Last week saw the announcement of an interesting acquisition by KORE. It bought Business Mobility Partners and Simon IoT. The two companies are part of the same group and therefore it’s actually only one deal, but they address rather different parts of the market so it’s interesting to look at them separately. Business Mobility Partners is a IoT services company in the healthcare space. Simon IoT is a hardware-focused reseller and MVNO serving the US.
This acquisition is illustrative of a couple of significant trends that we are tracking in IoT connectivity.
The first relates to verticals. IoT connectivity providers have for some time toyed with the idea of ‘moving up the stack’ and delivering vertical solutions. The appeal is obvious as this part of the IoT solution invariably accounts for the majority of revenue. Why limit yourself to just the 5-10% of revenue accounted for by connectivity when you can go after the 50-75% taken by the application itself? The logic is inescapable, but it’s not that simple. Vertical markets are typically highly competed, often with strong incumbent players with an existing customer base and channels to market. To really play effectively in this space requires the operator to earn the ‘right to play’, either through strong heritage in the space, or through acquisition. For instance, Verizon earnt the right to play in the fleet management space through multi-billion acquisitions. KORE is doing similar things in healthcare, first through its Integron acquisition and now through Business Mobility Partners.
The second is the sheer amount of consolidation associated with IoT MVNOs at the moment. As highlighted with our work on ‘$1 IoT’ we see a pronounced price decline in cellular IoT connectivity. To cope with this operators need to adopt some of a number of possible approaches. They can go up the stack, where they have the right to play, they can adopt a ‘hyperscale’ approach to connectivity, or they can consolidate and gain scale. Mobile Network Operators almost certainly won’t go for this approach, after all just 1-2% of their revenue comes from IoT so it will not be a driver. But MVNOs may well go for this, as outlined previously in our research on IoT MVNOs.
Thirdly, it reinforces the trend towards the combined sale of hardware and connectivity offerings. At Transforma Insights we predict the proportion of connectivity sold with hardware - and vice versa - will grow significantly in the next couple of years. Recent months have seen a number of hardware players beefing up their connectivity offerings.
Next week the Transforma Insights team will head to Barcelona for Mobile World Congress where we will doubtless be discussing these and many other topics (edge computing, eSIM, LPWA technologies and more) at the intersection of IoT and mobility.
If these are topics that interest you, check out our recent blog posts on related issues:
- 'New report ranks the world’s IoT MVNOs' which highlights some of the work we've done analysing 175 of the world's top IoT MVNOs, including KORE and Simon IoT.
- 'Who’s ticking the boxes of being a Hyperscale IoT Connectivity Provider?' draws on the results of our deep dive analysis of the strategies of major CSPs (including Kore) in addressing IoT, including quite a bit of vertical approaches.
- 'Webinar: Best practice for Communications Service Providers in delivering the Internet of Things' addresses many of the topics highlighted here, including the challenges of moving up the stack, the shift to hyperscale and consolidation.
- We're also participating in lots of conferences and webinars in the coming months where we will doubtless take the opportunity to discuss these issues. See our Events Page for more details.