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IoT Connectivity in 2020: Innovate, Invest or Get Left Behind

Latest Gartner Magic Quadrant for Managed IoT Connectivity recognizes Arm as strong new entrant to a market that's ripe for disruption
By Nigel Chadwick, VP and GM, Pelion Connectivity Management, Arm

Gartner’s Magic Quadrant (MQ) reports apply qualitative data analysis methods to reveal trends within a specific market or industry – and Arm’s inclusion as a strong new entrant within the ‘Managed Internet of Things (IoT) Connectivity’ market MQ is a fantastic acknowledgment of Arm’s recent investment into the connectivity space.

This year marks a shift in this magic quadrant’s title, from “Managed M2M Services” to “Managed IoT Connectivity”. Something as simple as a title change can say quite a bit about the current climate and future trends of the market – one that, as we begin a new century, can be summed up neatly as “innovate, invest or get left behind”.

The MQ highlights a number of mobile network operators (MNOs) who have made clear investment plans into the radio network and the new technologies that feed into that, as well as players who, like Arm, are very IoT-focused – working with different areas of the market and bringing business to these operators as an enabling function.

These types of players have invested heavily into IoT during the last 2-3 years. There have been huge investments into Narrowband IoT (NB-IoT), LTE-M (also known as eMTC or Cat-M1), and other emerging technologies that will allow industries to create new models and new products as a service.

As a result, this change shows a clear widening of who’s able to compete in this market. Gartner is now assessing vendors who have created an IoT service focusing on one specific use case (specialized smart meters, as an example) and label them an entrant into the wider IoT connectivity market. There’s more room for disruption as the focus moves from the larger traditional operators to the new IoT services that are transforming the market.

Emphasis on IoT rather than M2M places some interesting requirements on connectivity vendors

We’re seeing a lot of increased focus into a specific IoT vertical, with the opportunity for one player to excel in one particular use case. The strategy of horizontal-focused players like Arm is to continue enabling IoT connectivity in a range of areas, from healthcare to smart metering to automotive and beyond, addressing all these different variants being introduced and engaging with them.

The focus on IoT specifically allows different entrants to address the requirements to serve small, tight markets, and still be recognized as an excellent player, or as bringing foundational capabilities which allow customers to innovate and move into a new market as well. The resulting increased openness in the market fuels progress, which is beneficial to the IoT ecosystem as whole.

Key requirements driving innovation in a variety of use cases

Woman using Smart Meter

Customer requirements vary wildly depending on the vertical or use case being targeted. Taking healthcare as an example, robust security is required to protect any personal data being transmitted and there are high levels of service-level agreements (SLAs). These demands require a completely different approach from the vendor in comparison to an organization enabling a smart meter platform that transmits data once or twice a day. There are very different requirements, not only from a product perspective but also as an organization to enable the customer to succeed. SLAs, support levels, device manufacture methods—these pieces all vary massively.

Investing in security will be a key requirement when focusing on IoT connectivity moving forward, and Gartner emphasizes this heavily in this year’s MQ. It assessed how security was handled both from an organizational and from a product standpoint, including how we work with our vendors.

We’re seeing two big changes in connectivity requirements, specifically cost reduction and data management

We receive enquiries from enterprises striving to reduce costs by any means necessary and looking to take on new technologies to accomplish that. We’re regularly asked about the steps necessary to adopt eSIM, for example, or very early stage iSIM prototypes to help cut manufacturing costs. Companies want to reduce their time to market, so they’re looking for vendors that measure deployment in weeks rather than months. This allows them to move faster and to reduce their costs overall.

There are also businesses who are approaching IoT from a data-first perspective. IoT connectivity is rarely talked about within those conversations—it’s simply an enabling function to get insights out of data. If you consider Arm’s Pelion Data Management Platform, we’re finding our customers care about the output and all the critical data being created and handled by the data management platform, not how it’s harvested. Instead of discussing IoT deployment options, we ask “what are you trying to achieve? What does the future look like for you?” and then we work back from there. Deploying 15,000 sensors in shops or offices may be what’s needed, but that’s not the requirement from the customer.

Challenge of delivering IoT connectivity on a global scale

The capacity to deliver is also becoming a much more critical capability to be judged on. It’s not just about the service being provided; the organization must be able to deliver on their promises. How the business is set up, how many people are in the company, what the workforce is achieving—all these factors reflect their ability to execute. Regardless of who has the best pricing or the best product, an organization with 50 people is going to run into difficulties supporting a large customer who wants to deploy globally.

Take into consideration a larger entity which has 80,000 global staff to tap into in order to adapt its IoT connectivity strategies to bring in new business or new markets. That’s a strong reason why you might find this type of organization in the top right of the MQ. It can take on larger projects and execute on its strategy due to the people on its team and their individual capabilities.

Arm has a very similar perspective. We have a wide touch and access to many different markets around the world, so our ability to execute is substantial. As a new entrant to the MQ, Arm recognizes the importance of investment and will continue to improve our ability to execute and support our customers from the start-up pioneers to the multi-national brands that have chosen us as the IoT connectivity provider.

IoT fragmentation adds complexity to global deployment

Despite the complexities in IoT connectivity, customers still expect that global device deployment should be easy.

Yet with so much fragmentation in the market and with the array of technologies available plus several geo-political issues which impede growth, the effort required for one customer to deploy everywhere should not be underestimated.

Simply achieving a global deployment requires a vendor that understands the landscape and can guide customers in making the right choices, capable of understanding the intricacies of sensitive data storage or other security requirements enforced by local government, among other concerns.

A bit of healthy competition

Connectivity has always been a busy, competitive landmark. The landscape has recently gone through a period of consolidation, with many acquisitions which have allowed some of the entrants to unify capabilities. There are three types of players: the incumbents, the hungry competitors and the enablers.

In the top right of the MQ, we see MNOs who are clearly investing massively in IoT connectivity, with investments into their radio network, their workforce, their vertical solutions. The total investment into IoT from these players is enormous as they set themselves up for the future.

Then we have the MVNOs who are competing and trying to win business against the operators, with their own connectivity and niche technologies in smaller markets.

Next, we have the enablers like Arm, who aren’t competing per se. We aim to partner with the operator as we offer them added value that they may be unable to provide themselves. This partnership then provides our enterprise customers with the best of both worlds: leading management software and tier-one cellular networks.

From a more forward-looking perspective, customers are searching for a vendor they can trust to work with them over a longer period of time in order to collaborate and shape their product. They’re looking for longevity and a stable partner with a clear track record in the technology space.

Collaboration is key for long term success, with many organizations working closely with “competitors” to enable growth in the IoT connectivity market.

Looking to the future with NB-IoT and 5G

With new technology comes new ways of doing business. New service models will appear and new consumer products utilizing NB-IoT and 5G will begin muscling in on the “as a service” market. Companies taking advantage of these opportunities will be looking for partners that understand the new models and know how to build the business accordingly, maybe even sharing revenue for reinvestment.

From the perspective of a vendor in the top right of the MQ, NB-IoT and 5G enables them to win new business (or protect current business) so they will be holding tightly onto that opportunity.

Investing for success

It’s inarguably an exciting time for IoT connectivity, with significant interest in new deployments, feasible price points for new business models and technologies more readily available.

However, it’s also becoming ever more complex because everyone wants their slice of the pie and they have their own way of achieving it, rather than following a market led approach.

We predict that there will be further consolidation in the market, as bigger organizations invest in the smaller connectivity players. They see that the smaller competitors are starting to win business and offer new models, so they’re moving into IoT but want to accomplish that with less risk. They’ll put more investment into their partners and into key areas to minimize risk and have greater control.

Read the full Gartner Magic Quadrant report for a full snapshot of the state of the IoT Connectivity market

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Brian Fuller and Jack Melling
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