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Growing the IoT market through partnerships
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Growing the IoT market through partnerships

Posted by IoT Now MagazineMay 10, 2016

Since its formation in 2012, Tele2’s IoT division has taken a different approach to other telecoms operators with global ambitions in IoT. Tele2’s focus is on providing capabilities to customers and partners, rather than owning the entire value chain for solutions. Tom Rebbeck, Research Director at Analysys Mason talks to Ingrid Wistrand and Rami Avidan, managing directors at Tele2, who jointly run the company’s IoT division about their IoT strategy, partnerships and how they view IoT today.

TR: Tele2 has taken a different strategy to IoT from some other operators. Can you start by talking about your approach?

RA: I think it’s very simple. We have a horizontal approach. We don’t build end-toend solutions in given verticals. We offer connectivity solutions and then on top of that we wrap value-added services in many different areas, with a big focus on working with partners.

TR: When you talk about a horizontal approach what do you provide and how do your partners fit in?

RA: If you look at our offering it consists of two buckets. One is the Tele2 solutions – these include, for example, connectivity, connectivity management, data storage and security solutions.

The other bucket is partner solutions. We have partnerships with a lot of different players: Microsoft, IBM, Salesforce, SAP, Telit to name a few. With partners and with our own solutions, the idea is we should be able to cater for our customers’ needs, whatever their requirements.

IW: We provide a generic horizontal layer on top of which other partners build solutions for specific vertical requirements.

TR: How do you manage the potential for conflict with partners?

IW: From a channel perspective we focus on what we call open-book management. We have a clear view across our entire direct/indirect pipeline so we can see early on where there could be a potential clash or conflict, so we can manage it properly. We don’t partner with everyone under the sun; we pick our partners carefully. We are stringent on the requirements for our partners; they have to fit this open model or we will not work with them.

The other aspect is that, even if we have our own solution, it is critical that we meet the customer’s requirements. We are not going to choke customers with our solutions if it makes more sense for them to go with a partner solution.

TR: How does it work in practice? You have partners like ThingWorx and Telit that potentially compete against each other, and you may have some of these capabilities in-house.

IW: Basically we put the various components in front of the customer and let them make the decision. Sometimes it will be our solution; sometimes it will be our partner’s. There is not going to be one technology that wins. There is not going to be one platform. As a telco provider, the position we take is that we have to stay agnostic. That doesn’t mean that we can’t have our own solution, but we have to be agnostic.

TR: It would be useful to flesh this out with an example.

RA: Why don’t we start with ESAB. ESAB is the world’s second largest welding manufacturer. They wanted to move away from selling products, welding machines, to selling a service. ESAB approached us and we brought some partners into the deal: Wipro, as a system integrator, a local system integrator called Enfo to build certain components on the application layer and Larsen & Toubro from India to build the hardware. Together the four of us delivered an end-to-end solution to ESAB.

ESAB wanted the four providers to work together, but to procure directly from each, rather than to wrap it all up with the system integrator.

TR: Is that structure typical or do some customers want a single point of contact?

RA: I would say right now it’s around 50-50. As we move further along the track of IoT I think more and more companies will want a single point of contact.

TR: And who do you think it will be?

RA: It will probably be a systems integrator though we see an influx of application service providers (ASPs) – companies like CSL DualCom – adding value to the market. The ASPs are not only focusing on SME market but also on large enterprises. ASP is going to be a big segment.

IW: And Tele2 is being clear that we will not do the system integration part, we will not do the hardware part, we will not build the vertical solution.

TR: The fact that you can say: ‘we will not do this, we will not do that’ seems to be core to your approach and is different from some other operators

IW: Yes, most of our competitors are confusing not only their customer, but also their partners. We want to make it easy for partners to come and work with us.

RA: And I think Tom the message here for us internally and to the market is that we do not want to cannibalise our partner revenue streams.

IW: We can build a larger cake rather than eating more of the existing one, which is what you do when you enter into specific end-to-end solutions, alienating partners.

TR: There is an incorrect perception that connectivity is a commodity and the other aspects of IoT are more complex. What is your view on this? How you are providing customers with quality connections?

IW: The demands on connectivity for the IoT are vastly different when compared with the traditional telecommunications business.

As use cases are becoming increasingly business critical, if the connectivity isn’t working correctly the consequences can be much more severe than if you can’t make a voice call. To provide our IoT customers with an excellent connectivity experience you need control over your infrastructure and it has to be proactively managed by IoT experts.

TR: I am interested in the balance between bespoke solutions and more ‘off-the-shelf’ solutions. How is this mix developing?

RA: If you look at the ‘off-the-shelf’ solutions, the mature players already have a system in place and just need connectivity. But IoT is predominantly being looked at by ‘greenfield’ customers that don’t have an existing IoT solution. There is not going to be an ‘off-theshelf’ product available, as they will want it to be their product. They will want their logo somewhere, their look and feel based on their specific requirements.

Our vision is to make the products 80% off–theshelf to enable fast go-to-market for customers and partners.

TR: If the intention is 80% off-the-shelf, where do you say you are today?

RA: I would say that we are probably in the region of 40% to 50%.

TR: And how long it will take to get to that 80%?

RA: Probably two to three years. We are on a real, heavy trajectory of growth. We are hiring a lot of R&D people and product people. We are putting a lot of our focus on the value-added services side of things. We are now around 70+ people and growing rapidly so will be, organically, 100 by the end of the year, but we are also growing inorganically. 

TR: When you say inorganically where are you looking to grow?

RA: On the product side. We are engaged in four different acquisitions right now. We are hoping to announce one, maybe even two, before the summer and then an additional one or two after the summer.

TR: Are those all to add capabilities or is it for their existing customer base or their people?

IW: It is all about capabilities and capabilities come from great people. As Rami said, acquisitions are primarily on the product side but also on the technology side.

TR: There is a danger that by making these acquisitions, and offering more products, you will damage your partner relationships. How are you managing this?

IW: Acquisitions are 100% in line with our horizontal strategy, so there is no risk of jeopardising our partner relations – we will not start selling hardware or vertical applications.

TR: IoT is clearly extremely important to Tele2 as a group.

IW: We are the tenth ‘country’ in the group, but a ‘country’ without borders. The majority of our business is outside our network footprint. We are already, today, in 155 countries; it is a global business. Our top management and owners are investing heavily in us and in what we are doing as they see great potential in the IoT area.

TR: IoT at Tele2 is led by the two of you. It is an unusual structure. Can you talk about how the two of you manage decision making?

RA: I think it is something that stands out and also shows that Tele2 is ready to try new models. In our case it works well and we see it as part of the success we’ve had. Our model is to take all important decisions jointly, around strategy, major investments, key people and it works well. If you have two people who complement each other, you do get so much more than just one plus one.

TR: The final thing I want to get your take on is what is happening in IoT today. The forecast of 20 billion plus connected devices is turning into an IoT cliché, along with the connected fridge. Revenue forecasts are in the trillions. But the deals we see today are mostly small. Now clearly Tele2 is growing at a fast rate and the industry is too, but we are still at a very early stage. How do you manage expectations for IoT?

IW: It is a good question, and you are right; there is a lot of hype around the industry. When you read analyst reports, and listen to the consultants and advisers that speak to top management they talk about these billions and trillions. It is far from the reality we operate in. It sounds like you just can go out with your knife and cut gold. Of course is not as easy as that.

But, that said, it is an area that is experiencing strong growth and the potential is enormous, but as an industry we need to manoeuvre in the right way to capture the full potential. There are hurdles that we need to overcome like security, which we hear customers talk about more and more. Quality is also important as IoT becomes business critical for more companies.

There are a lot of companies involved in IoT – everyone wants to do IoT in one way or another. This all comes back to why we think it is so important to be clear on our role in the value chain. When Rami and I were setting the strategy in 2012, we decided that we needed to be focused because it is a complex value chain, and many players want to take a piece of the pie. To manage expectations, it helps to be clear on what you are doing.

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