It’s tough going out there. Enterprises are faced with a vast choice of MNOs and MVNOs for their IoT connectivity requirements. CSPs are also facing their own issues. TecFutures spoke to 75 of them and asked them to rank their greatest challenges.
Out on top is increasing competitive intensity – not surprising given the large number of providers being drawn into the IoT enterprise connectivity market, and it is a tumultuous time with organizations acquiring each other in a bid to remain competitive and benefit from scale. Some 52% of those CSPs surveyed ranked competitive intensity as the most significant challenge.
There is a lot of downward pressure on connectivity pricing at present. We can see that there is an emerging trend towards the commoditization of connectivity and its share of the overall IoT value chain is falling. Our survey shows that for every dollar spent on IoT globally, 7.3% is now spent on connectivity. This represents a fall of a few percentage points from over 10% a couple of years ago. CSPs fear this race to the bottom on prices and many have concluded that a simple connectivity play is not a viable long-term strategy. If connectivity cannot provide revenue growth then other services will come into play, and we are seeing more CSPs offering service wraparounds comprising value add such as such as security, analytics and in-life management solutions.
We can go further on this point by looking at the challenges that enterprises themselves face. An IoT deployment is not an easy matter and enterprises have clearly articulated their need to have solutions partners to guide them through the design, build and implementation life cycle. It is becoming clear that vertical sectors require bespoke solutions (and incidentally, they want suppliers who can offer sector specific track record). This is particularly the case at the less sophisticated end of the market where enterprises are looking at more off-the-shelf solutions tailored to their specific vertical needs. CSPs can find these types of solutions difficult and costly to develop, alongside a sector specific sales and marketing push.
At the other end of the spectrum, larger enterprises have more complex needs and have deep concerns about just how IoT will impact their legacy systems and processes. They also demonstrate strong requirements in new technologies including for example mobile cloud connectivity, edge processing and digital twins. It is true to say that some of the largest enterprises have dedicated IoT teams that can handle a large amount of the development in-house but many turn to IoT solutions provider for specific technical support.
CSPs are facing competitive pressures not only from other CSPs but also from systems integrators, IoT specialists and hyperscalers. These competitors may well offer connectivity as part of a more substantial offering.
The messages are clear – providing IoT connectivity on its own is no longer sufficient. CSPs need to move up the value chain and incorporate value added elements into their service offerings. They should leverage their strengths, develop solutions as necessary and partner where they lack the skills to go it alone.
Comments