Lessons for Industrial 5G from Hannover Messe 2023—a Little Less Technology Conversation, a Little More Outcome-Based Action, Please!

Hannover Messe is one of the world's largest industrial trade shows, attracting industry leaders and experts from around the world. In recent years, the focus of the event has increasingly turned toward the latest technological advancements that are transforming the industrial landscape. Among these innovations, 5G is undoubtedly one of the most significant. After a COVID-19-induced break, the 2023 edition of the Hannover Messe Industry (HMI) saw the return of the 5G Arena organized by the 5G Alliance for Connected Industries Association (5G-ACIA)—a dedicated exhibition space for 5G vendors, system integrators, and research institutions. Arguably, the most interesting and important aspect of this dedicated exhibition space, however, was the program of dedicated presentations at their own stage.

There were a few interesting cellular announcements throughout the duration of the show: Nokia extending the application portfolio for its MXIE platform, and Deutsche Telekom joining the Integrated Private Wireless on AWS program. The show also featured the fifth anniversary of the 5G-ACIA, so it is worth taking a closer look at how industrial-grade cellular connectivity was discussed on the show floor among potential implementers.

While certain media outlets have claimed that industrial 5G hit a wall of indifference (especially among potential implementers), this is a far too easy conclusion, as the role of enterprise cellular at a show like Hannover Messe is much more multifaceted and differs between the various exhibition areas. Not surprisingly, within the 5G Arena, industrial (private) cellular connectivity was the star of every discussion. However, the discussions within the dedicated 5G exhibition area were slightly artificial in the sense that this “Arena” attracted only tech-savvy visitors that came because they wanted to learn about 5G.

Outside of the 5G Arena, cellular connectivity played a much different role, as technology was considered as one connectivity technology among many others (e.g., Wi-Fi). Therefore, the focus was much more on applications and use cases that would dictate the choice of wireless connectivity technology. Consequently, a range of exhibitors—mainly hyperscalers, system integrators, and large industrial automation vendors like Siemens—showcased their industrial 5G solutions as a small part of their overall connectivity portfolio, alongside other technologies.

This shift from a technology-focused to an outcome/solution-focused discussion is an important lesson for the telco industry and underlines the need to evolve in order to secure space in the enterprise cellular value chain. Importantly, this calls for rethinking four distinctly different dimensions:

1. Focus on Certain Use Cases: First and foremost, private cellular connectivity providers need to position 5G as a solution to address manufacturers’ pain points, rather than a technology that everyone should implement just because it is the newest one. Instead, connectivity providers need to focus on a few select use cases to begin with—where private cellular connectivity creates a tangible benefit for manufacturers—and underline the economic mechanisms and profitability considerations. As discussed in previous ABI Insights, these application scenarios currently tend to be providing basic connectivity to enterprises with large outdoor areas, so telco providers should bank on this for the time being, but be prepared to evolve their messaging once The 3rd Generation Partnership Project (3GPP) Release 16-capable devices start to emerge and the value proposition for private cellular networks begins to evolve.
2. Follow a Platform Strategy and Embrace Partnerships: Understanding that enterprise 5G will only work if it provides a viable solution to enterprise pain points requires providers to understand that in a successful enterprise-grade private cellular solution, connectivity can only be one part of the puzzle. Arguably, much more important is the provision of specific applications that will, for example, allow manufacturers to operate their Automated Guided Vehicles (AGVs) at a higher speed, introduce cloud quality control, or provide tools for remote, predictive, and/or preventative maintenance. This, in turn, requires the telco industry to open their connectivity layer and offer it to external developers for designing specific applications. From a technology point of view, this might be a new opportunity for open network Application Programming Interfaces (APIs) and increases the chances of them being successful this time around. From a business strategy point of view, this requires telco connectivity providers to engage in partnerships with application developers directly. With its MXIE platform, infrastructure vendor Nokia is on a good path, especially as more and more partners present specific applications for the platform. Similarly, Deutsche Telekom’s recent announcement to provide its campus network connectivity through AWS’ dedicated program is a step in the right direction, but more needs to happen.
3. Adjust Business Models: In line with the first two recommendations, enterprise cellular providers will need to adjust their value proposition and business model to appeal to enterprise owners. In doing so, cellular connectivity providers will need to realize that the tangible value proposition for (private) enterprise cellular connectivity lies with applications and the outcomes that it enables, rather than connectivity technology itself. Consequently, the provider of cellular connectivity needs to adjust toward that new observation and focus on providing individual applications.
4. Increase Visibility into End Markets: At the heart it, the telco industry will desperately need to increase their visibility into respective end markets and engage in solution-focused discussions with potential implementers. One of the easiest and possibly cost-effective ways to engage in dialogue and increase visibility is by being present at these industry-specific tradeshows. This is where potential implementers come to gather ideas about how to solve their pain points around enterprise digitization and transformation; and to be successful, 5G will need to be an integral part of this discussion. Barring the notable exceptions of Telefónica, Verizon Business, Nokia, and Ericsson, the traditional telco industry remained largely absent. At the same time, global system integrators like Deloitte, DXC, Kyndryl, and Wipro, all major hyperscalers, as well regional integrator specialists, have done a much better job at Hannover Messe, putting pressure on the traditional telco industry to act now in order to secure their share of the enterprise cellular revenue cake.

All in all, the traditional telco industry needs to realize that bringing cellular connectivity to the enterprise is far from being a no-brainer. Quite the contrary, it requires considerable effort and opening up from the traditional telco players in different dimensions. First, they need to open up toward enterprise pain points and adapt outcome-based thinking. Second, the telco industry needs to embrace adjacent connectivity technologies, which will continue to serve the enterprise domain. As discussed in a previous ABI Insight, other connectivity technologies like Wi-Fi will continue to serve the enterprise domain. The key to success will, therefore, be to embrace this convergence and combine both technologies sensibly in a unified, easy to deploy, and easy to use offering.