Industry Voices—Jarich: When do we move beyond cows, bikes and grapes for massive IoT commercialization?

IOT

After a few years of hype (can we call it pre-hype?), the past year has finally given us plenty of examples of LTE-M and NB-IoT in action. We’ve heard about connected cows, and the added value connectivity (and analytics) brings to their owners. We’ve heard about the way NB-IoT has enabled innovative, new bike sharing businesses. We’ve heard about yield improvement for super-premium grapes thanks to IoT-enabled irrigation optimization. Operators around the world looking to compete more effectively with low-cost LoRa or SigFox solutions rejoiced. Vendors looking to earn their piece of the IoT ecosystem spending did too.

To be sure, other use cases have gotten their time in the spotlight too. Connected gas and water meters. Smart parking. Likewise, some of this isn’t really that new; connected crop management, for example, has a rather long history. In fact, a lot of this is getting a little old.

Don’t get me wrong, I like cows and bikes and grapes. Seriously. I grew up in Wisconsin. I live in the Bay Area and get up to wine country whenever I can. My backyard storage shed is occupied by no fewer than four bikes (two road, one tandem, one gravel). I’m all for connecting the things I like, but it’s time to move on.   

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Move on while the market is still wrapping its head around the value of IoT? Bear with me…

While these high-profile use cases are fundamentally different—they’re also the same in some very fundamental ways that make them work as examples of successful IoT.

  • High-Value. Cows don’t come cheap, particularly when considering the lifetime value of their milk production. The average price for a ton of Napa Cabernet Sauvignon grapes in 2016 was nearly $7,000—with the high coming in at over $59,000 a ton. And while the value of any given bikeshare bicycle is pretty low, the money invested in those businesses as a whole is anything but. In each case, then, we’re talking about connecting high-value assets—assets that cannot afford to be lost and whose productivity needs to be optimized.
  • Clear and Present RoI. The corollary to working with high-value assets is that the Return on Investment for any associated IoT project is also high. With 10% less crop loss on a ton of Napa Cabernet equating to $700, the costs of an IoT deployment aren’t that hard to justify—especially when each vineyard acre might put out from three to six tons per acre. You can do the math for cows or bicycles but the point is the same. High-value assets make the RoI on an IoT deployment a lot easier to estimate and quicker to achieve.
  • Easy-to-Grasp. It’s not hard to picture a connected cow, or vineyard or bike and understand the rationale for connecting them—for tracking their whereabouts, usage or productivity. That makes them great IoT showcases. It makes them easy to get behind. The value isn’t just easy to calculate, it’s easy to explain.

But if we want to get to the promised land where billions (trillions, by some forecasts) of devices are connected, we need to move past the easy use cases—the ones that are easy to understand and easy to justify an investment in.

And what will that require?

Device costs need to be cheap. Cheap enough to connect to low-cost assets. That means tight integration with cellular radios and modems. It also, likely means, less complex, single mode devices vs. those supporting M1 and NB-IoT.

Along with devices, connectivity needs to be cheap. Access pricing, sure, but also simple, cost-effective connectivity management. Loop in analytics and security and data management and the costs can add up pretty quick, making it critical for those costs to be clear… and ideally low. After all, it’s a lot easier to justify an investment when the cost side of the equation is marginal.

As operators try to figure out whether or not they have a role in (profitably) driving the IoT ecosystem beyond supplying connectivity, the lesson may seem counterintuitive. Although connectivity is a clear differentiator, it may be necessary to throw it in for free in order to secure higher value business—or, at least, package it into a larger offer where the costs are obscured. Sure, this is already happening for large, strategic engagements. But as everyone from vendors (think Nokia and HPE) to integrators (think Senet) roll out virtual network offers as a way to sell broader solutions, operators can’t sit by the sidelines—particularly where access network ownership allows them to control solution costs more effectively.

Peter Jarich is the Chief Analyst (Global Telecom and IT) for GlobalData. Follow him on Twitter: @pnjarich.

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