As organisations in the region cope with and strive to rebound from the not-so-great economic conditions, needless to say, innovation is the best recourse. And given the increasing trends to stay connected in various means all the while, Internet of Things and Machine to Machine communications top the innovation agenda for service providers. In 2016, IDC predicted that most organisations in the Middle East would begin to focus on IoT as a means of reducing costs and improving operational efficiencies. There also was a rising interest in the rollout of dedicated IoT networks. Looking ahead, it’s being expected that operators will focus on enhancing IoT platforms to shorten the time to market of new solutions and offer a quicker route to market.
The key challenges to IoT growth in the Middle East and Africa centre around data privacy and security concerns and the complex nature of IoT ecosystem, with its numerous standards and alliances, according to IDC. Connectivity is an important part of the entire IoT/M2M value chain. For operators to remain relevant and be a part of the ecosystem, they must invest in platforms that allow them faster time-to-market and differential charging mechanisms on M2M/IoT services. However, this is easier said than done. The first step is to restructure the operator’s business model to create a separate business unit to handle M2M/IoT business. Operators must also change the DNA of their sales force to discuss solutions around M2M/IoT with their enterprise/business customer base.
Pedro Aleixo, group enterprise director, Zain group believes that from a pure connectivity perspective, taking IoT offers to the market is quite similar to launching any other mobile value proposition; it is a simple tariff and doesn’t pose any challenge to mobile operators. However, he says: “Challenges arise when operators ladder up the value chain, and aim at targeting end-to-end solutions, being able to design, implement and support new business models for their customers”.
To be successful in the broader IoT space, Aleixo recommends that operators need to go beyond connectivity and develop consultancy and integration skills. “Consultancy skills to understand the customers’ business and value chain and to be able to design, not only cost optimisation solutions to run their existing business, but above all, systems to support radically different business models for their customers. Integration skills to support the new business models, developing capabilities in integrating sensors, location devices, automation equipment, software platforms and more complex after sales models.”
Sherry Zameer, SVP, IoT solutions for CISMEA region at Gemalto recommends that mobile network operators take a 360-degree approach by providing the essential building blocks that are required to create a robust IoT ecosystem. He says: “By bolstering IoT with the needed security measures, we help operators to focus on three main pillars: trusted connectivity, solid security and valuable monetisation platforms, all prerequisites of a productive and rewarding IoT roadmap.”
Operators will have to diversify their connectivity services and extend subscriptions from mobile to ‘things’. Solid security must also be implemented by protecting the device, the cloud infrastructure or network and the lifecycle management of the device, using embedded secure software solutions, data encryption, cloud based licensing, identity and access management and tokenisation management. Last but not the least, mobile operators must put in place a proper monetisation platform and be suitably agile to deploy new applications quickly to guarantee better ROI.
Alexo says that once an operator decides to ladder up and target higher value chain tiers it needs to acquire new competences in product development and delivery, marketing, sales and operations, and, on top, a new approach to partnerships – operators can’t do it all by themselves, they benefit from building an ecosystem of partners that complement us technologically and in the go to market.
The prime purpose of any service offering boils down to the ROI it generates at the end of the day. The potential return from an M2M/IoT programme is largely dependent on the involvement and relevance of the operator in the value chain. “If operators get involved in device distribution, service provision and data analytics, they can create a competitive advantage in the market,” says Zameer. He further draws attention to the fact that M2M/IoT subscriptions are typically postpaid giving far greater ‘Average Revenue Per User’ (ARPU) than standard prepaid consumer subscriptions in some markets if operators can charge differentially for the service in addition to the connectivity. Opportunities will exist in market sectors with large scale potential such as utilities, automotive, transport and construction. Healthcare is another growth area.
Andy MacDonald, vice president - global service provider, Middle East, Africa & Russia, Cisco believes that IoT and M2M communications will deliver significant competitive advantages for service providers who can grasp both the platform challenges and the services opportunities. Moreover, telecom operators themselves can use IoT to drive efficiencies such as pre-emptive maintenance and smart energy management.
MacDonald stresses that it is as agile service providers that. “By transforming their networks into highly secure and automated platforms, capable of delivering a full range of services from provisioning and managing billions of ‘things’ to delivering ultra HD video communications and entertainment, operators will ensure they are at the heart of IoT growth, not at the margins, disenfranchised by over-the-top players grabbing the bulk of the profits.”
In a traditional monetisation model, there are revenue streams attached to data connectivity, SIM/service management platforms, sensors and other devices management, software development/integration and after sales support services. Aleixo says that operators should also look at non-traditional monetisation models, where they can design a build-operate-transfer model, and extract value along the contract lifetime – this is a very appealing model for smart cities, where local governments can substitute CAPEX intensive projects by OPEX. According to Machina Research, the IoT cluster opportunities across Zain’s footprint are valued at approximately $500million by 2020, Aleixo adds.
MacDonald further believes that operators are vital to unleashing the socio-economic potential of IoT services, since with the all the network assets and expertise to connect everything, they are well-placed to play the role of innovators. Not to forget, they also have an incredibly rich mine of data from these connections which will power analytics and inject intelligence to create smart vertical applications.
Cisco predicts that there will be 500 billion devices connected by 2030. However, what’s of concern is this- unless speeds and latency are of extremely high and fault proof standards, the concept of connecting things can’t be properly realised. “The challenge that telecoms will face in the era of IoT can be summed up in four words: availability, security, innovation and partnership,” says MacDonald.
Aleixo is very confident about the technological capabilities of operators. He says: “Mobile networks are not a constraint to intensive deployment of IoT solutions, technology is normally a step ahead of the commercial uses and applications, and this is the case in IoT. Bandwidth, speed and latency over 4G networks cope with the requirements of IoT applications with large number of connected devices. In the future 5G will further expand the potential to connect devices.” He further highlights that there are different types of applications, some more sensitive than others to bandwidth or latency.
Competitive forces have been driving down tariffs in both enterprise and consumer businesses. To maintain bottom line growth, operators must look to differential charging on services that have large scale growth potential like M2M and IoT, according to Zameer. “Even when connectivity is marginalised, it is still relevant because it allows the operator to maintain the billing relationship with the customer and a platform over which additional services can be offered.”
It doesn’t necessary mean that operators should target exclusively the bottom of the pyramid value tiers – connectivity, says Aleixo. “Targeting higher value chain tiers, through end-to-end solutions, will yield higher revenues and margins.”
Going forward, Zameer is of the opinion that telcos should look at becoming service providers, either directly or through partnerships, in industry verticals that have large scale potential such as utilities, automotive, transport, healthcare and construction. At the same time however, telcos should offer third party application developers the opportunity to host their own applications on the operator platform for services that target M2M and IoT, opting for an app store approach for M2M and IoT. IoT will further drive the convergence between telecom and information technology, resulting in more innovation, competition and investment in telecom networks, as well as in the services, content, applications and operating systems, says MacDonald. The IoT market will bring both innovation and disruption to the telecommunications industry. Operators have only just started to explore the possibilities of harnessing data and analytics to create smarter services. The key to thriving in the IoT world is to start preparing the foundations now, not only from a technology perspective in the form of a secure, agile, automated platform, but also in the new workforce skills and ecosystem partnerships required to truly monetise the platform.
Paul Black, IDC believes that the Middle Eastern telcos can offer improved value propositions for data-centric IoT applications by making use of blockchain technologies. Apart from enabling strong data security and authentication mechanisms, blockchain technologies can also be used to create pay-as-you-go models that are more transparent and affordable, especially for the consumer segment. They will also need to introduce robust IoT platforms that support a number of IoT use cases, better position themselves for potential revenue opportunities, and play a bigger role beyond providing network connectivity in the future. For African operators, the ones that are willing to take the risk and invest in deploying IoT networks will be well positioned to take advantage of the growing IoT opportunities in telecommunications. Due to the highly competitive and tough operating environment in countries such as Nigeria, operators in Africa can also consider low cost IoT network deployments that utilise existing 4G network infrastructures.