I attended a webinar moderated by Carl Piva, VP, Strategic Programs TM Forum, with panelist Craig Bauchmann, senior director, Industry Initiatives TM Forum and Dan Baker, industry analyst. Though the event seemed to be a plug for the upcoming TM Forum Live! 2014 – Transforming to a successful digital business, it still touched on quite a few key topics affecting service provider business opportunities in IoT/M2M:
What is the SP’s role in IoT/M2M?
The supplier chain for an actual IoT/M2M solution can be quite complex, and the solution is not sourced by the SP alone but by many suppliers, supporting a full ecosystem of (1) devices/sensors at the CPE, (2) the access point connected to the public network, (3) the owner of the SIM (for example, the SP in the case of wireless solutions), (4) the data and its platform for transport, (5) service/order fulfillment systems with its associated analytics, (6) the service application(s) of interest along with its associated analytics, and (7) the VAR promoting the service. With this cast of suppliers one has to ask, “Who is responsible for the customer?” Is it the carrier SP or the reseller? Some implementers view the SP owning the customer because the SP owns the network. Others view the solution as a system, maintaining that all suppliers should have an equal stake. Since most, if not all, IoT strategies will be built around open systems solutions, the SP will have to look at its role sometimes as a dominant player but and at other times as a mutually equal partner. Different verticals will need to be served, and with no clear standards the SP really has to choose which platform(s) it can support to bring the solutions desired by the consumers to market.
Who is making money with IoT/M2M?
It will require many types of companies needed (for example, partner SPs, chip vendors, device vendors, VAR applications, support services) to deliver these services, and the SP actually may not be the dominant player in many situations branding the service. So the answer may be who is on top of the business model or deal at the time? Regardless of the answer, the stickiness of the service will always be around the customer’s quality of experience. So the management of the service has to be at the highest quality for all stake holders to make money.
Is there monetization within the ecosystem?
Now that everyone within the IoT solution has a relatively even stake, they will all have to determine how to make incremental revenue in addition to the overall solution. For example, in a telematics solution, SPs can offer retail coupons of various kinds to consumers to obtain incremental revenue. This is similar to social media companies such as Google and Facebook, which are essentially gouging the SPs of revenue. Because SPs don’t have a lead role in the IP space, they need to insert themselves into the value chain; a different mindset is needed to earn the most margin. With value at stake projected to be ~$14 trillion, everyone in the value chain stands to get a fair share.
How can SPs get majority of the margin?
SPs that obtain most of the profits in the IoT value chain will be the ones who can display the best quality of service generally and specifically in key verticals. For example, surveys show that SPs that can meet the strict service layer standards in the healthcare verticals will do well. This is because the customer and/or the application service provider will most likely be willing to pay for this level of service. Some winning use cases focus on smart construction sites and wearable services where basic safety and awareness monitoring were important. Nevertheless, use cases in these areas need deeper analysis to understand the total cost of ownership, the gross margin for the service and the revenue split between the suppliers and SP.
Regulation and standardization, where do they stand?
International standards groups and the TM Forum are discussing digital health programs and implementation standards. However, the SPs have to be aware of the operational expenses incurred in implementing these regulatory practices. Regarding international standards, the panel will discuss this large and important topic at TM Forum Live! event on June 2–5, 2014, in Nice, France.
Who is the owner of data?
Because the IoT market is still maturing, rules governing data privacy are somewhat elastic but not for long. An example is in the social media sector and the ongoing debate government groups as to who owns the data at certain points in the network (for example, http://www.latimes.com/business/la-fi-lazarus-20140506-column.html). These issues will be discussed in the TM Forum Open Digital Program projects.
What are IoT/M2M SP objectives?
A refreshing consensus stated by panelists was that the objectives of the SPs were not to look for “killer applications” but how to manage opportunities and vendors in the IoT ecosystem. MVNOs and SPs that own the customer and manage the ecosystem well manage the money, specifically, application offerings, business model to manage many partners and OSS control management to customers.
Which company will provide security leadership?
AT&T is making strides in security in IoT in the U.S., but data and monetization opportunities vary depending on the country. For example, providers in the healthcare verticals Canada seem to be taking the lead in best practices and security standards in the IoT/M2M space.
Internal management systems vs vendors which will it be?
The TM Forum is promoting a framework for enterprise IoT/M2M deployment services. This framework is focusing on agility through standardization of open APIs to address the open digital economy. This will be essential for Telcos that want to deploy OTT services faster. SPs offering these services in hotspots and home spots will notice the customer stickiness over time. MSOs already understand this business model so Telcos have to catch up.
How will IoT/M2M roll out?
IoT/M2M business solutions will enter the market suddenly, similar to the cloud solutions (think Amazon). For SPs, analytics will be part of the backend solutions (for example, backhaul and back office applications). These applications will ultimately be important drivers toward IoT/M2M growth. As far as cities, IoT/M2M growth will occur first in the rural areas then in major cities.
The main takeaway for SPs for IoT/M2M: (1) arm yourselves with knowledge of industry trends and open platform solutions, (2) capitalize on use case scenarios that enhance value within the supplier chain, and (3) proactively get involved in evolving industry standards groups to propel this industry forward.
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