Three keys to transforming IoT into new revenue

Telecoms.com periodically invites expert third-party contributors to submit analysis on a key topic affecting the telco industry. In this article Richard Ullenius, VP of International Managed Services at CSG International looks at ways telecoms can convert the hype around IoT/M2M into tangible business.

If there’s one thing that remains constant in the telecommunications industry, it’s the lofty predictions that come with the emergence of new digital services. Perhaps no other offerings are stirring more intrigue lately than those borne from the Internet of Things, or Machine to Machine (M2M), services.

From connected heart sensors, to washing machines, to Internet-connected devices in roads and buildings—the capabilities and potential uses for IoT are astounding.  And if the industry predictions are even remotely realized, traditional telecom service providers have much to gain from this emerging trend.

Cisco predicts that by 2020, the number of Internet-connected things—from household appliances and security systems to B2B technologies—will reach a staggering 50 billion, with $19 trillion in profits and cost savings coming from IoT over the next decade.

While growth from IoT is well documented, what is still not clear is what is needed to enable service providers to support this burgeoning market quickly and efficiently.

From our vantage point, as consumption of these services continues to grow, traditional telecom service providers stand to gain much of the revenue share in the market—provided they can seize three main opportunities that stem from IoT:

#1: Find new ways to leverage their existing infrastructure

The truth is, many providers have the IT infrastructure, network and systems they need to support the rapidly evolving business models coming from IoT—all they really need to do is optimize them.

That’s easier said than done when service providers have launched the LTE networks that will carry M2M data traffic are feeling the impact of managing the growing volume of digital transactions alongside the 2G/3G networks that handle voice and messaging.  These two networks and service sets must co-exist, creating a very complex environment that requires careful co-management of both platforms in new, more efficient ways.

While looking for innovative ways to capitalize on network investments, cut costs and create efficiencies in service delivery, many service providers are now turning to managed service providers who have expertise in both technology and process.

On one hand, CIOs and their teams must continue to optimize and maintain legacy systems that are responsible for the very fundamentals of the business: from billing to order management, mediation, network management and beyond. On the other they must innovate to rapidly adapt to develop new services that can generate new revenue streams.

How can providers juggle these two pressing needs? The reality is that amidst stagnant budgets and fewer IT resources internally, they simply can’t.

M2M is no different—and this is where managed services comes into play. By quickly helping service providers find new ways to leverage the Business Support Systems already in place, trusted partners with the expertise and business acumen to run these systems can help providers more readily enable new M2M services.

#2. Become a meaningful part of the M2M value chain

While the initial wave of M2M services clearly can provide a portfolio of differentiated offerings to consumers, the real value is in the data itself. As the industry matures, the simple transmission of data between platform and device will give way to a new wave of value: identifying trends and information in the data that in and of itself generates revenue.

Jupiter Research recently reported that the M2M sector will generate service revenues of over $40 billion globally by 2019, nearly doubling the size of today’s market. A healthy portion of that revenue will come from the data generated by these billions of connected things.

A great example of this is how the utility industry is using connected devices to help consumers understand usage patterns and lower their utility bills (and how utility companies are in turn using that information to effectively manage the Smart Grid.) Another great example is the auto insurance industry’s use of connected devices in cars to help consumers identify driver safety issues or warn of potential road hazards. This wealth of information can then help auto insurance companies better gauge driver risk while at the same time helping consumers minimize them.

For these businesses, as for service providers, profiting from M2M requires a transformation of the organization, its technologies and processes.   To gain the scale and flexibility required to handle new digital services, reduce operating costs and improve operational efficiency, managed services partners are becoming an invaluable asset to manage the growing applications of M2M.

#3. Create robust partnerships that unleash the power—and innovation—of M2M

Just as revenue splits from data roaming agreements and content partnerships required a new way of sharing profits, so too will IoT.

By partnering with device manufacturers, for example, telecom service providers are providing optimized and value-added services for customers. They can create more profitable packages that bundle Wi-Fi services alongside connected devices to provide a consumer with optimized connectivity and—and an optimized experience.

Companies like Verizon Wireless, for example, are working with specialist service providers in M2M development to exploit opportunity in a number of verticals, including healthcare, security, transportation, vending and marketing. Verizon’s selected partners in this new endeavor gain access to Verizon’s 4G LTE network test bed, where, in lab conditions, they can replicate real-life cell coverage.

Orange has been involved in the M2M business through their partner Mobistar since 2002. The carrier’s list of M2M solutions is extensive, from vehicle tracking and online monitoring and reporting to asset management, wireless closed-circuit TV safety cameras, satellite navigation systems, and much more.  Orange has developed numerous innovative M2M solutions, including beer or beverage monitoring where the M2M solution monitors temperatures, how often pipes are cleaned, how many pints have been poured and how long it takes to pour them.

Successful M2M players achieve maximum agility (and profitability) by enabling managed services partners to adapt their OSS/BSS from highly customized, proprietary platforms to ‘plug and play’ networks and platforms that other parties can use when working with them to provide new services and products.

It’s a new world, but fortunately existing systems still have a role to play

It’s a given that telecom service providers will manage the data, devices and services associated with M2M, but doing so through a managed services model can mean the difference between merely providing connectivity for these new services and delivering enhanced value and a differentiated customer experience around them.

The bottom line is this: As the consumption of digital services continues to grow, most providers will continue to look for ways to understand where their current infrastructure and capabilities can serve the digital economy best. Providers’ networks, service creation and provisioning, customer care, billing, service management and other Business Support Systems can serve as the framework for supporting future growth and profitability.

The good news is that providers need not go down the digital road alone. There are a whole host of trusted partners and experts who can bring their knowledge and skills along for the ride.

Richard joined CSG International in 2008 and is responsible for building and managing CSG’s managed services business globally. Prior to CSG, he held leadership roles at British Telecom and a number of innovation startups. Richard has significant sales, business development, partnership, managed services / outsourcing, and strategy expertise in the telecommunications and software space. He is a frequent speaker at various conferences and events and has been a leading spokesperson as one of the early entrepreneurs in the mobile segment.