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    HomeInsightsOperators look to potential of industrial IoT to produce new revenue streams

    Operators look to potential of industrial IoT to produce new revenue streams

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    The industrial Internet of Things is just one of the multitude of next generation businesses that operators are looking to for rich rewards. But like any opportunity facing the mobile industry, identifying it is one thing, implementing it is another.

     

    The sector is a broad church spanning the likes of smart factories, connected supply and logistics.

    New types of networks are making it feasible that cellular connectivity could provide the required level of service for intensive and mission-critical manufacturing processes.

    If they come to pass, the opportunities are considerable. Ericsson has predicted that the overall digitalisation of industry could provide a $619 billion revenue opportunity by 2026, while ABI Research has said it expects that 18 million new industrial IoT devices will be added between 2017 and 2021.

    Operators continue to take note, with Deutsche Telekom last month agreeing to work with SAP on real-time logistics. Manufacturers are also showing interest; in Austria, Siemens recently set up a partnership with the AIT Austrian Institute of Technology to research how 5G can support industrial production lines.

    Telefónica’s Head of IoT Vicente Muñoz tells Mobile Europe that while automotive is the “most thrilling” opportunity in the IoT market at present, he expects to see traction in the industrial IoT over the next 18 months.

    Muñoz, who leads a team of 200, speaks from the enviable position of being an operator that is walking the walk on IoT, netting €281 million in associated revenues in 2017.

    Kirill Dmitriev, VP for Sales and Customer Service at MTS, is also particularly bullish and expects IoT solutions for industrial processes to make up over 10 percent of the operator’s revenue in the future.

    So why now? On the one hand, 5G is expected to provide low latency and high data speeds that could compete with the quality of service offered by bespoke ethernet solutions currently favoured by industrial companies.

    5G could be used to provide connectivity to objects that need to move around the factory, such as robots, according to Mats Lundquist, CEO of Telenor Connexion.

    Telefónica’s Andres Padilla, New Business Director for IoT, lists network slicing, one of the most commonly cited advantages of 5G, as another attractive advantage to offer factories.

    Having a specially partitioned portion of a 5G network would provide factory operators or manufacturers with a guaranteed quality of service, meaning that they will not be disrupted by other usage of the network.

    In the shorter term, Lundquist highlights the advantages of NB-IoT and LTE-M, which is seen by some as acting as a bridge to 5G networks. He cites their suitability for providing coverage within concrete, something that is beyond most fixed solutions.

    Their advantages aren’t just limited to concrete. Operators could provide campus-wide cellular coverage where fixed solutions are unfeasible, according to Sanjay Khatri, Global Director of Product Marketing for the Jasper IoT Services Platform at Cisco.

    He explains: “Some of our largest deployments are just monitoring chemical levels and propane tanks and these…are very widely distributed for safety reasons. You can’t necessarily run a cable there [and] you don’t have Wi-Fi connectivity.”

    However, some voices are more equivocal about the potential of cellular technologies taking root in the industrial space.

    These include Pierce Owen, Principal Analyst at ABI Research, who notes some manufacturers being “overly cautious” about fully embracing these new solutions.

    “It’s a difficult market to get into,” he says. “There is a lot of distrust from end users and they are slow to change: they’ve been doing things the same way for a long time and the IT and OT [operational technology] departments don’t talk to each other.

    “They don’t trust [cellular] as being as reliable and secure as other technologies they have more control over, such as ethernet and Wi-Fi.”

    Lundquist of Telenor has similar reservations about the sceptical nature of industrial players. He says manufacturers implementing connectivity solutions in their businesses are often dogged by legacy, or fixed-line, thinking.

    However, Lundquist doesn’t go as far as believing that manufacturers are too conservative to change. “All industries need to digitise production and if they see productivity improvements they will do it,” he adds.

    Although cautious about the potential of conventional cellular connectivity in smart industry, ABI’s Owen says for operators to make progress they should focus on promoting the benefits of network slicing and multi-access edge computing.

    He says they also need to highlight the provision of a guaranteed level of service and low latency for particular industries or end-users.

    In essence, he says, the task is not only to show why cellular networks can do the job, but why only cellular networks can do a job.

    “You have to solve the basic problems of manufacturing, including increasing production, decreasing downtime and maintenance costs, reducing costs for inventory and logistics, reducing time to market and improving quality,” he explains.

    But he warns that this will be “extremely difficult” and more importantly, contrary to the optimistic projections from operators. In his view, it will not happen automatically on the back of the virtues of the technology.

    Lundquist agrees: “You need to get market awareness and there could be some barriers to that. This is a lot about direct sales, traditional B2B sales capabilities to work with these [verticals].”

    He adds: “To get the technology in place will take couple of years, then you must have the skills to reach customers. The fundamental turning point is the technology, but technology never sells itself.”

    If operators are able to carve out a niche to offer connectivity to industry, whether they go beyond this will be down to the vision and success of each individual operator.

    For example, according to Padilla, Telefónica’s offering will consist of connectivity alongside specific software solutions. At the moment these span areas such as energy efficiency management and transportation, but will come to cover management tools for connected assets in the factory.

    MTS’s Dmitriev says the operator wants to “go beyond connectivity as far as possible”, adding IT solutions to traditional methods.

    “Frankly speaking if you look at the traditional monetisation model, if you are providing just connectivity you don’t have enough money to make this model justifiable,” he says.

    Meanwhile, Telenor’s Lundquist talks about a “value-add” on top of just connectivity, but claims that operators shouldn’t necessarily be looking to provide end-to-end services across every industry. For example, Telenor Connexion is offering cloud services with analytics alongside connectivity, but these are horizontal rather than industry-specific.

    What’s clear is that as with many areas of the IoT, the potential is rich but operators need to deal with a wide range of issues before their grand designs go from the conceptual stage to the production line.