Never has a technology been more hyped than IoT. Except perhaps 5G, AI, drones and a few others… But you get the point. We all get the point. Everything is going to be connected within our working and living environments. This will drive new experiences and increased efficiency. But, the big fly-in-the-ointment question has always been: will it drive revenue?
IoT businesses continue to receive investment and continue to underperform. Take so-called 0G provider Sigfox, which recently entered bankruptcy protection in France. There’s little wrong with its tech, and its use cases are coming along nicely – with a specialism in logistics and the ability to connect low-price objects for an affordable price. What’s wrong with Sigfox is its seeming inability to clearly explain its role in the complex IoT market as opposed to the alternatives, combined with a business model that makes no sense (to us at least).
Think of the business logic here: IoT connectivity has to be seamless and wide reaching for applications such as logistics, but Sigfox licenses each country separately and each operator must contribute back to the central organisation. Consolidating everything and putting some money into marketing would make the whole proposition work better. Spending more of the cash on commercialisation rather than it being an afterthought to network build would have been far wiser – a point on which CSPs can’t afford to be smug either.
In fact, Sigfox illustrates a key problem in the wider telecoms market – the trend to speculate with technology and just hope that business will follow. It’s exactly what operators have done with 5G and some are bound to come a cropper with that too. Others – rather like drug addicts – are selling everything they have to fund their next network fix. They have little choice because they’ve bet everything on having the ‘best’ network – committing them to constant upgrades.
Tech – and not just IoT – has a big problem with how it goes to market – too often it’s speculative rather than commercial, and buoyed by oodles of VC that cushions firms from the harsh realities of the market. Great tech is frequently let down by bad business. But we also see bad or empty tech spun up into enormous valuations by fantastic marketing and some slick PowerPoint into what we call a ‘souffle company’ – all hot air and little substance.
But back in IoT-land it’s not just Sigfox that’s in trouble. You will recall CSPs have been backing away from NB-IoT as well. With NTT shutting down its NB-IoT service in Japan and Dish abandoning its own efforts and writing off $253 million in the process.
Omdia did a quick calculation and reckoned global IoT NB-IoT connections passed 100 million in mid-2020, but most of these connections are in China. Ericsson calculations put cellular IoT connections at 1.5 billion by the end of 2019, but most used 2G. They continue to forecast that cellular IoT will increase more than two-thirds to 2.5 billion by 2025. But how much profit will this drive?
The tech hype industry – a combination of PR, journalists, analysts, marketing and VC – is also to blame. Once again declaring huge, fast market growth that wasn’t credible. And no, not just because of the pandemic, but because the basic business proposition wasn’t there. Buying IoT is currently too hard and too confusing. Most CSPs have overcomplicated it and they’ve ignored the B2B mass market. (Which is why China is growing so quickly because it has the scale as well as the commitment.)
Until everyone takes a long hard look at monetization of IoT, it will continue to be our embarrassing little secret. That dress you bought at vast expense that never really fitted you properly but is still in the back of your wardrobe in case it ever does. That guitar you bought as a last attempt to connect to your youth that’s propped up in the corner unplayed.
IoT’s potential remains, but unlocking it needs a business guru of the calibre of Steve Jobs to get this market to the tipping point. As for Sigfox, it needs acquisition not investment.
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