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Market Insight

IoT connectivity platform management (CMP) vendors enjoy a growing market, but with a challenging competitive environment

August 02, 2019

Sam Lucero Sam Lucero Senior Principal Analyst, IoT Platforms
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China Mobile’s choice to build a CMP with Huawei brings the outlook for merchant CMPs into sharper focus

The merchant connectivity management platform (CMP) market grew explosively in 2018, rising from 239 million connections under management at the end of 2017 to 684 million connections under management at year-end 2018.

While several vendors reported strong growth—Cisco Jasper currently is growing at 2.5 million managed connections per month—the principal basis for this growth in 2018 was the decision by China Mobile to work with Huawei to develop a CMP called the Connection Enablement Platform (CEP), which Huawei is making available to other connectivity service providers (CSPs). With China Mobile’s decision, it is now clear that the three incumbent Chinese operators (China Mobile, China Unicom, and China Telecom) have chosen to use merchant market CMPs and bi-lateral relationships with other CSPs, to manage their IoT connections.

The Chinese CSPs account for 62.7% of the total 2018 volume of global cellular IoT connections. Furthermore, the overall global cellular IoT CSP landscape is concentrated as well. The top ten CSPs (including the Chinese operators) represented 87.2% of global 2018 cellular IoT connections. These ten CSPs have now largely settled on their respective sourcing strategies for CMP functionality, i.e. build in-house or outsource to a CMP vendor.

Effectively, the merchant CMP market has shifted from a greenfield opportunity to a more constrained, competitive environment, in which CMP vendors will have to displace other vendors to increase their market share to any significant amount.

As the merchant CMP market competitive landscape grows more challenging, several vendors have exited

A CMP is a collection of software and services that support a CSP in managing IoT devices on their networks and in providing the CSP’s enterprise customers the ability to self-manage key operational features of the subscriber identity module (SIM)-based connections to their remotely deployed IoT devices.

We can think of CMPs as “IoT-specific Business/Operational Support Systems (B/OSS)” for telecom networks. Many CSPs in fact have used their traditional B/OSS infrastructure to launch IoT services, particularly consumer-oriented IoT services, such as support for connected consumer electronics devices. However, given the differences in operating parameters that IoT devices have from traditional handsets, most CSPs eventually either build a CMP in-house, or (increasingly) source a CMP from a vendor.

With the market inflection described above, several CMP vendors effectively exited the market, though some may continue to support legacy customers. Vendors leaving in the late 2017 and 2018 timeframe included: Aeris, HPE, nTels, and Symsoft. In addition, ZTE essentially transferred its CMP, along with the rest of its ZTEsoft telco software unit, to Alibaba. ZTE still claims an ownership stake in the unit however, which has now been rebranded as “Whale Cloud, an Alibaba Company.”

The top five CMP vendors (by global volume of cellular IoT connections under management) in 2018 were (in alphabetical order): Cisco Jasper, Ericsson, Huawei, Vodafone, and Whale Cloud. Collectively, these vendors represented 97.6% of global merchant market CMP connections under management in 2018.

Vendors are attempting diverse strategies to compete successfully

Although the merchant CMP vendor competitive environment is concentrated, and the top five vendors by global unit volume market share in 2018, have remained the top five since 2015, there is still both an opportunity for other vendors to increase their market share and for any of the top five vendors to lose market share in the future.

Strategies that CMP vendors are taking to enhance their competitive positioning include:

  • Developing “network near” enhancements to their core CMP offerings. Vendors are constantly pushing to enhance the technical capabilities of the CMPs. For example, multiple vendors have introduced support for non-IP NB-IoT communications in the telco network control plane. Cisco Jasper introduced “Alliance Manager” as a way for the various CSPs using its Control Center CMP to re-home SIMs over the air between CSPs. Unfortunately, such technical innovations gradually tend to be absorbed into technical standards (as in the case of the GSMA’s eSIM specification relative to “Alliance Manager”). As such, this strategy can be a weak basis for differentiation.
  • Placing a primary emphasis on enterprise customers rather than CSPs. Typically, CMP vendors target CSPs as their primary customer base, though the vendors may provide significant market and sales support to the CSP to win new enterprise customers. Some vendors, however, are going straight to enterprises and offering them a CMP that the enterprise can use to manage multiple CSP contracts that they negotiate for themselves directly. Usually this is paired with an MVNO offering providing the enterprise with connectivity in regions where the enterprise does not or cannot negotiate a direct CSP contract. This strategy expands the field of opportunity for the vendor, though it is somewhat limited by the number of enterprise prospects that have the volume opportunity to negotiate a better direct deal with a CSP than what would be on offer via an MVNO.
  • Providing an alternative to the CSP alliances for enabling a global footprint. Cisco Jasper and Ericsson have each formed “alliances” consisting of CSPs that use each vendor’s respective CMP as the basis to support mutual enterprise customers on a global basis. These alliances (the IoT World Alliance, the Global M2M Association, and, relatedly, the Bridge Alliance) have been an effective means of differentiation for Cisco Jasper and Ericsson given the importance of providing a global footprint for connectivity. Vodafone has leveraged its own internal global footprint to provide a similar benefit. Likewise, Arm, KORE, and Transatel have an MVNO capability that enables them to offer a de facto global footprint, either to CSPs or to enterprise customers directly, albeit typically via a global roaming SIM.
  • Reexamining the traditional “revenue share” pricing models. In the past, CMP vendors have monetized their platforms by negotiating revenue sharing agreements with CSPs. Sharing rates have typically been around 18% of connectivity service fees, though ranges of 6 – 20% have been reported. However, some CSPs have expressed unhappiness with the revenue share model in general and with sharing rates in the 18% range specifically. This unhappiness on the part of CSPs, along with the rapidly falling average revenue per unit (ARPU) rates for IoT connectivity services, has led several vendors to see alternative ways to frame the value inherent in their platforms. For example, Cisco Jasper is moving to a subscription model that recognizes there is a need for different sets of features to support different types of use cases. By creating “packages” that cluster and match those features most needed by a given customer, Cisco Jasper hopes customers will see how Control Center supports their specific needs.

IHS Markit has recently published a report assessing the merchant CMP market opportunity

While the competitive landscape for CMP vendors will likely remain challenging, the market for merchant CMP offerings should experience strong growth. IHS Markit forecasts that the global merchant CMP market will pass US$1.5 billion in 2019 and reach US$2.6 billion in 2025. Please see IHS Markit’s recently published report on this market at: https://technology.ihs.com/612767/connectivity-management-platforms-report-2019.

Organization
Huawei
Research by Market
Enterprise & IT
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