With all predictions claiming the internet of things (IoT) will see billions of additional connections added to mobile networks over the next few years, the opportunity for operators is clear. More data passing through a pipe can mean a lot more revenue. But market trends suggest the cost of data is falling, so how can operators best capitalise on the opportunity IoT presents?
When I put the question to Vodafone’s global CEO of enterprise, Erik Brenneis, he agrees it is a key problem for the industry. But it is one, he adds, that the UK-based operator has been tackling for years.
“Our IoT division is a €700 million business in pure numbers sense. We feel suitably comfortable and confident about our position and prominence,” he explains.
Vodafone has consistently been ranked as a leader in this space. First, as a machine-to-machine (M2M) provider, and then in IoT, when M2M moved into the wider connected world. Brenneis has been at the forefront of this arm of Vodafone: he became its head of M2M in 2009. Last year, he was promoted to CEO of Vodafone Global Enterprises.
Originally, I was due to meet Vodafone’s director of IoT Ivo Rook, but he suddenly left the business in July, which led to Brenneis stepping in to lead the IoT division temporarily. It was a return home for the affable German.
“IoT hit the tipping point last year and has now became mainstream. Three or four years ago, we changed our division from M2M to IoT – M2M was a term that didn’t ever make it out of the industry, but IoT is in the mainstream. Most people understand that they might have connectivity in an electricity meter or in a car,” he says.
“A few years ago, companies also began looking at IoT and digitisation. They were thinking about how they connect their products. The main thing on their mind is: ‘What does digitisation and IoT mean for me and my business?’
“The penetration for internet of things connections that are out there is still very low. There is still huge potential in markets, some of which have been addressed for many years. That means there is even greater potential in untapped markets. The market for IoT is there, but there’s still so much potential.”
How does that potential look? Brenneis says he expects connections to be driven primarily by specific solutions developed by specific industries. The exciting bit is that this could be virtually any industry – from automotive and consumer solutions such as smart homes, to agriculture and manufacturing. Vodafone has been involved in solutions that fall into all of those categories.
“We are now beginning to see the democratisation of the internet of things, which sees small businesses or individual people developing solutions or applications using IoT,” he adds. “For that, they can use our IoT connectivity platform. It’s like when Apple first began to push the App Store a decade ago. It is coming on top of the big demand we get from industrial segments.”
The Apple comparison is a useful one for explaining how Vodafone sees itself in the growing IoT boom. When Apple first launched the iPhone in 2007, it didn’t come with a built-in App Store. This would be like the connectivity Vodafone provides – a core, underlying system.
In order to encourage usability of this platform, Apple launched the App Store in 2008, and began working with developers to create new apps by giving them access to a core toolkit that works with the iPhone. Apple, and its partners, made millions (if not billions) of dollars from this model.
In this case, Vodafone’s Global Data Service Platform (GDSP) serves as the core platform, from which developers can create new IoT solutions for any number of problems, with the operator primarily making money from the connectivity.
The platform allows users to manage IoT connections from a centrally hosted, secure self-service platform. It comes with pre-provisioned SIMs. It is open to any size of user, from individual garage engineers, to universities, to corporations.
“What we’re seeing at the moment is mid-sized companies in some markets that are either developing, or considering developing, new service models using connectivity. That’s a huge push at the moment. We’re also seeing a lot of applications from small companies and individuals around smart cities,” says Brenneis.
“The real market opportunity is around all of these smaller applications that deal with problems we may not even think of, because they’re linked to particular industries or use-cases.”
Herd of the connected cows?
One example he gives is a start-up that Vodafone works with called Moocall – also known as the connected cow company.
A sensor positioned on a cow’s tail is then connected to Vodafone’s IoT network. This helps farmers to identify when cows are pregnant, how far along they are, and when they are about to go into labour.
The Irish company claims it can reduce the mortality rate of cows and calves by 80%. More than 110,000 calves and 50,000 cows die around the world each year due to birth complications. In addition to saving lives, Moocall can save farmers money, with cows costing between £1,000 and £5,000 each, and also increase productivity.
“Vodafone is the biggest provider. We have the longest global reach, and that gives us a huge advantage. We own all the IP [for the GDSP],” he says. “Our developers manage it, we integrate it into all of our networks, and so we control all the application programme interfaces. We control how we can make that publicly available. For us the huge advantage was how closely it is integrated into our network.
“But we also have full control of it, and as the numbers grow – we have many millions of connections running on [the GDSP] now – it also becomes a cost advantage over competition, because if you use a third-party platform you put a certain percentage of revenue into it, but we regularly invest in it. We’re pushing this out through direct channels, indirect channels, third parties, universities – they all promote our platform.”
The platform currently supports 59 million connections and works in 190 countries around the world. It is powered by the strong roaming agreements Vodafone has with partners, along with its own wide-reaching wholesale network.
Beyond the platform, Vodafone has also made a number of acquisitions and investments into IoT companies in order to position itself as a leader in the market.
The biggest investment for the company by far was in Italian firm Cobra Automotive for £115 million in 2014. Cobra provides in-car telematics solutions to some of the world’s biggest car companies, including all connectivity solutions used in Porsche’s vehicles. It also develops anti-theft solutions for the likes of Nissan, Toyota and Volkswagen, among others.
Buying Cobra gave Vodafone the ability to offer end-to-end solutions in this space, Brenneis says. “Cobra is the best example because there we provide automotive services and technologies end-to-end – the complete connected car technology for the likes of Porsche – and we provide complete usage-based insurance services for insurers.
“We deliver the hardware, all the analytics, software, the calculations, and we also run the secure operations centres as well,” he adds.
“That’s going very well for us – Cobra has exceeded our own expectations for growth and it is significantly growing now in those segments. It was pretty heavily focussed in Italy but as Vodafone we’ve internationalised that. We’re now the fastest growing usage based insurance provider in the UK and we’ve also entered the German market as well.”
This isn’t the only acquisition ithas made. It has also snapped up a Greek IoT company and also invested in German IoT vendor Device Insight through its Vodafone Ventures division.
Device Insight supplies products to companies in the construction, energy and healthcare markets, and has a service-enablement platform that helps other companies to create their own M2M applications.
For Brenneis it is about adjacent industries, and how the data generated can be useful to those industries.
“How do you stop being a dumb pipe?” he asks, coming back to my original question. “You provide services relevant to adjacent industries and also ensure you’re not just providing connectivity. We’re about providing managed services from one end, like making the boxes that go in cars, to acting as a consultant for companies on how they should be entering the IoT space.
“For some it is the first time they are doing it. But for us, we’ve done it before. We can bring that expertise for industries starting their journey into IoT.”