Summary Bullets:

• 2022 saw not only market leaders exiting the IoT platform market but also other changes in the IoT vendor ecosystem, including Semtech’s acquisition of Sierra Wireless and Telit’s acquisition of Thales’ IoT module business.

• These changes may signal a much-needed consolidation of a crowded, fragmented market but also show the difficulty of monetizing IoT platforms as standalone offerings.

The IoT platform market is more-or-less divided into two sub-markets. The first sub-market is the connectivity and device management platform market that has long been led by Ericsson and Cisco, both of which sell them to CSPs that in turn position them as enablers of managed services to enterprises along with IoT connectivity. CSPs generally have a revenue share arrangement with these third-party platform vendors. Many mobile operators such as Vodafone (GDSP), Telefónica (KITE), and Verizon (ThingSpace) have also developed their own platforms, as this gives them more control over feature sets and product lifecycles with the ability to add on capabilities such as hyper-precise location, rapid on-boarding, and usage visialization and analytics. It also allows the operators to avoid the revenue share deals, which erode profits. Operators use these platforms to enhance the value of their IoT connectivity services with the ability to offer VAS for management and visibility. In some cases, they do not charge the enterprise separately for connectivity management but use it as a built-in capability with which to entice enterprises to deploy IoT services via an easier to use end-to-end solution. Several operators have their own platforms but may use third-party solutions for particular customers. There are also vendors such as Huawei, Software AG, Nokia, and Telit that offer IoT platforms directly to enterprises.

The second primary segment of the IoT platform market is focused on higher layers of the stack – i.e. on data visualization, vertical solutions, and application enablement – and originally was led by IBM, SAP, HP, Oracle, PTC, and Siemens (the latter two specializing in the manufacturing vertical). In recent years, HP and SAP had left the fold while at the same time the hyperscalers entered in, with cloud-based IoT platforms pitched originally to developers, and enriched with vertical solutions, analytics, security, digital twins, and a rich set of APIs and other resources. For Microsoft and AWS, these platforms are more of a means to an end rather than viewed as a meaningful revenue generation engine in themselves. Over time, these vendors have garnered an increasing slice of the IoT platform market, however, edging out CSPs, edging out business intelligence software stalwarts such as SAP, Oracle, and HP, and capturing enterprise business. Google, on the other hand, has been struggling financially and competitively against rivals’ cloud businesses and left the IoT market, believing that having IoT application specialist partners manage the process for customers is better for everyone.

There has been some convergence of these two market segments as horizontal players added on vertical solutions or integrated with partners that have done so. MVNOs with their own connectivity platforms such as Kore and Aeris also have taken on more of a vertical solution orientation to achieve differentiation and to get away from aggregating commoditizing cellular connectivity as their primary product.

Meanwhile, the seemingly sudden high-profile exits of IBM, Google, and Ericsson from the IoT platform space have been described by some pundits as a death-knell for the IoT market overall. It is true that IoT took a lot longer to get going and a lot longer to grow as well as remains a lot trickier to monetize than anticipated, especially for operators. However, it is still a major element in digital transformation initiatives, and IoT applications such as near real-time warehousing and logistics, security surveillance, automated operations, predictive maintennace, remote monitoring, and environmental data collection and analysis are growing and remain the primary use case examples for private networks. In fact, Vodafone has mentioned a likely spin-off of its IoT business in order to free it from the slower-moving telco organization. Rather than this implying problems for IoT, Vodafone suggests that IoT is becoming more profitable as it is experiencing connection growth of 20% and usage growth of 100%. Monetizing IoT platforms as a separate product remains difficult for all players (in fact, Ericsson described its IoT business as a key driver of the losses in its business area technologies and new businesses division). However, having a platform as an intrinsic capability within an arsenal of IoT solutions where not only connectivity services but also consulting, integration, deployment, proof of concept and testing, custom dashboards, IoT security solutions, managed services, and end-to-end bundles of connectivity, devices and applications that may be offered by IT service providers, equipment vendors, and operators still makes sense for many players.