As technologists, it’s hard to go to a website, read a publication, or attended a conference that doesn’t mention the Internet of Things (IoT). Depending upon who you listen to or what you read, the size of the opportunity ranges from “significant” to “breathtaking,” and the number of potential devices is no less staggering. McKinsey & Company estimates there to be 26-30 billion objects connected to the Internet of Things by 2020, and Cisco forecasts the market to be $14.4 trillion in 2022. These forecasts are great, but only if an operator is able to seize a portion of the business and service them profitably.
So, how can network operators capture a profitable portion of the IoT market? That will require strategies that carriers should be working on now.
For an operator to profit from IoT, they need to realize that being everything to everyone for free just won’t work. Yes, there are applications that will run over the top of their networks for free, and there is nothing that an operator will be able to do about them. But there will also be applications where the application operator will willingly pay a premium for a secure, reliable network. If operators start developing an IoT strategy now, they will be able to align the right offerings with the requirements of those unique markets.
Let’s use the California agricultural industry as an example. California produces about 90 percent of the U.S. strawberries, a $2.6 billion industry. Field sensors, today, play a significant part in monitoring temperature and soil moisture to optimize irrigation. Given that all strawberries are handpicked, monitoring a sampling of the quality (sugar content) of the berries prior to deploying pickers could optimize the placement of field workers and improve crop yield and quality, thus making the harvest more productive. After the berries have been processed, trucks are loaded and headed east. The actual destination is determined by real-time market pricing, distance, and freshness. All of this data is continually updated as the trucks role down the freeway. The value to the farmer of having real-time fleet management capabilities, integrated with road conditions and market pricing, is invaluable in maximizing the farmer’s profits.
This type of coordinated, real-time intelligence of pulling together sensor data, weather forecasts, road conditions and market pricing is not a fundamental competency of the farmer, but well within the core competencies of a network operator. It pulls together both the hosted business service capabilities of the operator with the capabilities of the network to provide communications between devices and people. Making the service profitable requires more than just running a network.
A Unique Value Add
For an operator to create a valuable IoT offering, there must be something that sets it apart from a traditional broadband pipe, and the users of the service must find value in that differentiator. For IoT services, one differentiator will be a guaranteed, secure, and reliable connection. I believe that we will therefore see greater importance placed on service level agreements (SLAs). In the past, SLAs have been hard to verify. In the future, customers will demand verifiable proof of compliance, and operators will want visibility into service issues before service quality bumps into the SLAs. For that, the carrier will need to ensure that the service is continuously monitored, scales on demand, and is protected from security violations.
Cost Effective to Build, Maintain, and Operate
While the demand and revenue side of the business case for IoT is important, so is the cost the side of the equation. Profitability will be achieved by optimizing costs through a combination of new network technologies and routing techniques, including application optimized routing/policy-based routing (AOR/PBR), virtualization, and network slicing.
How will these technologies help to create a premium IoT service? If part of the “value add” by the operator is the ability to ensure the quality of service (QoS), the operator must be able to distinguish premium IoT traffic from general IP traffic. Using application optimized routing or policy based routing, the traffic can be identified at the edge of the network and routed to and through an infrastructure that is constantly monitored for performance reliability.
Virtualization will hold down the cost of hardware by allowing multiple network functions to operate on common off-the-shelf hardware. Software-defined networking (SDN) will allow for service provisioning automation, and traffic based orchestration will ensure that virtual environments scale up and down in real-time. This will allow the operator to offer a network service that scales on-demand, seamlessly without the intervention of operations staff.
Network slicing allows operators to support virtual networks across both the backhaul and core of the operator’s network. Network slicing will, in essence, provide the customer with a virtual, dedicated network from the IoT devices through the core to hosted or managed services, or to some other location or data center. The key is that this network is operated at a higher level of service reliability because the applications and users require a higher level of service, reliability, and security.
Marketing, Engineering, Planning all need to Work Together
The market success of any operator’s IoT premium offering will require cross functional cooperation and coordination. The business parameters with which operators will offer the service must be considered in addition to the infrastructure that is required to make this work. This is the SLA that each IoT application will expect.
Carriers should not underestimate the importance and work required to design and implement SLAs, or the work required to successfully monitor SLA compliance. Fortunately, today’s service assurance solutions provide unmatched visibility into the real-time performance of networks and services. In addition, these solutions support proactive alarming and can quickly direct operations teams to emerging issues before they impact SLAs.
Beyond serving as proactive service assurance tools, these systems can also be leveraged to provide real-time network information for service orchestration in software-defined networks. And lastly, this traffic data insight can provide marketing, planning, engineering, and operations a common, consistent, and reliable view of the usage of an IoT service offering, allowing further strategic decision making on IoT offerings to be based on real service usage data.
There is no doubt that IoT is coming. The impact on operators’ networks will be real, and it will be significant. The question is: how will operators respond? They can either sit idly by, or they can be proactive and begin the work of figuring out how they want to play IoT. Preparing for IoT will require work, cooperation, and coordination across the service provider organization. In the face of the coming tsunami of traffic and devices, planning correctly will ensure that this traffic generates revenue for the service provider, their shareholders, and their employees.