Earlier this year, management consultancy Bain & Company penned an article about Telcos' Competitive Advantage in the Internet of Things, noting that communications service providers (CSPs) were focusing too heavily on acquiring industry-specific solutions for IoT (e.g., fleet management and telematics), rather than developing horizontal solutions that play to their core. Bain highlights a three-tiered opportunity for telcos in IoT:

Whether CSPs decide to launch their own vertical IoT solutions or become a platform for third parties, a critical enabler of their IoT businesses will be the monetization engine. Monetization spans rating, charging, invoicing, payments, general ledger integration and the configure-price-quote process.

In Heavy Reading's latest report, "IoT Monetization: Beyond Billing," we examine the functions and processes that an IoT monetization solution should encompass, from quote to cash. The report looks at the key challenges to monetizing IoT, given the wide variety of pricing models (variable, flat rate, QoS-based, event-based, subscription, etc.) and business models (B2B, B2C, B2B2X). We examine the IoT platforms that have proved popular thus far in monetizing connectivity and the cloud subscription billing solutions that offer an economical way to sell simple B2B or B2C services. We also outline the key requirements to consider when choosing an IoT monetization solution and discuss how CSPs can turn their monetization capability into a platform play for other industry participants to build on.

The report includes CSP perspectives on IoT monetization from Unlimit, the IoT unit of Reliance Group, and Numerex, an IoT managed service provider that is in the process of merging with Sierra Wireless. "IoT Monetization: Beyond Billing" also contains profiles on 11 technology suppliers, including IoT platform, multi-industry subscription billing and telco-oriented billing vendors.

Just selling wireless connectivity and managing devices is unlikely to make IoT a meaningful profit contributor for most CSPs. To move up the value chain and become IoT service providers, CSPs need to package connectivity with third-party hardware and software and sell the bundle as a managed service. The telco value proposition from IoT is shifting toward an ecosystem-driven model; monetization is no longer just about connectivity, but more about partner management and revenue sharing.

In our report, we suggest that CSPs are well positioned to become platform providers for IoT, not just dumb pipes providing connectivity. Their platform strength lies in managing communications between different parties, leveraging relationships with enterprise customers and exploiting their existing monetization (billing and revenue management) capabilities. It is early stages for IoT, but CSPs should move fast to best capitalize on the opportunity.

— James Crawshaw, Senior Analyst, Heavy Reading