David Levinson: It's like in chess: First, you strategically position your pieces and when the timing is right you strike[...]
Marty Gilbert: And then what?
David Levinson: Checkmate.
That’s from Independence Day, of course. Never let it be said we’re too high brow here at Transforma Insights Towers. That exchange is what I was put in mind of when I was sitting through the sessions during Vodafone’s annual industry analyst event in London this week. Specifically, I was thinking about it with regard to IoT.
Early on Day 1 CEO Nick Read talked about the plan to transform from a traditional Communications Service Provider to a “Technology Communications Company”. He talked a bit about being purpose-driven, a new social contract for the organisation, being ‘Digital First’, deepening customer engagement, radical simplification and so forth. As ever I was looking for some zingers. And there were two big ones for me. In IoT he described a move from being a good connectivity business in IoT to providing end-to-end services. More on that later. He also described the plan to insource IT development, imitating technology companies in some of the adjacent areas to those in which Vodafone plays. This push on in-house software engineering is potentially game-changing, allowing for way more differentiation. Mobile networks are increasingly becoming IT-driven as telcos undertake their own digital transformations, so having the firepower to develop products will make an interesting dynamic, albeit a challenging one to manage and there are risks attendant with pursuing the independent path.
Johan Wibergh, group CTO, followed by outlining Vodafone’s technology plan for 2025. The “Tech 2025” plan included things like switching off 3G networks. The interesting thing, and maybe not entirely new, but more clearly encapsulated than before, was the move to standard platforms (IoT, Multi-Access Edge Computing, TV, payments etc.) delivering standard APIs upon which a set of products can be built. This is classic digital-transformation-for-telcos stuff: cleaning up the core systems environment in order to pursue new products and services with more agility.
The discussion about the technology plan for 2025 got me thinking about what the commercial plan would be for 2025 and the conversations I had for the rest of the two days were very much focused on thinking that through.
Let’s make no bones about it, Vodafone has been successful in IoT. Nearly 100 million connected devices so far and over $1 billion in revenue. But the future is potentially a lot more interesting if it can successfully pull together the pieces it has assembled into a coherent full market offering. What pieces am I talking about?
Firstly there are some technology offerings that round out what has proven to be a pretty astute approach to IoT. In terms of connectivity and platforms Vodafone seems to have made some pretty good bets. NB-IoT is getting deployed, roaming agreements are being made. Keeping GDSP as an in-house platform has, to my mind, proved to be a good choice, and fits well with the overall strategic direction of the organisation. For instance, it allows the controlled exposure of APIs for the App-Invent development environment. In terms of new additions, Multi-Access Edge Computing (MEC) and Mobile Private Networks (MPN) genuinely give extra capabilities to support client requirements, particularly as 5G is rolled out. MPN in particular gets Vodafone into the industrial environment, with attendant opportunities to lease spectrum to end users for Private-Networks-as-a-Service.
Going to the other end of the stack, Vodafone has also acquired some very interesting capabilities to directly address vertical sectors. Its focus verticals have changed a little over the years, but the new approach is mostly to pursue sectors where they have bought in know-how through some interesting acquisitions (nicely mirroring what I was saying about Flairware in a recent blogpost). And Vodafone hasn’t been scattergun about it. The selected verticals meet the sensible criteria of some combination of wide area mobility, secure and robust connectivity and a fairly consistent deployment environment around the world.
For instance, IoT.nxt has built a strong reputation in the mining industry in Southern Africa, and Vodafone is using it as a platform for directly addressing that sector globally. In that sector solutions are generally very portable between geographies, and offerings like MPN are very appropriate. I also got the chance to go deep on Grandcentrix, the recent German acquisition which provides product development services that help predominantly German Mittelstand (and slightly larger) companies take a product and connect it, including everything from the initial consulting through hardware design to data services. This strikes me as being another extensible offering.
The question I have always had for Vodafone is the extent to which it wants to be a professional services company. I have raised the idea a few times with them about buying a Systems Integrator, for instance. The logic being that so much of the value of IoT sits in the layer that the SI addresses, and IoT inevitably requires some element of customisation. What they’re trying to do instead is maintain scalability (and not compete with their SI partners). The focus is on establishing a strong set of know-how in a particular field and applying it multiple times. It’s a world away from having to reinvent the wheel every time as might be the case with a systems integration proposition. This is particularly the case for mid-market enterprises with revenue of less than about $1 billion; they can’t afford a tailored suit but they may be able to afford an off-the-peg with a few alterations to cut it to size. The risk, of course, is that such an approach isn’t flexible enough to meet the diverse demands of its client base, and that leading-edge solutions may emerge at the top of the market and trickle down into Vodafone’s target markets.
Vodafone has inevitably had to get into the customisation business to meet the demands of IoT. But it is trying to do everything that it possibly can to mitigate that scalability challenge, including buying in sector expertise, and platform-ising as much of the business as possible.
We are certainly not at the endgame for Vodafone. Both IoT.nxt and Grandcentrix, for instance, were only acquired last year. There are doubtless some significant plans to further expand their offerings, and maybe pick up a few other specialist providers of IoT services. The ultimate end-game for 2025 looks like a strong set of horizontal platform products, which can be either sold through channels, or applied directly to clients supported by a set of vertical competence centres, which provide some degree of customisation.