Is AWS about to disrupt the IoT connectivity market cloud-style?

In an exclusive interview with IoT Now, Eseye’s chairman and CEO, Nick Earle and marketing director, David Thompson reveal their plans with their partner, hypercloud company Amazon Web Services (AWS). The plan? Nothing less than turning Internet of Things (IoT) connectivity services on their head. Editorial director, Jeremy Cowan reports.

Nick Earle: We have several hundred thousand vending machines around the world. What companies want to have is a single global product SKU (stock-keeping unit) that they can roll out throughout the world, and just power it on and it connects. We connect to just over 500 now in 192 countries, but what you then can do is make one coffee machine. You may have to change the payment device, like QR codes for China, but essentially one product SKU in one factory and ship it all the way around the world. And the supply chain savings are absolutely enormous.

In the case of Costa Express (coffee retailer), and quite a few of our customers, it’s the ability to work with Eseye for a single global product SKU which, when you take a contract out with a mobile network operator (MNO), of course you can’t. MNOs can only offer coverage in certain regions; even with roaming agreements they only still have a subset of networks.

Cellular, ubiquitous, out of the box, network-agnostic, IoT connectivity is needed to get the promised business benefits of IoT. Secondly, it cannot be delivered by an MNO-centric solution. It has to be abstracted to an agnostic independent software switch or network switch, which then federates connectivity across multiple MNOs. So, it’s a really fundamental market disruption; it’s actually the primary reason why AWS selected us as their first global AWS Advanced Technology Partner for IoT. So AWS are disrupting the model.

Our average ARPU (average revenue per unit), per month is £1.00 (US$1.3) and that is for the data and the switching platform. That coffee machine costs Costa Express one cup of coffee per machine per week.

So, ‘Is IoT going to grow?’ Look at the top three impediments for IoT connectivity. A lot of projects start and then they hit the mud and stop. One of the most common reasons for them stopping is that the business case is not delivered, often because the device was not designed properly for the use case. A lot of people are thinking, ‘This connectivity is really simple. I’ll just whack a SIM card in there. How difficult can it be?’

Well, the answer is: Very. We’ve been in business 11 years, we have 1,400 customers, and 80% of all the projects we’ve seen in 11 years are customers who come to us with an existing failed IoT project.

IoT Now: Eighty percent!

NE: Eighty percent. And the reason it’s failed is because the device was not designed for the business case. That Costa Express  coffee machine is a great example. You know, with lots of sensors. There’s a lot of things that you have to say, if this happens, then what? How does it reboot? How does the firmware on the processor talk to the modem? What if the power or the network goes off?

Cellular IoT is primarily controlled by the MNOs. However, the regulator controls where they can have direct access. And each MNO, of which there are over 800, has a subset of other MNOs that form into a contractual-based set of roaming agreements. There is no commercial incentive for the major MNOs to transfer traffic seamlessly from one to another. There is no incentive or capability for seamless global roaming. It’s still based on the model of the PAC code with a cell phone.

If you’ve got 50,000 IoT devices, a) you don’t want to contact them 50,000 times, b) you don’t want 24-hour turnaround and, c) you certainly don’t want to have two sets of contracts.

Currently, cellular is about 21% of all connections growing to 40% driven by the fact that these things are going into more remote locations. Secondly, data prices are coming down and 5G’s coming in so there’s new use cases. So, let’s look at it from the outside in.

What’s it going to take to achieve the business goals of IoT? And the answer is ubiquitous, global, out of the box, zero-touch connectivity. That’s the Holy Grail.

The only way to do that is to have a new model which involves a smart SIM and a cloud-based network switch. Eseye is trying to become the leading provider of a cloud-based, agnostic (we don’t care who we’re connected to) network switch that is based on maximising the service provision into the device. If we get to touch and design the device then we can deliver an average 99.75% connectivity through dynamic over the air, international mobile subscriber identity (IMSI) switching into the device.

The business case, which could be a single SKU, could be the ability to do proactive maintenance, we track and trace and you never lose it. But the really the fundamental bit is that you get straight line deployment. You don’t get to 200 devices and then go, ‘Oh, they don’t work in Poland’. Once you start deploying these devices, you deploy them at the speed of your business case.

Like the Bosch automated lawnmower. They’ve got tens of thousands out there, selling more everyday through retail stores all around the world, people switch them on. And the data just appears in Bosch’s cloud. It’s zero touch for the user. None of this faffing around, connecting your lawnmower to your home Wi-Fi, nobody wants to do that.

The idea of connecting something to your home Wi-Fi is based on the weaknesses in the current system. It’s the manufacturer trying to put the onus on the customer. You shouldn’t have to think about connectivity. If you can get out of the box, single product SKU it’s the Holy Grail. Technically we are there and this is what we do!  We believe cellular IoT connectivity will move from a world where it’s controlled by the major MNOs to a cloud-based network switching surface which will connect to all the MNOs.

We’re trying to create the eye of the needle through which all the MNOs will connect. And that is why if you go to AWS Marketplace right now and type ‘IoT cellular connectivity’ it says one entry found; Eseye. A lot of people don’t understand what AWS is trying to do.

IoT Now: I don’t think they do.

NE: I was with HP for 17 years, I was with Cisco for 13 and ran the cloud and the managed services business with Cisco globally in the UK. And I was an investor in Eseye which I thought was an interesting company. Then they asked me to join the board about three years ago, and 18 months ago we had a board meeting.

Ian Marsden, who is the brains of the outfit, was giving an update to the board of directors in London. He said, ‘Oh, and we’ve just been selected by AWS to create a new security solution for IoT.’ And everybody looked at each other.

We went, ‘Excuse me?’

He said, ‘Yeah, I’ve been in Seattle and they invited all the people from the Gartner Magic Quadrant, including AT&T, T-Mobile and Vodafone. We’ve been selected and we’re going to be building a new IoT security feature for them.’

The way it works now is that you have to send your security certificates to a third party manufacturing company, if you want to install them on the devices before they ship, which is a bit risky. Or you have to unpack the devices and touch them. Let’s say it’s a lawn mower or a coffee machine, you connect them to a separate portal, you put it in your product in China. But when the device lands in Nigeria, you have to connect to the cloud to download your certificate. So, you have to touch it.

Ian said, ‘So we’re going to build it with them so that you do the whole thing out of AWS. Then our technology in the device will work much more simply for AWS IoT customers.

The Board were saying, ‘Well, why would they do that? Do they know we’re only a small company?’

I went, ‘OMG. I think I know exactly what they’re doing.’ People looked at me, and said ‘What are you talking about?’ I’d spent two years studying AWS and trying to stop them from killing Cisco; that was my job for John Chambers and Chuck Robbins. For the first seven or eight years I was in Cisco people would say, ‘Oh, cloud, that’ll never affect Cisco. People will buy boxes till the cows come home.’

Eventually we said, ‘No, they won’t. You gotta realise what AWS do. AWS don’t build a better product. Whenever Cisco has found a good company outside, if they were building a better mousetrap, we either bought them or threw engineers at it and built an even better mousetrap. This is the first company you’ve ever seen that is actually saying, ‘What if there were no mice?’

They said, ‘Of course, there’s always mice.’

‘No, but what if there were no mice. What if you never actually needed a computer?’

What AWS do is disrupt and simplify. All you need is a browser and a credit card and five minutes later you have access to a data centre in the cloud. For years, people completely misunderstood that, ‘That’ll never affect us.’ Then look what happened to the data centre hosting business, and the hardware business.

Fast forward to today; 80% of data is going to the edge. AWS makes money from data. It doesn’t take a brain the size of a planet to work out where AWS is going next. They’re going to the edge. But I believe the light bulb hasn’t gone on, people don’t realise they’re not just going to take today’s model and implement it. They’re going to do the same playbook. It only has two chapters; one’s called Simplify, and one’s called Disrupt. What AWS want to do, and they’re public about this, is to recommend a standard device architecture.

For AWS it’s all about the device. If they can recommend the device architecture, they could make ubiquitous global connectivity available out of every device. That device automatically sends its data into AWS, not into Azure or Google, and that device is automatically secured. And if that device could be managed from within AWS for anomaly detection, device configuration, etc., and if you could pay for the whole thing, through your AWS Marketplace invoice, then you would have vastly simplified and automated the whole IoT process. And that is exactly the play book AWS used to become the world’s biggest cloud company. So, in my view, it is obvious they implement the same strategy to be successful in IoT. Frankly, I don’t think it’s wise to bet against them.

It’s like, ‘Holy crap!’ I honestly believe people don’t know.

Now, AWS love mobile network operators. We love mobile network operators, they love us. But the fact is there’s a disruption coming and it’s as big a disruption as Apple did with the iPhone. Apple had tightly coupled software and hardware into the device to create a ubiquitous, seamless customer experience.

Which we now know is the iPhone and the App Store. AWS are saying, put this chip in your device and you get seamless connectivity globally. Everything to do with AWS is zero-touch. We’re not a channel partner for AWS the way that they have 60,000 channel partners. We’re a technology enabler of a business model change by AWS.

We have an intelligent SIM, it’s basically a small server, and we can put IMSIs in and different bootstraps, and we are the eye of the needle. We federate connectivity across multiple MNOs and it gives us 500 options. You get a single invoice, single management portal, single support, so it’s a one-stop shop.

IoT Now: How do you do it?

NE: The single most important thing is if you get the chip into the device, everything works. That allows you to do a single global SKU, a single lawn mower, single tracker or anything. When the product is turned on it bootstraps to a network and connects; you don’t have to do anything as a user. Third step is it registers into AWS automatically.

The certificate is created within AWS and stored in the device. That’s hugely important. You no longer have to ship security certificates outside your firewall, security certificates are created by AWS. Your security policy is a rules-based engine inside AWS and that’s dynamic as well. We worked closely with AWS for AWS Device Defender and launched it on stage with them at the AWS Chicago Summit.

IoT Now: Why haven’t Amazon bought you?

NE: If you’re a $30 billion company growing at 50% and you come up with this great idea to simplify IoT then you don’t need to own all of your partners, we’re the eye of the needle through which all AWS IoT data flows. Because when this device gets turned on, it actually connects to us before it goes to AWS.

Of course AWS could decide to buy us, but for the moment what is important to both companies is that we execute on both models, to grow market share as fast as possible.  It’s a hands-off relationship, they just recommend us. Secondly, they still want to have relationships with the major mobile network operators. We’re just the technology enabler of a simpler solution for them.

David Thompson: We’ve had conversations around things like customer support. If you’re a connected lawnmower company with tens of thousands of connected lawnmowers, and some of them aren’t working for some reason, AWS don’t want to be dealing with those questions. It is better that specialist companies like Eseye are on the case for that company’s brand.

NE: You’re getting the business benefits. You’ve got one contract with AWS and one with Eseye. That is a disruptive business model. We won’t be the only people who do it but we have been doing it for 11 years and we’re proud of our close relationship with the biggest hypercloud client. Cellular IoT will require a model that is network switching-as-a-service, algorithm-based switching in the device (the device can switch without talking to the server) and algorithm-based switching in the network platform.

Clearly AWS believes that this model is what’s needed for IoT. Because of the problems of delivering more than 80% connectivity through global roaming, if you want to get into the high 90s% you’ve got to have an abstracted, agnostic switching platform. That’s what we’re trying to build.

IoT Now: How much money are you raising for this?

NE: I can tell you in the last 10 months we’ve raised about £7 million (US$9.1m), which is about as much as we’ve raised in our previous 11 years. And we are likely to be raising more going forward.

IoT Now: Are the MNOs your friends or your frenemies?

NE: We absolutely believe that the AWS relationship increases our value to MNOs and we’ve tested that theory by launching the AnyNet Federation, like a Star Alliance for IoT. We’re creating a network of preferred MNOs with a central clearinghouse called AWS. Network providers love this, because they now get a share of all IoT sold out of their host country. AWS send the invoice to the customer, the customer pays AWS and AWS distributes the revenue.


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