The rise of the IoT hyperscaler – and what this means for the end user

The original vision of Internet of Things, at least the one laid out at trade shows from about five or ten years ago, was a consumer-driven affair very much based around the smart home.

The humble fridge was singled out for particular attention in this brave new world: it could order in groceries for you, or it could act as “second screen” in your home, controlling lighting, security and home entertainment.

Elsewhere, there were connected washing machines that were able to contact engineers if they broke down and all manner of other connected gadgets that would allow telecom operators to sell a new growth opportunity for shareholders.

But the IoT ecosystem for the smart home never quite materialised in the way that the networks envisioned, despite device manufacturer’s best efforts. And in the home, most of these gadgets are not likely to rely on cellular connectivity, but Wi-Fi and Bluetooth.

The cellular IoT reality appears far more enterprise driven and has accelerated with the uptake of cloud, edge computing and 5G.

It’s typical use cases include helping delivery businesses to track parcels; the use of IoT and edge computing in factory 4.0; and connected devices for complex health requirements – these are all low volume, high return enterprise clients as opposed to the mass consumer market hoping to live out the lifestyle of a Futurama episode.

So, it makes sense then that both mobile companies and big tech firms are starting to reassess their position in the market

IoT exit

In the last year IBM (via its Watson IoT platform) and Google Cloud have quit the market, while last December, Swedish MNO Ericsson sold its loss-making IoT business to Californian-based Aeris – albeit acquiring a small stake in the IoT provider in the process.

Even well-established IoT players such as Vodafone – the only non-Chinese firm to have over 100 million IoT connections – and one which consistently ranks top among IoT vendors in terms of connectivity and services, announced last June that it would be spinning off its €900m IoT business.

While details of the “splitting off” from its main business still remain vague, Vodafone said in its annual report that the move would allow its IoT division, headed by Erik Brenneis, greater flexibility in terms of potential customers as well as who the IoT unit procures connectivity from.

And yet, rumours still abound that a complete divestiture by Vodafone in the form of a sale, is imminent.

Last month, comms software specialist Twilio became the latest company to offload, selling its IoT business to pure IoT player Kore – a deal which again involved the exchange of shares – 100% stock this time: ten million shares of Kore common stock or around 11.5% of the firm’s issued and outstanding shares.

So, have the big tech and mobile networks given up on IoT connectivity as a money-spinning entity? And where does this leave the end user?

According to Rajesh Gupta, Kore’s SVP of customer experience, the very fact that some of these deals have involved an exchange of shares signifies that big tech hasn’t given up completely on IoT.

“Economic conditions aren’t great, so as a strategy most of these organisations are looking to do fewer things better,” he says.

“They are still invested in IoT because they have taken a stake in firms like Kore – if they had given up, they would have gone for a different kind of transition altogether,” Gupta adds.

According to Gupta, while IoT is not a money-spinning entity at this point, it is a growing market and when the market does start to deliver bigger profits, then big tech firms can always invest or acquire later down the line.

Remarking on this trend during Transforma Insight’s annual IoT peer Benchmarking Report, published earlier this year, IoT analyst Matt Hatton confirms that IoT divestment should not necessarily be seen in a negative light.

“It’s part of a wider introspection within the IoT space, with organisations as diverse as Bosch, Google, IBM and SAP rethinking their approaches to the market to reflect the world as it is, rather than how they anticipated it would be,” says Hatton.

While the move by MNOs like Vodafone to become a separate entity might enable great flexibility, any spin outs require very robust arrangements in place for long term access to the parent company’s roaming agreements, as well as the ability access IoT data.

If you are an existing enterprise customer of an MNO that has recently been acquired or spun off into a separate entity, then it’s worth checking that these terms are in place.

MNVO challengers

As mobile networks and big tech focus on their core businesses during a challenging economic climate, Transforma’s latest report notes that – while Vodafone still tops the list as the most favoured IoT provider, the companies which are making the real investment in terms of innovations and customer service offerings are the mobile virtual network operators.

MVNOs – companies that own mobile services, but who don’t own the networks – include Aeris, Kore, Sierra Wireless, Soracom, and Wireless Logic.

Through its purchase of Twilio, which includes the acquisition of its eSIM technologies, Kore said that it hopes to become “an IoT hyperscaler” that will become the go-to for businesses with mission critical IoT requirements.

While each MNVO’s IoT set up is different, Kore’s IoT offerings fall into verticals including Connected Health; Fleet; Industry 4.0; Asset (the shipping and tracking of high value assets) and Retail.

According to Gupta, Kore wants to tailor IoT solutions to these specific industries, offering a full one stop shop service – from shipping to device configuration, roaming requirements in different territories, compliance and data handling.

He uses the management of a cardiac monitor in healthcare as a case in point to illustrate all the “under the iceberg” tasks that Kore wants to offer.

“A connected device like this may look simple, but you often must sign up to multiple companies to get the thing connected. What we do is we help device selection, design the solution, select the right connectivity for the right part of the world, which is most optimised.

“We will also handle all the logistics: shipment to warehouses or to patients – and supporting them, taking their calls on how the device works; roaming requirements if they need to travel with the device as well as security and data compliance: getting that data securely from the device to the healthcare company so that they can do the monitoring,” explains Gupta.

By looking after all the complexities and compliances of IoT for the end user, Kore hopes to do for IoT what Google or Amazon have done for Cloud.

Kore is also working with clients to bring IoT solutions to the market – just one example of an MNVO innovating in the way that few MNOs have the momentum or investment for right now.

At Mobile World Congress this year, for instance, Kore launched a SaaS-based platform MoDGo – which was developed with one of its fleet clients – the vehicle driving data and connected insurance solution provider IMS.

The platform claims to make it easier for fleet companies to manage, order and deploy IoT on the go.

Twilio acquisition

What the Twilio acquisition brings to the table, says Gupta, is a software developer community which will help Kore innovate with more IoT products and services.

“We were born in 2003 whereas Twilio was only created six years back. They are digitally born and the whole developer persona and digital community they have created we are now able to tap into and leapfrog,” he says.

According to Gupta, while Kore has focussed its IoT offerings so far around deploying, managing and scaling IoT – the missing part of the equation has been the ‘build’ part – a device builder to enable the management of devices in the cloud “this is something Twilio has mastered” the svp adds, with products such as Microvisor.

With ambitions to become a hyperscaler there will likely be more acquisitions in the offing for Kore as well as a further consolidation among IoT players in general.

Gupta adds that any more acquisitions by Kore are likely to help it progress with their chosen verticals.

Automotive IoT seems like an obvious missing piece of the jigsaw for this IoT pure player – but it’s also one where the barrier to entry is notoriously high, as Gupta, who used to work in this side of the industry, acknowledges.

“If we get into that space it will have to be through acquisition – organically it’s too long a gestation period – but we haven’t given up on that market and several manufacturers take connectivity from us although we are not directly providing IoT service.”

A few more acquisitions and product offerings down the line, this may change as the challenger MNVO IoT hyperscalers and the MNOs all prime for pole position in a burgeoning market.

And the IoT hyperscaler competition is already ramping up, with the news, announced just before Easter, that UK telco BT has expanded its partnership with AWS.

In the new deal, which illustrates that not all MNOs are willing to let go of their IoT offerings, BT hopes to unlock a potential $500m in revenue from IoT connectivity and digital solutions aimed squarely at the B2B market.

As part of the agreement, BT’s Digital Unit and AWS will look to lure customers from “a variety of verticals” with new, jointly developed IoT industry solutions including 5G and edge computing offerings, based on BT’s network and delivery expertise and AWS’s services.

For potential customers, this competition is likely to result in a broader, more cost effective range of IoT solutions and services.

And, if legacy roaming and data agreements are negotiated favourably by  MVNO acquisitors, this should also simplify things a great deal for end user – even if it doesn’t automate a full Ocado delivery direct from their fridge.