The narrative on digital transformation in India has steadily taken shape with almost all players of the ICT ecosystem trying to pitch their piece to organizations. Over the last decade and a half, companies have steadily migrated from struggling to manage complex infrastructure sprawl to consolidating their physical infrastructure, embarking on the mission of virtualizing their infrastructure to deploy their solutions in the cloud.
From this adoption framework, it was evident that no piece of technology has uptake until and unless it is a critical business requirement.
Digital transformation becoming a priority
That brings us back to the present scenario. We live in extremely uncertain times courtesy of the pandemic. Every business decision that involves capital is scrutinized. Yet, companies understand going digital is not to stand out or to have a market edge; it’s essential for their survival.
In a way, the current pandemic has worked as a catalyst for future digital transformations in India. Areas like cloud computing have seen a surge in requirements from sectors that were historically averse to charting the course.
The way true transformation works, all these technologies that enable an organization to go digital, i.e., virtualization, cloud computing, Big Data, and Internet of Things (IoT), usually work in unison. A spurt of growth inevitably affects the other and vice versa.
According to Frost & Sullivan's analysis, the cellular-based IoT market, which has grown rapidly, is expected to have a year-over-year (YoY) decline of about 4% by the end of CY2020. However, the market is expected to start reviving itself from 2021 and to close CY2022 growing YoY of upward of 20%.
Telecom and enterprise
As the telecom sector is going through a rough patch, a lot hinges on how companies address enterprise business. Most telcos have a clear charter to focus on emerging technology areas like cloud, data center services, managed security services, and IoT.
The challenge for the telecom sector is to go beyond connectivity and offer end-to-end services, much in line with their counterparts in the IT services sector. For this, it needs an ecosystem and an effective execution strategy.
However, despite significant growth in M2M connections, in terms of revenue realization, it does not add up to a significant value if one was to compare it with the overall IoT ecosystem.
Currently, connectivity contributes to less than 10% of the overall revenue share, with a bigger share resting with applications, platforms, and hardware.
To drive higher value, telcos will have to challenge the pecking order and start conversations around the end-to-end service capabilities, which, at present, are mostly driven by their counterparts, from OEMs to IT service companies. Owning the network and leveraging their experience in servicing clients from key industries, like Automotive and Utilities, actually gives them headway in the race to the finish.
As far as Indian enterprise business goes, the Automotive & Transportation, Retail, and Energy & Utilities industries have led the adoption of cellular-based IoT, according to our analysis.
Automotive & Transportation, and Retail, were adversely affected due to Covid-19, resulting in reduced expenditure in areas like IoT. But, this is expected to be a momentary hitch, with limited impact on the adoption of IoT in India in the long run.
Applications like asset tracking, smart metering, PoS, and automatic fleet tracking have found decent levels of traction in the Indian market, paving the way for many other use cases to follow, like industrial monitoring and connected devices.
While the outlook is largely positive, like every other technology, IoT also has its share of challenges. While challenges range from the complexity of solutions to interoperability to security and budget constraints, most of them are teething issues that will subside with time.
Usually, the bigger challenges are related to organizational and cultural changes. These are deep-seated and require a considerable amount of time before they are overcome.
The best way to overcome these bottlenecks is to create success stories for each of these industries that resonate with their peers. This formula has succeeded in the past, and there is no reason why this won’t work for IoT.
To put things in perspective, the telecom sector is going through a volatile phase. Its future lies in how it plays its cards on the digital transformation front. IoT, in many ways, can be the key. It is perhaps closest to the DNA of a telco. Having the right blend of vertical-specific solutions, potential partnerships and right pricing structures can be the key to future success.
- Apalak Ghosh
- The author is Associate Director, Digital Transformation Practice, Frost & Sullivan