IoT vertical markets: Trends in 4 key sectors

Recommendations for providers

• Connectivity for vehicles is no longer a newsworthy or differentiating feature, but is becoming an essential underlying enabler. At the same time, auto OEMs’ managed connectivity requirements are growing – they now need single-service-provider global connectivity solutions. This opens up new opportunities for innovative mobile network operators (MNOs) and mobile virtual network operators (MVNOs). And, existing auto OEM connectivity arrangements are for current vehicle models only – the partners chosen to enable the next generation of cars should (and most likely will) be different.
• Software and technology vendors will have more opportunities as connected cars are increasingly linked with wider, often open, ecosystems – including other manufacturers’ models, roadside infrastructure, cloud-based resources, smart city applications, and aftermarket/in-home hardware and applications. To make this work, auto OEMs require strong software platform partners to provide managed networking services that guarantee data processing and routing. This is a big opportunity for software developers and platform providers that are able to deliver solutions that are “auto OEM grade” (that is, offering very high performance and reliability) – a term long-applied to vehicular components and hardware, which is now being extended to software.
• While CSPs may not dominate on the smart home device and platform front, Ovum believes that the smart home still holds significant value for them and can support churn reduction and new revenue objectives. As with other IoT verticals, if telcos are to succeed in making their services or hardware (for example, the home gateway) critical to the successful functioning of the smart home, there has to be a value proposition beyond simple connectivity that hits the mark with consumer end users.
• Telcos and technology players targeting the insurance sector should bear in mind that take-up of IoT-based insurance offerings is still low, and appetite for investment from insurers themselves may be muted. Many are still in early stages of considering IoT strategies, despite understanding that the IoT will be massively disruptive for the sector. That said, insurance company partnerships can be an effective way to build out these propositions jointly, particularly in areas like smart home and automotive.
• Given ongoing pressures on government spending in most countries, telcos and technology vendors offering smart cities solutions will need to be creative in their approaches to financing what are likely to be long-term relationships with city and government authorities. We note the emergence of innovative contractual solutions for dealing with upfront costs of smart city technology deployments, through as-a-service deals and “opex for capex” swaps. The most successful models can be replicated across multiple cities in a country or region.

Finally, both telcos and vendors should look to build flexible, multilateral partnerships to address IoT-enabled vertical opportunities. In some cases, these may cross or combine several verticals (a la the recently announced smart home/home insurance/security partnership between KPN, Philips Lighting, French insurance firm AXA and French energy company ENGIE). It is still early days for the IoT and vertical ecosystems; there will be plenty of trial and error. Whom to partner with and how far to stretch across the value chain will continue to be important strategic questions, both in the short and longer term.

For more information about IoT research and analysis from Ovum, which belongs to the same corporate family as IoT Institute, send email to [email protected].