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The path to profitable growth through the Internet of Things

Finding the right opportunities for communications services providers.

Overview

The Internet of Things (IoT) will represent a huge paradigm shift for a lot of industries, including communications. As the IoT ecosystem forms and incorporates a diverse set of companies, the time is ripe for Communications Service Providers (CSPs) to determine their strategy and business model. For CSPs, the IoT opportunity is an extension from their core business of "connecting people" to "connected everything."

Making Internet of Things Work for Businesses

Background

Many CSPs have taken a lead in the IoT area, primarily through customer-facing M2M initiatives. Smart meters, home security systems, logistics and connected cars are some of the early use cases enabled by M2M connectivity using cellular networks. The early days of machine-to-machine have already revealed some key CSP themes which will become amplified in the IoT space:

  • Security

  • Reliability

  • Interoperability

  • Ubiquity of the connectivity (including convergence)

  • Billing and provisioning

  • Distribution

  • (Big) data analytics

CSPs should explore how each of these themes can be enhanced, reinforced and optimized as a differentiating element in the position taking into the value chain. The lessons learned from the battle around the device operating systems.

In the mobility era – moving from operator defined/influenced specifications and propriety kiosk like services to completely device dominated operating systems and service platforms (Android and iOS) – should stimulate CSPs to carefully asses their strategies. CSPs that have invested in integrated M2M platforms with a long-term view are well-positioned to succeed in this fast evolving area.

Recommendations

Accenture strongly believes that IoT will have sweeping impacts on the way the world works and lives. Bridging the physical and the digital worlds will create end-to-end autonomous systems capable of reducing waste, optimizing resources, changing the nature of work, creating new business models for enterprises globally and, ultimately, delivering huge value to businesses and consumers alike. This complex ecosystem can be successfully tackled by CSPs. To do so, following are the prerequisites that CSPs need to have in place:

  • A coherent strategy with a clear business case, market and sector identification

  • Partnerships in the ecosystem, including possible acquisitions to fill gaps in strategy execution

  • Clarity about the operating model: consider creating a subsidiary or separate line of business to avoid the fixed overhead of the enterprise

  • A plan to lower cost of IoT-specific networks for affordability

  • Technology expertise and delivery capability

  • An entrepreneurial culture that is agile and enables teams to try more and fail fast

Our latest point of view, "The Path to Profitable Growth through the Internet of Things: Finding the Right Opportunities for Communications Services Providers" discusses how the IoT is a long-term, high growth but slow burn business. It may test most CSPs management capacity and CAPEX appetite to invest, particularly as the traditional CSP "cash-cows" are being slaughtered. But CSPs should not ignore the IoT opportunity. It is a profitable path to future growth at Internet scale, which leads to higher market valuations in the short term and new cash cows into the future.