Telenor IoT strategy required core software change

Hotbed for IT innovation

The Nordic region has manufacturing companies that fit the profile to have an IoT strategy, such as heavy machinery manufacturers that are attempting to wrap services around their products. The region is also a hotbed for IT innovation and startups, which support an IoT industry.

Telenor is working with Volvo, Scania and outdoor toolmaker Husqvarna in the Nordics, providing a service to help these companies sell services on top of their manufactured products.

“These customers are used to selling products, but now want to sell a service,” said Östbye. “But selling a service is a completely new business model and for that, they need help.”

Businesses used to selling products must get to grips with the importance of understanding the people who use their products and must change the way they monetise and report sales, he said.

“In the telco space, we are seen as being very good at taking small amounts of money from many people and developing consumer relationships,” said Östbye. “Companies like Volvo and Scania are only used to B2B [business to business].”

But now, through IoT strategies and selling services, companies can go directly to customers, he said. For example, Husqvarna is offering a service called Fleet Services, which is a cloud-based system connecting landscaping teams with their machine fleets through an online management portal.

When you have networking and cloud expertise as well as a history of generating revenue via subscriptions, like Telenor, it might seem a simple step to create a business to offer IoT as a service. But about two years ago, Telenor added software firm Zuora to support its own and its customers’ subscription-based business models.

The software helps companies that are used to selling a physical product get into the subscription economy and take a recurring fee for their services. It removes the complexities of the business model, automates processes, helps companies to understand what customers require through business intelligence, and enables them to customise services to meet this demand.

Zuora’s customers include data storage-as-a-service supplier Box, the Financial Times and the Guardian newspapers. These companies have something in common – they already get their revenue from subscriptions or are increasingly selling services rather than products.

The software supports Telenor’s IoT business, which is also subscription-based, as it grows. Without software like Zuora’s, it would be difficult to create subscriptions to introduce and monetise new services, said Östbye.

IoT business growing

Telenor’s main IoT business is in the Nordics, but it has a presence in other regions. In Europe it operates in France, the UK and Germany, and also has a presence in Japan, the US and Singapore.

Telenor IoT currently has about 10 million SIM cards in use, which means 10 million connected devices. Östbye said this is growing by about one million SIMs a year.

The IoT business unit has annual revenue of about £50m, which comes from about seven million subscriptions and a further three million subscribers and £30m sales from other business units selling its services. Telenor’s total group revenue is about £13bn, so the IoT business still plays a small part.

“This will change dramatically because the number of people and telephone subscriptions is limited, but the number of connected things is almost unlimited,” said Östbye. “It will take many years, but it will be a growing business for us. We are on a journey from being a traditional telecom operator to being a digital services provider.”

Östbye said the biggest challenge for companies moving to selling services linked to their products through the IoT is not a technical one, but transforming from being products-focused, with sales through a distribution network, to being a services company going directly to customers.