IoT as-a-Service in Industry Verticals: Will Vendors and Customers Benefit from This Shift in the IoT Ecosystem?

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4Q 2021 | IN-6390

IoT-as-a-service continues to expand, with Qualcomm now catering to over thirty verticals nearly a year after launch.

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What "as-a-service" Means for IoT


IoT-as-a-service means a company must be able to provide products across the entire IoT (Internet of Things) value chain as opposed to specializing in just a single point of the value chain. The “as-a-service” business proposition must synergize with the technology proposition so that the commercial enterprises who are customers of IoT-as-a-service stand to benefit. Firstly, the business proposition is that IoT customers face less CAPEX (capital expenditure), i.e., less up-front costs when investing in IT (information technology), and less costs in OT (operational technology) infrastructure. Examples of OT include sensors for detecting faults in factory machinery, as well as sensors for generators and turbines in the energy sector. Customers pay as they scale their operations, which translates into more OPEX (operating expenditure) as the business grows. Therefore, enterprise customers benefit from IoT-as-a-service since it converts fixed costs for IT and OT investments into variable costs. The technology proposition of “as-a-service” is that suppliers of technology, such as hardware and software, provide enterprises with an IoT solution which is not only designed to be deployable in the field, but also one which is easier to maintain in terms of uptime and service, especially for updates of firmware, software, and hardware. So, for IoT-as-a-service vendors like Nokia and Qualcomm, this service is bound to be a new challenge given their focus on hardware for telecoms and IoT customers, respectively.

Comparing IoT-as-a-Service With Cloud Computing Services


While the concept of “as-a-service” is ubiquitous in cloud computing, there are, however, subtle differences when deploying this to IoT. There are technical hurdles, such as with IoT-as-a-service, it is common to synergize services like device management with other services like connectivity management. In cloud computing, a service provider can provide the infrastructure, platform, or software, but this is divorced from network connectivity which realistically is Wi-Fi, ethernet, or cellular mobile in the IT domain. In contrast, for IoT, the OT domain’s scope for LPWA (low power wide area) technologies creates potential for connected things to have SIMs (Subscriber Identity Modules), either as a card or embedded on the chip. This highlights the greater depth and breadth of the requirements an IoT customer expects in terms of OT connectivity from their supplier, rather than an IT cloud computing customer.

Similarities between cloud computing and IoT as-a-service include interconnectedness of IoT with cloud computing, which is deeper than only having IoT devices transmit key datapoints to a data center in the cloud for storage. For example, when companies want a cloud solution, they often go beyond data storage and syncing and instead want a platform on which they can run customized applications, which are typically customized to their industrial segment. This provides a lesson for IoT-as-a-service providers who can leverage a path already tread upon by the cloud players, since the IoT solution is also likely to require additional applications running data management and device management, in addition to data orchestration which are unique for each industry if not each company. So, there are business parallels between the value proposition of IoT-as-a-service and cloud computing services (like Platform-as-a-Service).

Challenges and Opportunities for IoT-as-a-service Market Players


In terms of volume, IoT hardware shipments and IoT network and services connections are forecasted to grow substantially. It is expected that a significant number of deployments will be new (i.e., greenfield). While legacy brownfield deployments may find it more challenging to adapt to IoT-as-a-service due to significant upfront CAPEX investments in acquiring sites, maintaining IoT, and purchasing servers. These upfront investments would otherwise be wasted in switching over to IoT-as-a-service. This poses a challenge to the business strategy for IoT-as-a-service vendors like Qualcomm and Nokia—there must be a significant incentive for brownfield deployments. Otherwise, IoT-as-a-service can only target a fraction of the total size of the IoT market, and most of that would be new greenfield deployments of future IoT markets. However, as the IoT market is still relatively nascent in many industry verticals (e.g., smart city and infrastructure) an opportunity is presented: by dominating what is greenfield today, IoT-as-a-service can capitalize on that momentum to maintain dominance in later years as those greenfield markets mature.

A case in point is Qualcomm, whose potential customers include municipalities and government agencies, which caters to smart cities, and other verticals where the government is present, like education and healthcare. Beyond the public sector, private companies are targeted broadly but with verticalized applications rather than a horizontal “one-size-fits-all” solution. These verticals include fleet management, logistics, and agriculture. For Qualcomm, hardware sales have been a key enabler of its success and is part of the company’s history. However, this pivot to IoT-as-a-service reflects a growing trend in the market for hardware providers to bundle additional services like Artificial Intelligence (AI)-driven analytics, platforms for device management and application enablement, or even 5G-based connectivity through a MVNO (mobile virtual network operator). From a technology standpoint, this IoT-as-a-service proposition blurs the line between hardware and software service vendor and so is likely to create disruption.

To conclude, IoT customers stand to benefit from this disruption, as deeper integration of remote hardware configurability is one potential outcome which would be welcomed by customers. This is because a hardware vendor provides additional services on the application layer and so can integrate device and data management deeply with their native hardware. Another possibility is that IoT-as-a-service creates scope for plug-and-play solutions (which work straight out-of-the-box), which could be due to integration with LwM2M (Lightweight Machine-to-Machine) at a chipset level. In terms of technological change, this is a challenge for IoT-as-a-service vendors (like Qualcomm and Nokia) who have to invest in upgrading the IoT infrastructure for their customers. However, for an early mover this could be an opportunity from a business standpoint to create stickiness with potential IoT customers.


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