IoT Leaders
IoT Leaders

Episode · 2 months ago

The Decline of Data: Moving from Volume to Value w/ Matt Hatton

ABOUT THIS EPISODE

History is littered with examples of technology companies that failed to adapt when there was a sea change in the prevailing business model.

Consider the companies that fell by the wayside when the software industry switched from a per-license pricing model to SaaS.

We’re on the precipice of a similar sea change within IoT.

In this episode, Nick talks with Matt Hatton, Founding Partner & Analyst for Transforma Insights, about how companies will need to pivot for the inevitable changes that are on the way.

Join us as we discuss:

  • Why we never reached 50 billion connected devices
  • The challenges of true global connectivity
  • Strategies for handling continued price erosion
  • The future players of the IoT market  

Mentioned during the podcast:

To hear more interviews like this one, subscribe to IoT Leaders on Apple P odcasts, Spotify, or your prefered podcast platform.

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You're listening to Iot leaders, apodcast from Si that shares real IOT stories from the field about digital transformation,swings and Mrs, Lessons Learned in innovation strategies that work. In each episode, you'll hear our conversations with top digitization leaders on how Iot is changing theworld for the better. What IOT leaders be your guide to Iot, digitaltransformation and innovation? Let's get into the show. Hello and welcome to theIOT leaders podcast. For those of you who perhaps have not listened before,this is the podcast produced by Si, the company that I run. Myname is nickel ceosis, a podcast that attempts to de mystify and shed somelight on the complexities of Iot and how one of the Best Practices to becomesuccessful. And each podcast we have a we have a guest, and thisweek I'm delighted to welcome Matt Hatton, who is the founding partner of acompany called transformer insights. And so, Matt, welcome, welcome to theOOT leaders podcast. Thank you. Nick, likes to be here. Okay,and Matt, one of the where I'd like to start. Actually,I know you're in big demand and the I see you a lot of onthe conference agendas and speaking but in particular, I first got to know you alittle while ago and a one of the things that came to my attentionwas a great little book. Actually, I give it to people when theyjoin Si, and it was called the Internet of things myth, which Ithought was a was a wonderful title, but it basically was a book,the way I described it as a book that explains, you know, whyIot hasn't yet happened and in particular, what resonated to me early ons thethe claims from various companies, including the company I work for it at thetime, Cisco. You know, we were got by two thousand and twentyand we're a year past it now. Of course we were all going tohave fifty billion things connected. Life was going to be great, and infact it's probably going to be more than fifty billion. It would be evenmore. And actually it turned out when the when the does settled and welooked at the numbers, it was eleven billion, and I think it's thebook is one of the best explanations of of actually what happened in retrospect.So maybe we can just start off now. I know you co coauthored it.What would you say, just for our listeners and viewers when it seeon social media of this podcast? What were the main reasons? Can yousummarize why we had such an enormous miss on our predictions as an industry?Yeah, I mean the starting point you've got to go back to a littlebit is where the fifty billion was a reasonable target or what the expectations reallyreally should have been. And actually, someone who is doing market forecasting inaround about two thousand and eleven of the Iota Market with my previous company,the Quenar Research, we didn't think it was going to be fifty billion devices. So there was kind of a expectation, a gap a little bit. Sowe pictured around think twelve billion was our was our first two thousand ofnot not bad, not bad. That was very good. We'd say thatthe figure now is, or the end of two thousand and twenty was aroundabout nine billion, I think, something like that. So you know,I think we were we were pretty pretty close. But back to the question, I mean it's still a still a valid question in terms of okay,well, against those expectations, why did we not quite see the the takeup? And I'm more important for me it's not necessarily about about numbers ofdevices. It's that it's the impact. People were talking about how IOT wouldhave a world changing impact on all of these industries and it would completely transformeverybody. And that has happened in some case cases, yeah, but alsohasn't happened in a lot of other cases. Now you can look at things likeon the consumer side of things, there were some some terrible business models. I mean things where you'd get your...

...connected garage door bricked if you didn'tcomply with with terms of service, or you've got situations where something that youused to buy as a as a piece of hardware and owned forever, you'reeffectively going to a subscription model for lighting or for music or for any numberof different things. And is that really the best user experience for people whoare used to having something that would just work constantly for the life time durationof the device? Probably not. And switching over to the the enterprise sidof things, there was, I think, a quite a disconnect between how organizationsin their it departments perhaps saw IOT is being. It's wonderful, brightshiny thing that we can we can go play with, and the reality withinthe the organization in terms of their operations and commercial models and so on,and how capable they actually were of taking advantage of of the opportunities that thatIot brought them. And this was part of the reason why you saw allof this POC hell, all trials and and and so on. That happenedbut never really went to commercial deployment. It's because, for the most part, companies of testing the technology and it was a kind of a proof oftechnology rather than a proof of concept, because there was never really a muchof a thought on how this is going to change the organization and what itdoes. So you've got things like the operations, you've got things like,okay, if you switch to earn as a service business model. One ofthe big capabilities that IOT allows is in go from selling potato sort to sellingpotato sorting as a service. That's the example I always like to throw him. You can do that, but for that potato sorting machine manufacturer that involvescompletely changing how they do everything, from their finance, their operations, thecustomer service, just about everything, and very few companies have really thought throughhow that would how that would change, and so there was inevitably going tobe a bit of a gap between what the promise was and what the thereality was. Is that. I mean there's a couple of other things.It was also pretty complex. You've seen, I think, in the last tenyears, quite a lot of driving out of the the complexity. You'vegot a kind of platformization of the sector which makes it a lot easier.You've got more technologies available that more appropriate. FRYOT. I'm thinking about particularly someof the low power white area technologies. But in two thousand and eleven theymaybe didn't exist and and maybe there was an expectation that they would peerand be much more widely deployed and used than then. As it happens,they did. So you've got you've got all those sorts of factors. Iand and if I by the way, just as an aside, my previouslives. One of my previous lives, previous careers, I was at Ciscoand was actually running the unit with it was tasked with doing the change managementacross the company from transactional box selling, essentially, to a newity. Andyou're absolutely right, the biggest issue was everything changes. I mean your financesystem has to change, your operations system has to change, how you paypeople that job descriptions your budgeting process. I mean it's just so fundamental pulland no one really understood it was so well, we just sort of chargefor it as an annuity. But know all the back end systems have tochange and but but you know, the other issue, that one thing thatI saw in the book and one that here Si course, that we pickedup on, is this issue of certain assumptions that we all had, whetherwe were saying it was a I by you saying thirteen that I think youwere thirteen the most accurate, but there are a lot of people who saidfifty. I mean Cisco was one of them. But I be Erics.I mean that a lot of people said fifty and and there wasn't a thereare some basic assumptions and and maybe we...

...could just step through them. Andone of the first ones was, well, connectivity is going to be like cellularconnectivity is going to be pretty easy. I mean, you know we alreadywe already done that. It's a problem the industry is solved. Westick a SIM card in a in a piece of hardware that has firmware andmaybe a screen and because that's phone and we know how that works, andand it just works right. But it turns out that and you get ahundred percent connectivity. But it turns out those use cases that you talked aboutthey require in many cases near a hundred percent connectivity. And it is certainlyconnectivity was not easy, was it? I mean, people don't know abouthardware. The large global mobile network operators in the cellular consumer voice world.They sell great connectivity, but it's not at the sort of levels that ofteniot devices need. Is I mean, from an industry point of view,globible, truly global connectivity is a real challenge, is it is? Itwas more a question of, I think, optimize ation. While there's t twoissues. One is optimization. So the the old way of doing thingswith with mobile friends, you know, you stick at anybody, see himin any device and it goes more or less anywhere in the world in itand it works fine. Doesn't really carry over into into Iot because you're dealingwith much more extreme use cases, things that require, as you say,that much more coverage or longer battery life. So say you need to optimize thedevices and the and the network and and all those various constituent parts forfor delivering that that capability. So yeah, it was a it's a much morechallenging environment and perhaps more challenging than everyone gave it credit for. There'salso a bit of an inertia as well. You know, it's it's not justokay, there are these use cases and wouldn't it be wonderfully if theywere connected and then suddenly they're all going to be connected. It takes time. It takes time and effort to pull together a proposition that that seems appropriateto those use cases and and to persuade the the the sectors involved that it'sthat it's a vital part of what they need to do going for it's oneof the conversations I was having on a previous podcast. We don't put afew hours people were saying it was also the opposite of of the way wethought the world was going to go, and I just to explain that.You know, when cloud came, cloud represent to simplification. I mean aWS talked about simplification and driving costs down, something that will will come back to, I'm sure because of a blog that you've recently done. But essentially, a WS their promise was it's just simpler than owning a box, managinga box, operating a box. It just connect to the cloud with thecredit card and we'll take care of the complexity and it's infinitely scalable. Ofand we all sort of believe that and said, well, you know thatthat's hardware. Hardware is now gone. It's the personal device, say,or perhaps a PC, but basically I'm not having to design hardware or managehardware. And yet they are. Along came Iot and, as you've justsaid, because of issues to do with the use case in the device,different sensors, battery life management, firmware settings, global deployment, linking todifferent MNO's, over eight hundred M's wilet. We're operators around the world. Suddenlyhardware was front and centers as one of the big things in in IOTdeployment. But most users, it's very rare for a user to have ahardware design department. To customer to our hardware design department and you know thatthey although there are cloud IOT platforms, the hardware design side of it suddenlybecame a huge issue and that and most people said, I don't want tobe involved in that, I don't know how to do that. And yetthe research says eighty percent of problems in IOT deployments can actually be traced backto something within the device. That we...

...suddenly went in a back almost backto the future. We went back to something we thought we'd let go ofas an industry. Yeah, well, to use the the well worn andslightly hackneyed phrase, hardware is hard. You've got certification of the advices,you've got such a and I come back to it again, the diversity ofuse cases meant that if you wanted to develop a solution for your particular requirements, then probably you had to almost build it from the ground I'll commit inmany cases and if you didn't, then okay, user, user gateway.Fine, that's okay, but the cost associated with with using a gateway wasprobably well out of proportion with with what you'd be prepared to spend. Soyou do end up with with with quite significant challenges where and and certification onto networks. You know the particularly the the US operator a very restrict aboutwhat gets approved for going on to their networks. It's a challenging thing.On the subject of networks, one of the other significant things was compliance.So, particularly in this in the cellular words, you had some some horrorstories of companies trying to support their or network operators trying to support connections inother markets based on roaming and the host operator saying, Hey, I'm notreally happy with with you having these permanently roaming devices on my network, notwithstandingregulatory but this was just now operator Inter operator relationships, and they say nothaving this, I'm switching those, those net those connections off. And ifyou've got hundreds of thousands of vehicles in the US, as some European networkoperators did in cars, what do you do? You've got stranded devices andnone of this helps to reinforce this idea that IOT is going to be easyand a great thing to do. If you'RE A if you're a car manufacturers, say so, it's you. That's just another, another thorny issue.That was was a bit of a problem back in ten years ago or so. Yes, actually it was. That was one of the reasons, youknow, I when I joined their side. We see, they said to me, I will we do this ubicharous global connectivity, but we've also gotthis team of people over here, and I said, well, one ofthose guys do and said, well, that's our hardwood design even I saidHardwood Design team. You know, I'm well, what sort of an oldfashioned concept is that? And actually, as you just said, it turnedout to be incredibly important because the devices you can't use a gateway off andit's just too expensive, it's physically too big, it's not right for theuse case. You have to put connectivity into the device, of security intothe device. That get the firm we're settings and, as you say,the certification is different. I mean even in the US the way you know, a t and t GSMAD heritage verising with a CDMA heritage. If adevice wants to go between one and two, you're now connecting to networks that havedifferent requirements, and so that that just that. That one thing meansif your networks going to localize or connect onto both, it's got to havefirmware that actually converts things and puts them in at the other way around.And so anyway, that so we got. You know that that's back to thisthis point that we it didn't happen, but it is happening now. IOTis growing. Now we're starting to simplify things. Now we're seeing somegreat use cases. We talked about that a lot. You've talked about ita lot. We talked about a lot on this podcast series. We oftenhave our customers. We have two thousand customers. We often have our customersare and talk about their use cases. So they we're actually showing. Look, you know, these guys have found a way through and I'm now doingsome amazing things. But I think what what's now happening, and I wantto come back to your blog that you've recently written. There's something else overand above. You know, have this...

...vision of we sort of fight throughthe complexity and we we somehow. We get the device designed, we getthe global ubiquitous connectivity. We sought out the issues to do with roaming andthe whole e Sim and ECC movement is really helping on that. have beenmultiple podcast on that subject, but let's just say for them, but webattled our way through. Now we have some industry changes that are putting pressureson business models and one of them in particular is the decline of data.So I wanted to ask you about your blog, because the one that you'vewritten, I make sure I'll get the title right. How will connectivity prideas cope with one dollar Iot. So could perhaps you could just explain alittle bit about what that means and what the challenges are? Yeah, ofcourse this is really about price erosion, simple as that. We're seeing quitewell continued price erosion. It's always something that's happened and to the point wherewe're heading in the direction of a prevailing price point, particularly at the lowerend in terms of the amount of data being used, of about a dollarper year. We've seen some eyecatching pricing of exactly that kind of kind oflevel. If you look at China, they're already at about the sort ofone to two dollar per year level. If you do the sums on thenet hands that are being being added by a lot of the the operators atthe moment, they're probably in this sort of four to five dollar per yearkind of a range versus cross standard base of maybe maybe a dollar a month. Yeah, we see this this this gradual but notable decline heading in thedirection of a dollar a year. Now that's not all bad news, ofcourse. Bentally come on to that common enterprise point view. It sounds likegreat names, absolutely, and the use cases that are enabled obviously many,not least because you might be able to use cellular where previously you mighty useWi fi, using set, using Wi fi, for instance, collect connectora fridge. Okay, well, you can sort of see the point,but having to manage the keys and and connected on to your own Wi finetwork and whatever, it's a pain, whereas cellular is up and running andand it gets going right. So the question is, does the margin erosion? Is that reflected in growing adoption where, of course, to a certain extentit's ineviting to go every inevitably going to be. The question is whetherit whether it more than makes up for it. Probably doesn't. And soyou're in a in a scenario where, okay, well, where do yougenerate your your revenue from? Where does the money come from? All whatapproached you need to take in order to make sure that's that's still profitable,and there's a couple of things you can do. One thing is, andyou alluded to it in the in the previous comment, was it's about knowhow. Okay, so it stops being about providing connectivity and it comes abouthaving the hard yards in helping companies to deploy I owed to be and thereforebeing able to support them. So it's not just selling sins, it's sellingthis nohow, okay, how do I connect things? How do I makesure my device is optimized to work on the network? All of these sortsof, in a way, value added services, but it's the kind ofstuff that a lot of the more long in the tooth connectivity providers have beendoing for a for a very long time. So that compensates to a certain extent. But you've also got a situation, I think, where you have tosee the communication service pride as the the connectivity providers making a bit ofa pivot. Some are further on this along this pivoting than others to whatwe're terming hyperscale iot connectivity provider, and...

...that involves things like making sure thatyou're on boarding and and sin management, connectivity management platforms are right size andhave the appropriate scalability for that sort of low touch, no touch on boardingand managing, and there's a whole whole series of things cloud integration, havinga ultra simplified way of integrating the data into the cloud, just to removethe requirements to touch the device or touch any any element, to effectually juststreamline getting that that connectivity working and you know that by adopting that approach,we think the cost comes into line, mean with where we see the therevenue heading. But that is a change management challenge, isn't it? Imean, if you assume the price, you know, a dollar per yearand who knows him, five years time we could be saying for fifty centthirty cents. I mean it's kind of like a more's law type truism.If you assume that that's going to happen. Then the challenge is, can businessespivot their business model? And now we're talking about the supply side,not the enterprise. Seems to be all good news for me, Das apivot your business model to team, but as it isn't compatible because if you'vebeen if you've built up over the years sort of muscle memory that is aroundselling sims and there your proprietary Sims, they have your ms in so themoment you sell the same you get the connection. You choose, you're inthe seat that chooses the roaming or whether you roam or not, and youknow you choose the pricing. You've got a lock in because you've got aproprietory SIM. And suddenly here you have this world where is first of all, it's not a proprietory sim anymore. It's an e SIM, so it'sprogrammable Ota over the air. So you no longer have a lock in inthe device. You've got Ey SEC standard, which enables states to be wholesale transferredfrom one operator to another operator. So again, your lock in,if you like, has been loosened at the on the connectivity level. Andnow here we are saying, oh well, all you have to do is climbthe stack where you know and you can monetize services. I mean essentiallyservices what you're talking about. You know device design, you can monetize knowhow or advise what we call advisory services, which is, you know, advisingpeople on Best Practices of how to go through this journey. And whatyou're what you're actually saying is, is is. But there are companies whowill just be the kings of low data and they will, they will know. The Aida will us is data if you like, but they, they, they will absolutely drive this price down and you'll see a bifurcation between itseems to me that what we're entering into is a bifurcation between volume and value, and that bifurcation is can be broadly categorized as platform and services on thevalue side, and things like security, which I want to come up backto in a minute. But volume is almost like data and choice of dataand which is in gives you the ability to switch. The EU se seethe ability to switch provider. So do you see that that world that I'mdescribing making making sense? A bifurcation into volume and value almost like an uncouplingof the data and the platform and and enterprises as such take control of thevalue side of the equation. And then you have a challenge for M's andMBA, those IOT partners, how quickly they can move up the value start, because if they can't, they're going to get eaten essentially from the bottomby the by the volume cost goes. Yeah, you you can sort ofthink of it as a you sell the connectivity, but what you're really tradingoff is the other things that you that...

...you lay are on top of it, and there will be. Then there's a lot of those you look at. Okay, we talked about communication service providers as a homogeneous block, butactually there's a whole load of different approaching. I think of somebody like orange.Okay, orange has orange business services. They provide a lot of systems,integration, consulting, you know, very heavy stuff, and the connectivitypiece is more of a support act to that, if you if you likeand sense to be so. They've said, you know, our focus is probablymore on doing that consulting piece. The bit that that that where wecan add the value and we can we can differentiate ourselves rather than the ratherthan the pure play connectivity and the I think you're right about the the bifurcation. When I took about one dollar Iot, that's sort of a guess some mediumlevel of a dollar and probably we're looking at five years before we getto that that sort of a level. So you're talking about a lot ofconnectivity that is still high value, high volume. There's a lot of additionalvalue to be able is that. But but that can still be done moreefficiently. Okay. So this, this application of the concept of being ahyperscale IOT connectivity provide applies equally to to that as well in terms of justbeing more efficient in the way that you you address the market and therefore improvingimproving margins it. If I'm a an EMMINO mobile network operator. As Isay, there's eight hundred of them and I know a lot of them watchthis podcast because I get linkedin messages and Huh and whatever. What are theattributes of a hyperscale would you call it a hyperscale IOT connectivity provider? Sowhy? Why hyperscale? And secondly, what are the attributes of of thatas compared to what they how they are and how they go to market today? Why hyperscale? It's a bit of a borrowed term really, because it'sobviously that the cloud providers were considered. That was to be the hyper scalersand we yes. The thinking is that you've got to apply similar sorts ofprinciples to the provision of connectivity. And in terms of what the characteristics are, well, a lot of it is that is that low cost, lowtouch on boarding and management capability that I was talking about earlier. There's alsoa lot about integration up and down the stack, take king out some ofthe complexity associated with the hardware, with the cloud integration. Those are acouple of the other big and significant pieces. So, for instance, we discussedokay, it's very complex to get your your hardware of APPs and optimizefor the for the appropriate device. Well, with the there's an increasing move froma lot of players to integrate that hardware piece into the into the propositionhave the devices pre integrated into platforms, pre certified, those those sorts ofactivities. And in terms of the hyperscale cloud, the integration the cloud,what Iot will happen in the cloud? Or are the application piece of itwill happen in the cloud, and so the most critical thing is to haveefficient delivery and management of that of that cloud based data, which means thatyou've got to have the sort of plugs to to push data into the cloudin the most appropriate it almost to the point where you maybe you go tothe cloud provider as you're as your first board of corn. Then they say, okay, well, these the connectivity options associated with it and we're we'repulling data and actually you don't need to worry about the conductivity. Yeah,the I have got a cloud background,...

...as you are aware, from mywork at Cisco running the cloud program and the and I do believe the lessonsfrom the hyper scale, they won't call the hyperscalers of many years. Welooked at them initially saying what's going on here and they're not. They're losingmoney. Of course we didn't realize what the what the strategy was, butit was basically simplification and reducing pricing, very analogous. But what's happening isthat the data, what we've found certainly was the the data. This issueof integrating the data from Iot use case into your back end systems is socomplex that in many cases what people are saying is, I'm not even goingto do that, I'm actually going to put it straight into the cloud.And then you get the well, how do I do it? I meanjust at it's very basic level, you've got data and you've got to convertit into M Qtt messages. I mean just that in itself is that will. How do I do that? And then how do I pay for it? Well, you pay for M Qtt messages and capacity packs. You BuyFiftyzero messages at a time from, in the case of a Wus, theaws, a marketplace. And then how do I handle security? And ofcourse now you have a set of managed services that are like device defender forfor aws that does that and then you have to get security cificate back in. And how do you do a nominally detection behavior. So it comes back, I think, to the your issue or your point about know how oneof the things that we did about two three years ago, when we sawall these issues and we saw how complicated it's it is for people, andwe saw the directions that it's going, with the hyper scales, the truehyperscalers, beefing up in terms of what they're doing, having a much,much lower price for unit of compute. Data. Pricing inevitably going to comedown and still, when it does come down to this level, it's stillway above what we're paying on our cell phones for data. So you knowit's going to come down even more. And then you look at all ofthe back end integration problems and we realize that that what people actually need isis is advice. We call it advisory services, or to be a guide. You know, be a guide. It's actually one of the reasons thatballoon he had ahead. The idea is that you don't take a balloon upon your own. You go up in a balloon with a guide and theyactually, you know, let you rise above the problems and take you towhere you want to go. So we actually rethink our whole company around adviceand guidance. And because too, because this was but people just don't knowwhat to do and and the stats that are bandied around about the number ofIot projects fail are really scary. In a this, as you point out, at least ten years. And of course, when IOT projects failure hasconsequences on people and the careers. So we absolutely believe that the advice ona whole variety of areas, all of which all of the ones that wewe talked about, is one of the biggest gaps in the industry. Andand you it isn't just stand them and consulting how that people use. It'sgot to be advice in the context of Iot and in the context of whatthey're trying to achieve. So what you get is that, you know,there isn't any such thing as a connectivity company. You almost need a consultinghardware connectivity blend as a company to actually help people go through this journey.But it is going to be tough, isn't it? Do you? Doyou think, if I go back my career, whenever there was a bigchange like this, a business model change, I remember when software was sold ona per license basis and it became stats and what happened was the modelgot adopted, but there were casualties. A lot of the companies that wereselling software licenses, enterprise software, didn't make the transition. They just couldn't. Their financial model. You know, you we can't go from collecting themoney net thirty to collecting more of the...

...money. But over a three yearperiod the financial model collapse. So do you think that that everybody will beable to make the transition? I mean there are eight hundred mnos, mostof which on doing. You mentioned orange, but most of which are not doingwhat you say. Apparently, according to one research report, I readthat there's a thousand people who claim to be an IOT company. MM says. No shortage of people say I'm an IOT company. That's not an Emino. Do you think there's going to be a lot of casualties as these issues, as data drops, interoperability of rides, in terms of Easterremony, U seeseeing some people have to move from volume to value. Casualties is abit of a difficult thing to to to define for a start. Okay,so you think about, for MNO's network operators. Okay, there's eight hundredof those but for the vast majority of them Iot isn't more than one ortwo percent. It is less even declare in their financial result exactly. Sorealistically it doesn't make an awfer lot of a lot of difference to the tothe top line or the or the bottom line really. But what you'll seeis is with some a retrenching going much more to a wholesale model, Ithink is how we describe, where they're the carrier, but in terms ofgo to market or any of the other the other additional cost items, theydon't do much other than work with them being no set maybe sell, andthat's part of this bifrigation that I was to hear that, yeah, theywon't even try, they'll just they'll just make sure they're one of the thereare wholesale providers to the value provided. Yeah, and and they're typically partof a Triopoli in most market. So there will you know, they'll,they'll go for a fair share of their revenue in the in the market inwhich they're present. And and that's fine, and that's already the strategy of thevast majority of those eight hundred you mentioned. You know, if you'rea third operator in a small market it. It's very unlikely will have an IotaEam. You probably won't even have an IOT person. It's likely thatthe the person with any kind of responsibility variety sits in the wholesale team anyway, and so it's thought of as being more of a wholesale opportunity. Yeah, so when you look back at lessons of history and in terms of it, then whenever there was a change in the business models, they were oftencasualties. And what I mean by that is, let's just take one thatwe're all very familiar with. In the s most enterprise software was seld ona license baces. You bought a one, two, three year license or bya number of users a but essentially it was a transactional cost. Youbought it, you paid for it, you put it on the shelf andsometimes you used it in sometimes you didn't. Along came Sass and and actually whathappened was the suss model rose to the top. But but most eightyninety percent of the companies that were in large enterprise space weren't able to makethe transition, just for these issues that you mentioned at the beginning of thepodcast and the back end issues. The fact that instead of getting all therevenue up front you you then got it over a monthly basis over three years. But everything had to change internally and the financial model dropped and of youa public company, that you share price dropped because the fact that your nextyear's revenue was going to decline but longer term it would grow. So myquestion then becomes, when we talk about the change that the people have togo through, a Mo's many NBA Nos. Do you think there will be casualtiesor and or do you think there will be rather than casualties because theyhave protected interests, regulatory protection in many cases? Do you think there willbe? What we're seeing is going to see a wave of consolidation in theindustry? Yeah, I think it's inable to. Casualties is probably a bitstrong and leave on the certainly on the...

...on the network operated side of things. Right. So you've got one or two percent of revenue be accounted forby by Iot. It's not going to drive consolidation on on network operators.It's probably not going to make an awful lot of difference to to the topline or the or the bottom line if they change strategic approaches to to Iot. But what we might see is as a bit of a retrenching two moreof a wholesale base model, and we have seen examples of this from fromone or two operators. We've got a report coming out on Thursday ur CSPIOTbenchmarking in and some of those operators that were profiling have made a notable movetowards being a little bit more wholesale focus. So effectively they're not the go tomarket engine for Iot. They're providing a network, but it's never goingto drive consolidation for those kinds of place for the NV and nos. Yeah, absolutely. I think there's probably a bunch of companies at the bottom end, the sort of long tail providers, of which there are millions. Alot of people came from consumer side and just basically do roaming in cellular,roaming MV and no's from then from the voice consumer side that I say,Oh, we do the same for Iot. But that that seems to be thebit that it's going to get caught between the two bricks. Okay,I think so. And and also you know, the story of MV andno's and Iot has been one of consolidation over the years. You get newcompanies appearing and they tend to a period about the same sort of rat asthey get merged into into others. So you've you saw that with core acquiringor being the result of the acquisition of a whole bunch of companies in therein the US in the sort of two thousand and fourteen, fifteen sixteen sortof time frame. And wireless logic is going through a process of acquiring companiesover here. You know that's about gaining scale, geographical scale, or protectingyeah, exactly, and it's the natural reaction to h get bigger quicker.Exactly. So, so pricing pressure will naturally lead towards that. But butfor me it's a bit of a short term approach. I think it onlycomes to tied from coming in for a period of time. But ultimately thewater stilling the world of use, that analogy still comes in absolutely, andthat's not to be litterally either. The organizations that I mentioned orders to jestthat they haven't done that. But but doing it through Ma is probably notthe optimum way of doing these things. There are these internal systems and approachesthat you need to get right rather than just going for scale, and I'mjust to finish and we could talk for hours. But then it's actually interestingbecause the lot of our podcasts are to do, as I said, withcase studies or our other aspects of the industry. This is more become adiscussion on the future of the of the IOTEA market, on the players andwhat strategies they have to deploy. So it is one of those subjects andgoing for a long time. But I did mention that. I wanted tocome back to security and our own view is that, driven by things likehe see in EUICEC, the rise of the hyperscalers, the decline of thedata I mean there's a lot of head winds which are coming in now,and the in the attractiveness of Iot is a business case because it really isattractive if you can get it right, and it really will disrupt and createa new user experience. We think that the bar has to be raised evenhigher. It's certainly something we're trying to do. It it's not easy,but it's something we're trying to do, which is to go and actually againlearn lessons from the industry, and one lesson that I just want to referto is that when that Sass model did change that. We were talking aboutthe it architecture was fragmenting at the time and it was going to minis pcsand cell phones, mobile phones. But...

...what was happening is the threat limiterwas getting bigger and so although the costs were coming down and the software wasit's now available on an Iphone, it was available on a Samson phone,etc. But what was happening is the security concerns, we're getting bigger,and so this issue of setting central policy and deploying it to the edge startedto become the biggest gating issue of whether or not these models were adopted.And the reason I mentioned that is, as Si we've just published a reporton interview a few hundred users around the world of one of the biggest reasonsright now for not implementing it and scale. Couple of years ago and for thelast few years it has been this complexity that we talked about now.Very clearly number one issue is security concerns. The the the the idea of havingthese devices which in many cases are not protected, they don't have agein security software on them, the idea of having deploying them at scale.People can easily hack them because often if there is a password on it,it's for Zeros or something like that. Easy hack them and then tunnel inand you've oh you by solving all these technical problems, you've actually built thetunnel for people to hack you. And so one of the big differentiators,and it's not solved yet for the industry, but we believe is going to bea policy management with auto deployment to the edge, of which security isthe main one, but the security compliance, configuration management, a whole series ofthings which is as the edge expans, we need to actually we're going tosee a swing back to the people in the center saying, unless youcan show me how to do network level deep packet inspection, a nominally detectionbehavior, for example. And I don't care how good the business value propis, if we get hacked and they take all of our data, wecan be out of business or or we can have a ransom bitcoin attack beforewhatever. And so it's a subject for few to future podcast. But Ithink we're going to see another abstraction of value which is to do with enterprisevalue. CIO, CSOS, CFO concerns, which for many is is yet anotherchange management challenge because now you have to come across as an enterprise softwarecompany and previously you've been an Mvno or you've been a roaming partner. Andagain that ultimately the put. Whoever cracks that will probably become a platform anda standard, if you like, for the interpase. Yeah, there's onething that we as analyst like more than anything else and that's category creation,defining definding a category of things as technology. Of Yes, something back in themacinary research days. We do it with LPWA. That was one ofthe ones that actually we are. We came up with as an organization ofit said, okay, there's a bunch of technologies here all doing much thesame thing. Will create that craft. Yeah, and I think there's acategory around what you're talking about there, which is over and above connectivity management. Is that quality management, is security, and I think you're right, there'sanother abstracted layer about supporting global connectivity with compliance and all of those thosevarious different elements. I think it it's still needs defining, but I thinkthere is certainly a there there, if you know what I mean. There, as the Americans stay exactly so I think we it needs it's positive.It's a positive thing that the requirement for this is possessed appear, because theimplication of that is it's yeah, it's entering, it's coming into the mainstream, it's maturing. It's not one of those things that's out there and it'sa project or science, but project. It's entering mainstream and therefore it hasto be held the same standards. Yeah, anything that goes in and well,listen to Matt, when you when you write the report and you defineit as a category. Just remember.

I remember who mentioned but I knowyou've already been thinking about it. Anyway. Listen, we could go on forever, but we will exceed the time limit in the patients of our listeners. So I just want to end it there. Thanks very much. Asenjoy our discussions. We also we always get off into what could happen next, what's really going on, and one are the challenges in the players andI know a lot of people find those conversations very useful. So I hopethat's the case for everyone who's watching this listening to this this time. Soyou've been listening to the IOT leaders podcast with myself, Nicol CEO SI andMatt Hatton of, as it says, behind his head, transformer insights,but also there's a lot of work on the blog side and if you goto his linkedin profile, there's lots of links there and he's a frequent speakerof many industry events. So, Matt, with that, I really appreciate thediscussion and I wish you well and I look forward to this category beingcreated and getting similar advice and what's going to be needed absolutely my pageonic.Thank you all right, thanks very much. Goodbye. Thanks for tuning in toIot leaders, a podcast brought to you by Si our team delivers innovativeGlobal Iot cellular connectivity solutions that just work, helping our customers deploy differentiated experiences anddisrupt their markets. Learn more at SICOM. You've been listening to Iotleaders, featuring digitization leadership on the front lines of Iot. Our Vision forthis podcast is to be your guide to Iot and digital disruption, helping youto plot the right route to success. We hope today's lessons, stories,strategies and insights have changed your vision of Iot. Let us know how we'redoing by subscribing, rating, reviewing and recommending us. Thanks for listening.Until next time,.

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