This Industry Viewpoint was contributed by David W Wang
Internet of Things (IoT) is a concept created in contrast to the notion that Internet connects people. By connecting devices, IoT generates data that help to create more friendly products, smarter insights and better business results. It’s stunning that as far back as 2008, the number of devices connected to the Internet already exceeded the number of people on Earth.
Today for the telecom connectivity market, due to the fast advancing of technologies and competitions, many enterprises have forged a new mentality of “paying less for doing more” in budgeting and spending on existing mobile and broadband services. As the result we expect to see flat growth in the existing connectivity business in next five years or more, let alone the continuing decline in legacy voice and data service revenues.
As the telecom industry is exploring new fronts and horizon for revenue growth, IoT looks like a promising market to engage. According to various sources of professional forecast, the number of IoT devices, sensors, and actuators will reach more than 46 billion by 2021.
However, before IoT can become a real new engine of growth for the telcos, there are still some gaps to be filled along its value chain.
Fundamentally, an IoT solution is made of four major components: 1. the Thing - the device like a sensor or actuator 2. the Local Network - this can include front mobile access, and a gateway translating proprietary communication protocols to IP, filtering and processing data, handling security, etc.; 3. the network backbone that hauls the IoT traffic via Internet, MPLS or Ethernet; 4. the Cloud-based back-end Services including operation control centers, data processing systems, or interactive devices. IoT service therefore is more an ecosystem from device vendors, software vendors, IT service providers, telecom and cloud service providers, rather than a standalone solution.
At this stage, based on the report of Analysys Mason issued in June 2017, the struggle the telcos are facing is while the revenue from IoT solutions (total spend including devices, applications and connectivity, on IoT devices with a SIM) will exceed $200 billion in 2025 at CAGR of 18% worldwide, IoT connectivity revenue will only reach $28 billion by 2025 for the telcos, representing just 14% of the IoT total revenue pie. Hardware and software vendors are poised to grab the majority of IoT revenues away.
This is because most of IoT traffic today is in lower bandwidth and speed over wide areas, and the Industrial IOT often requires reliable and secured transport over the private but more expensive MPLS networks. To date this IoT model of relatively small stream of traffic over the private IP network still plagues many telecom service providers.
In order for the telcos to effectively capture the fast growing IoT business opportunities, they need to switch from a pure connectivity provider to an IoT platform aggregator, taking on and fulfilling these two strategic initiatives: enable and tailor the big data IoT vertical platforms via intelligent edge networking; reduce the cost and optimize their backbone network performance through SDN/NFV.
Software Defined WAN (SD-WAN) can play a pivotal role in this strategic transition for the telcos.
Different from the Lower Data IoT’s “messenger role” that mostly just monitors and reports a device’s status, Big Data IoT often plays a “platform role” in monitoring performance, processing data, responding to issues, and interacting with the front devices instantly. The big data IoT vertical applications include industrial machinery (e.g. remote oil drilling); transportation equipment (cars, trains, and planes); health care equipment; precision agriculture/farming solutions; smart buildings, smart cities, smart utility grids, and future AI solutions.
Big data IoT therefore must be powered by a dynamic and low latency distributed network with smart edge computing and data center capabilities, customizing to manage the IoT traffic pattern of vertical industries respectively. This would allow data produced by IoT devices to be processed quickly and locally - closer to where it is created instead of routing across long haul to the central data centers or clouds.
The innovative architecture of SD-WAN can accommodate the scalability and flexibility required of big data IoT workloads, via implementing vCPEs on the edge. operating as an agnostic network overlay directly linking to the cloud, and abstracting network architectures over the wide area and distance. Such an edge networking model with a close and robust interaction with the cloud allows fast and real-time issue management, performance adjustment, and trouble solutions for the big data IoT.
vCPE virtualizes the functions of the local IoT gateway, and leverages the edge cloud computing capabilities in better managing the IoT traffic, facilitating effective data processing, simplifying the service provisioning, and providing tighter security.
Furthermore, SD-WAN’s central orchestration and control capabilities are critical to IoT’s successful deployment and operation. For example, while edge computing is getting popular, central clouds will continue to serve as the core layer of the IoT service and can effectively support and backup the services to the edge. All this requires the telcos to orchestrate, glue together, and manage the IoT solution bundle from a central point, integrating network services across the various device, mobile access, gateway, and cloud-tier architectures. SD-WAN can serve as the glue.
Cost wise in comparison with an MPLS network, SD-WAN is around the range of cutting the WAN Capex and Opex by 30 - 70%. The vCPE also improves the gateway’s utilization and power density, and reduces its procurement and operation cost associated.
In summary, the telcos would need a SD-WAN powered Intelligent Edge Network to better address each of the vertical industries in the burgeoning IoT market, targeting the big data IoT applications. Recently AT&T announced that Flexware, its virtual CPE platform that offers policy-based intelligence at the application level, will support SD-WAN in early 2018, “in a marriage of AT&T's Intelligent Edge approach and its intelligent network”.
This looks like the right direction to go.
David W Wang is a telecom/IT business development principal and senior consultant with ITCom Global, LLC based in Washington DC metro and author of the new book “Cash in on Cloud Computing. David can be reached at ITComG18@gmail.com