Another year has passed analysing CSPs across the globe as they evolve their strategies in IoT and look to capitalise on the fast growing opportunity. This year, we have talked about the consistent leadership in the industry and key themes of bifurcating strategies and solution based selling.
The challenge with talking about leading CSPs however is it implies that all of the innovation is coming from the top players. That is very much not the case. There are a number of initiatives that we think are priming their respective CSPs to realise some very interesting opportunities in IoT. To this end, there are certainly numerous CSPs “to watch” in the year ahead. Among the smaller players for instance, Tele2 has adopted a very bold horizontal global approach associated with connectivity.
Meanwhile Telia has started to think big about the monetisation of data, which is the next big opportunity in IoT. Between them, these two are strategic outliers, both of whom we think have taken the correct approach. A few more examples of notable CSPs worth watching include those that have made unmatched investments in the space, possess distinct capabilities and grew faster than the rest. This group of CSPs to watch in IoT could aptly be described as the investor, the consultants and the grower.
The Investor
Verizon takes the award for boldest (and largest) financial investments in the last year. Verizon’s past acquisition of Hughes Telematics and recent purchase of Telogis (as well as the proposed Fleetmatics acquisition) demonstrate the significant investments a CSP will make to move up the value stack by delivering the application itself. This is a massively vertical-oriented play that allows Verizon to further tap into the hot growth vertical. What will however be interesting to watch is how Verizon leverages the technology assets beyond the use cases they deliver today.
We believe that will be the crux of unlocking the value of the acquisitions which, on the surface and when considered only in the context of going deeper into the fleet business, may appear a bit on the expensive side. These acquisitions do sum up to multi-billion dollar investments and should the Fleetmatics acquisition close, we estimate Verizon’s IoT revenues will come to well exceed US$1 billion.
The Consultants
CSPs such as Deutsche Telekom and Orange, because of their respective T-Systems and Orange Business Services counterparts, are not surprisingly the ones who particularly highlight the value they deliver as well as derive from providing business consulting and systems integration services as part of their IoT offering. Machina Research believes that this is an important point for them to make. Our own surveys as well as conversations with enterprises note the critical role systems integration and consulting organisations have in helping them understand IoT.
System integrators (SIs) are thus the kind of organisations enterprises look to for advice on their IoT journey. Consequently, they are also an important source of lead generation. This is, therefore, a key point of differentiation for the two CSPs vis-à-vis the global leader. Just how and how well they leverage this asset will be an interesting market activity to watch ahead.
The Grower
Another CSP worth highlighting arises because of the extraordinary growth it delivered for 2015. This is Sprint (owned by SoftBank Corp), a CSPs with an already meaningful IoT business scale that managed to expand its IoT cellular connection base faster than any of the firms profiled in our report. Sprint when counted on its own (i.e. US operations only) delivered a whopping 50.9% expansion (the CSP delivered 9.6 million connections at the end of 2015, up from 5.6 million the year prior).
For a CSP that has faced many challenges in the last twelve months, especially in its traditional business, IoT is an important bright spot for its overall business (retail and wholesale). To the extent IoT can be the tool for turning around the CSP 
business in general make companies like Sprint worth watching.
The author of this blog is Godfrey Chua , principal analyst, Machina Research
