Article Source:Ulink Media
Written by Lucy
On 16th Jan., UK telecoms giant Vodafone announced a ten-year partnership with Microsoft.
Among the details of the partnership disclosed so far:
Vodafone will use Microsoft Azure and its OpenAI and Copilot technologies to improve the customer experience and introduce further AI and cloud computing;
Microsoft will use Vodafone's fixed and mobile connectivity services and invest in Vodafone's IoT platform. And the IoT platform is scheduled to complete its independence in April 2024, with plans still in place to connect more types of devices and acquire new customers in the future.
The business of Vodafone's IoT platform is focussed on connectivity management. Referring to data from research firm Berg Insight's Global Cellular IoT Report 2022, at that time Vodafone acquired 160 million cellular IoT connections, accounting for 6 per cent of the market share and ranking fourth globally behind China Mobile with 1.06 billion (39 per cent share), China Telecom with 410 million (15 per cent share) and China Unicom with 390 million (14 per cent share).
But even though operators have a significant advantage in "connection scale" in the IoT connectivity management platform market, they are not satisfied with the returns they get from this segment.
In 2022 Ericsson will sell its IoT business in IoT Accelerator and Connected Vehicle Cloud to another vendor, Aeris.
The IoT Accelerator platform had more than 9,000 enterprise customers globally back in 2016, managing more than 95 million IoT devices and 22 million eSIM connections worldwide.
However, Ericsson says: the fragmentation of the IoT market has led the company to make limited returns (or even losses) on its investments in this market and to occupy only a small part of the industry's value chain for a long time, for which reason it has decided to focus its resources on other, more advantageous areas.
IoT connectivity management platforms are one of the options for "slimming down", which is common in the industry, especially when the Group's main business is hampered.
In May 2023, Vodafone released its FY2023 results with full-year revenue of $45.71 billion, a slight increase of 0.3% year-on-year. The most striking conclusion from the data was that the company's performance growth was slowing down, and the new CEO, Margherita Della Valle, put forward a revitalisation plan at that time, stating that Vodafone had to change and needed to reallocate the company's resources, simplify the organisation, and focus on the quality of service that its customers expected in order to regain its competitiveness and capture growth.
When the revitalisation plan was issued, Vodafone announced plans to cut staff over the next three years, and the news that it was "considering selling its Internet of Things business unit, valued at around £1bn" was also released.
It was not until the announcement of the partnership with Microsoft that the future of Vodafone's IoT connectivity management platform was broadly defined.
Rationalising the limited return on investment of the Connection Management Platform
A connectivity management platform makes sense.
Especially as a large number of IoT cards have to be interfaced with multiple operators around the world, which is a long communication process and time-consuming integration, a unified platform will help users to do traffic analysis and card management in a more refined and efficient way.
The reason why operators generally participate in this market is that they can issue SIM cards while providing software service capabilities to improve the competitiveness of the industry.
The reasons for public cloud vendors such as Microsoft Azure to participate in this market: firstly, there is a certain risk of failure in the network connection business of a single communications operator, and there is room to tap into a niche market; secondly, even if it is not possible to directly obtain a considerable amount of revenue from IoT card connection management, assuming that it can first help industry customers to resolve the problem of connection management, there is a greater probability of providing them with the subsequent core IoT products and services, the Or even increase the use of cloud products and services.
There is also a third category of players in the industry, namely, agents and startups, this kind of vendors to provide the connection management platform than the operators of large-scale connection management platform, the difference lies in the process is more simple, the product is more lightweight, the response to the market is more flexible, and closer to the needs of users of niche areas, the service model is generally "IoT cards + management platform + solutions ". And with the intensification of competition in the industry, some companies will expand their business to do modules, hardware or application solutions, with one-stop products and services for more customers.
In short, it starts with connection management, but is not limited to connection management.
- In the connection management section, the IoT Media AIoT StarMap Research Institute collated the Huawei Cloud Global SIM Connection (GSL) product traffic package specifications in the 2023 IoT Platform Industry Research Report and Casebook, and it can also be seen that increasing the number of connections and connecting more high-value devices are the two main ideas for expanding the revenue of the connection management platform, especially as each consumer-grade IoT connection contributes not much to the annual revenue.
- Beyond connection management, as research firm Omdia points out in its report "Vodafone hints at IoT spinoff", application enablement platforms generate 3-7 times more revenue per connection than connection management platforms do per connection. Enterprises can think about business forms on top of connection management, and I believe Microsoft and Vodafone's collaboration around IoT platforms will be based on this logic.
What will be the market landscape for "connectivity management platforms"?
Objectively speaking, due to the scale effect, the big players will gradually eat up the standardised part of the connection management market. In the future, it is likely that there will be players exiting the market, while some players will gain a larger market size.
Although in China, because of the different corporate backgrounds, the operator's products really can not be standardised to meet the needs of all customers, then the speed of the big players to annex the market will be slower than abroad, but ultimately it will be towards a stable pattern of the head players.
In this case, we are more optimistic about vendors jumping out of the involution, digging emerging, transformation space, market size is considerable, market competition is small, with the ability to pay for the connection management market segments.
In fact there are companies doing so.
Post time: Feb-29-2024