Global expenditure on the Internet of Things (IoT) is set to grow 17 percent year on year in 2017, and to be near $1.4 trillion by 2021 according to market intelligence company IDC. However, IoT connectivity revenue will only reach $28 billion by 2025, representing just 3 percent of worldwide mobile telecoms revenue, according to telecoms consulting and research firm Analysys Mason.
So then where is the disconnect? “The discussion about IoT has shifted away from the number of devices connected,” said Carrie MacGillivray, VP for Internet of Things and Mobility, IDC.
“The true value of IoT is being realized when the software and services come together to enable the capture, interpretation, and action on data produced by IoT endpoints.”
For the telecoms industry to truly become big IoT players, they need to get more revenue from it, and more than connectivity alone can generate.
On a positive note, in its five-year forecast, IDC states smart home technologies are forecast to experience robust growth (19.8 percent CAGR), while Analysys Mason predicts that revenue from application development and enablement will represent $123 billion, and hardware will account for $50 billion.
Nevertheless, to capture a larger share of hardware or application revenue, Michele Mackenzie, Analyst, and Tom Rebbeck, Research Director, Analysys Mason, suggest that mobile operators bear in mind the following:
- Create an independent entity – “performance metrics should be commensurate with a new growth area, and it should be granted autonomy for investment decisions”.
- Build platforms and enablers to operate in new areas – “Some operators have separate R&D and ICT divisions that target specific industry sectors”.
- Foster partnerships – “Most operators must build partnerships to enter new areas of the value chain, either in capabilities such as application enablement-platforms, or by bringing end-to-end solutions to market.”
- Bold investment and acquisition – “Mobile operators have been relatively cautious in terms of acquisition in the IoT space.”
A recent TM Forum report – The roadmap of options: Monetizing and managing IoE services and its accompanying webinar, surveyed 40 communications service providers about how they’re approaching IoE (Internet of Everything — the Forum includes people and processes too), what the biggest challenges are and to share examples of success.
Mackenzie and Rebbeck continue:
“For the IoT to grow to a sizable share of revenue and be considered an important driver for growth, operators must capture some of the $123 billion application revenue or $50 billion hardware revenue that we forecast for 2025. Addressing these areas of the value chain will require significant investment and carries a higher risk of failure.
“If operators want to remain visible in IoT and develop strong revenue streams, they will need to increase their appetite for risk and invest accordingly.”
While telcos’ current focus is on mobile-connectivity services, the IoT economic opportunity provides telcos with a significant new way to grow when harnessed effectively.
For more on the topic, register for our webinar to find out how platforms combined with IoE will be essential to 5G