In January 2023, Transforma Insights published a report ‘A new taxonomy for IoT reveals new roles and opportunities’ which looked at the changing dynamics in the Internet of Things and the implications for adopters, vendors and the wider ecosystem. In the first blog post based on that research, we examined the ‘9 key themes for the Internet of Things in 2023’ which are influencing the changing dynamics. In this blog post we look at the implications those changes (and more) will have on the ways in which IoT products and services are delivered, and specifically the taxonomy of vendors in the space.
Transforma Insights has identified a set of Domains relating to different aspects of the provision of IoT. The first set are the traditional ‘Infrastructure Domains’ that dominated IoT until now. There are certain elements in the IoT ecosystem, with associated providers, that are associated with physical infrastructure: devices, networks, cloud or on-premises data centres, and the enterprise back-office systems with which the IoT data is integrated. These four elements are shown on the left-hand side of the figure below.
What has changed recently, due in part to the trends noted in the ‘9 key themes for the Internet of Things in 2023’ blog post, is that there are now separate ‘Service Domains’ which are focused on flexible software elements as well as other business services. Virtualisation has meant that newer more nimble companies can build innovative services, separate from having to provide the underlying infrastructure. Furthermore, demand from enterprises for a more ‘managed’ experience creates a greater appetite for something other than simply the device, network, cloud platform, or whatever.
Why is this important. Mostly because it heralds a change in how IoT products and services are purchased, and from whom. The functional aspects of IoT have become increasingly commoditised. The value persists not in the Infrastructure Domain itself, but in the Service Domains. Each of the Infrastructure Domains has an associated Service Domain (e.g. Device Management or Connectivity Management) where the true value will be delivered.
Furthermore, the elements of IoT are not typically consumed as horizontal products, but as vertical services. The needs of every buyer of IoT are different based on their vertical, and for the most part they require support on selection, deployment and operation. The most effective vendors will be those that position their offerings as a set of services, addressing as many of the Service Domains identified below as possible.
Key to the new taxonomy of IoT are 7 Service Domains. It is worth examining each of those in turn.
The concept of Device Management is relatively well understood at its most basic. It involves the provisioning, configuration, authentication, monitoring, control and updating of devices deployed in the field to ensure they are functioning correctly and securely. However, that functionality is evolving, as laid out in our recent report ‘Device Management Platforms are emerging from the shadows’ (April, 2022). The old environment where DM platforms were proprietary to the vendor has changed and we see an emerging set of non-proprietary DM platforms. Beyond this, there are number of areas related to managing devices in its broader sense that fit within this Service Domain. One involves a deeper control of how the device management process is itself managed, i.e. handling it as a managed service, another involves integrating device data with connectivity and perhaps application data to provide a more holistic view of the full solution, such as in BICS’ Connectivity Twin. It also potentially extends to device lifecycle management. Kore, for instance, has an active offering in this space.
This is probably the most transformed of the Service Domains in recent years, with numerous initiatives that create a much more diversified services layer over and above the simple act of operating a network. One of the key technology trends in networking is the concept of virtualisation, with the separation of the software/control layer of the network from the physical infrastructure. This provides a number of ways in which the delivery of IoT is being moved into the software arena. One way this is manifesting itself is through the increasingly common practice of deploying a virtual core network dedicated to IoT. Another connectivity technology development that is likely to trigger changing dynamics in the market is the arrival of eSIM, iSIM and remote SIM provisioning. This takes the SIM function much more into the software arena, and RSP makes the provisioning of connectivity a software function, whereas it’s always been a hardware function. All of the network, platform and subscription developments are valuable tools for non-facilities-based connectivity providers, sometimes referred to as IoT MVNOs. Historically, connectivity might have been thought of as more the purview of network operators, but increasingly with virtualisation it’s being wrestled away from them. The MVNOs are increasingly able to run a rich suite of services that compete aggressively with mobile network operators.
The increasing prevalence of cloud computing, including in the context of how IoT is deployed, has been well documented. An increasingly large proportion of IoT applications are hosted in the cloud. Even more closely linked to IoT is the growing importance of the adjacent edge computing, whereby intelligence (in the form of processing and storage) is being placed closer to the edge devices to allow for greater application independence and responsiveness. The most mundane function in the Cloud/Edge Management service domain is the streamlining of delivery of data to and from the cloud and/or edge via the cloud connector. The ability to orchestrate where IoT data storage and processing is occurring, as well as efficiently deliver data between device, edge and cloud, is a clear requirement for future IoT. With the growing importance of low latency applications, including those involving AI, there is a further growing requirement to orchestrate the functions on a dynamic basis.
In most cases, IoT solutions are deployed with a view to feeding data into an enterprise’s back-office systems, typically Customer Relationship Management (CRM) or Enterprise Resource Planning (ERP) systems. Integrating IoT data into those processes is often the focus of an initial up-front systems integration project. However, we at Transforma Insights believe this is better thought of as a managed service. Evolution in architectures, security, data requirements and much more will mean that there will likely be some need for timely adaptations to whatever might have been provisioned at set-up. Oracle’s Fusion Cloud IoT Intelligent Applications are a good example here, whereby the aim of the solutions is to deliver actionable data into back-office systems. This is equally true for systems integrators, and similar, carving out a new role for themselves providing such capabilities as a managed service. Another opportunity relates to multi-tenanted systems in the form of data exchanges, such as Deutsche Telekom’s Data Intelligence Hub.
Security consistently rates as one of the top considerations for IoT buyers when selecting vendors (see blogpost: ‘Enterprise preference for trusted brands in IoT has implications for service offerings’ for the results of our recent enterprise survey). There are numerous ways in which security can be applied to IoT, most of which involve some element of being provided as a managed solution. The report examines many of them, including basic features such as IMEI locking, private APNs, and IPSec VPNs, as well as more sophisticated transport layer security such as IoT SAFE, and end-to-end security solutions.
The regulations around areas related to IoT have expanded significantly in recent years. This has increased the requirement on all vendors of IoT solutions to consider compliance-related topics. This is particularly important for some countries that have more challenging regulator regimes, e.g. Brazil for permanent mobile roaming, China for data sovereignty, Europe for data, or the US for device security and certification. There is an opportunity for compliance-as-a-service which ensures that IoT connections and all their associated systems, are compliant with regulations, and relevant partner policies. Vodafone, for instance, has its own telecoms regulatory consulting team, particularly focused on how to deliver cross-border services which move between different regulatory environments. These dynamics represent an emerging opportunity in Governance, Risk & Compliance (GRC) platforms as discussed in our report ‘Today’s challenges are an opportunity for Governance, Risk and Compliance (GRC) platforms’ (March, 2022).
None of the elements noted above necessarily require much specific knowledge of the vertical in which the solution is deployed. All of them will benefit to some extent. For instance, in compliance rules specific to the vertical, or in understanding security threats. But it is not a requirement. However, what is increasingly clear in IoT is that there is a notable benefit to customers from taking a service from an organisation that understands the context in which it is deployed. Therefore, there is a final service domain which is related to what we term ‘contextualisation’. It is quite common for solution providers in IoT to seek to move ‘up-the-stack’ and sell vertical solutions. That is not quite the capability we are referring to here, although by definition an end-to-end solution is a highly contextualised managed solution. What we are referring to is the building of vertical expertise allowing the solution provider to better support service providers and enterprises in deploying into those verticals. This contextualisation capability is not necessary to deliver IoT products and solutions. The other service layers identified above can be delivered as horizontal capabilities. But every buyer of IoT exists within their own vertical context and will benefit from being supported by an organisation that understands their specific requirements.
The report ‘A new taxonomy for IoT reveals new roles and opportunities’ is available to anyone signing up for the Transforma Insights free ‘Essential’ subscription.
To learn more about the 7 Service Domains, join us for our webinar (catch-up available after the event) on the 9th February ‘Who's winning the race to become a Hyperscale IoT Connectivity Provider? IoT best practice for CSPs.’ where we will share more about the trends driving change in IoT, the new service domains and the strategies and approaches of Communications Service Providers to addressing IoT, many of which relate very closely to the Service Domains.