The talk of the table – or at least my end of the table – at the annual Cybersecurity Dinner – hosted by Copper Horse Ltd. – was the dismal state of IoT. Millions of devices are being connected – but no one is making money.
Of course that isn’t absolutely accurate. There are organizations that are able to make money in IoT, but these organizations tend to be smaller, more nimble, with low overhead and a narrow operational focus.
It is the larger organizations that have sought to scale up the IoT business to make it a billion-dollar proposition that have encountered woe. No organization better epitomizes this phenomenon than Ericsson. In December of 2022, Ericsson off-loaded its IoT Accelerator business to Aeris Communications, marking a key turning point for both Ericsson and the industry.
Most telling about the deal was the price. Ericsson reputedly paid Aeris $100M to take on the business along with some Ericsson personnel. At the cybersecurity dinner the word was that those chosen Ericsson employees were not keen to change employers. Ericsson had no comment on the financial or other terms of the agreement – other than to confirm the transfer of some personnel.
The challenge facing the world of IoT is the perfect storm of demanding customers with high performance requirements and quality of service expectations for an array of mission critical, low bandwidth applications. Add to this the increasing emphasis on low power devices designed to last for 10 years, and you have a complete picture of commercial disaster – unless you are a lean, mean, and very clever operator.
In fact, it was the consensus opinion at the cybersecurity dinner, that the automotive sector was the only profitable segment in IoT. Clearly the industry is in even more peril if it is pinning its hopes on connected cars to save the day.
I won’t bore you with the details that designing and producing a car can take 3-4 years and that they tend to last for as long as 15 years. That might be reason enough, though, to give any connectivity executive pause. I also won’t touch on the impending disaster of 2G/3G network sunsets in Europe and the impact on the millions of cars already on the road with built-in eCall devices.
Connected cars have never really belonged in the IoT category. It is true that for the past quarter century the connected car space has been a low bandwidth proposition for vehicle location, tracking, emergency response, and diagnostics. But the onset of electrification and automated driving along with the United Nations Economic Commission for Europe 155 and 156 regulations regarding software updates and cybersecurity – have combined to alter the landscape.
The connected car space is rapidly becoming a higher bandwidth sphere and one encompassing a multitude of connection types – 5G, C-V2X, Wi-Fi, satellite – requiring increasingly complex solutions including – most recently – consumer-style SIMs. That being said, connecting cars itself has become a low margin business for the makers of the hardware and software that actually deliver the connectivity. Sometimes it seems as if only Qualcomm is making money. (Of course, Qualcomm is not the only company making money in connectivity.)
It does mean, though, that the connected car business is a major focal point at MWC 2023. It remains to be seen what organizations – other than Qualcomm (and Huawei?) – will make money connecting cars. They are out there. They are clever. They are lean and mean.
The IoT business is in distress. The organizations that are making money need to school larger operators as to how to turn a profit in the business of connecting things. And we have to stop thinking of cars as IoT devices. Connected cars will not save IoT. Connecting cars is a unique business proposition with a unique set of challenges that the industry is only just beginning to grasp as it transitions to 5G. Enjoy the show.
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