment will be worth $1.1 trillion in revenue by 2025, though connectivity could be worth as little as 5% of the spoils.

Despite statistics such as the estimation of 25 billion IoT connections providing some sort of comfort to the telcos, the GSMA warns these organizations much diversify if they want to be rewarded for the vast investments which are being made into delivering connectivity for the IoT revolution. In the early days of the IoT euphoria, market value will shift from connectivity to platforms, applications and services, as enterprise organizations search for a viable business model. Telcos will have to start prepping for this transition, as many would question whether they are more than a utility as it stands.

“As the number of connected consumer devices and industrial machines grow rapidly, the IoT ecosystem will evolve to become a trillion-dollar market over the course of the next decade,” said Sylwia Kechiche, Principal Analyst for IoT at the GSMA. “But the IoT revenue opportunity is shifting away from simply connecting devices to addressing specific sectors with tailored solutions, and successful ecosystem players will need to adapt their business models in line with these market trends.”

Platforms, applications and services growth within the emerging IoT segment will surpass that of connectivity, capturing 68% of the total by 2025. With 5% being allocated to connectivity, IoT professional services, such as system integration, managed services and consulting, will take the remaining 27%.

The concern which we have is the idea that the telcos should be advising other companies on how to capitalise on innovation when they are yet to demonstrate they are capable of doing it themselves.

BT is one of the companies which has been gearing up to become more of an advisory business with its Global Services business, but that division has been nothing but a headache over the last 12 months, despite making some progress prior to the scandals. That said, there are few examples in recent years of the telcos taking charge of a burgeoning industry, and continue to lead the way in terms of innovation. The smart home is turning into a missed opportunity, as was the cord-cutter revolution, and autonomous vehicles is looking like another.

Stereotypes are there for a reason, and it is generally because there is an element of truth. The stereotypical telco is defined by legacy business models, cumbersome, delivers poor customer experience and doesn’t like to take risk. For the telcos to have any credibility in adding value services to the IoT ecosystem, there needs to be some leadership and innovation in the segment. A telco which sounds anything like the stereotypical description above will fail in the IoT mission.

This is not to say that it is an impossible dream, but there will need to be notable changes not only in the operational model, but also the culture of the telcos. To compete with the likes of Capgemini or Accenture in the professional services arena, or AWS and Microsoft in the platforms game, the right people will need to be attracted to the organization. When looking at job prospects, young, talented university graduates aren’t likely to come out with ‘my dream job is to work at Vodafone’.