The full transcript of the podcast is available below.
Welcome to this week’s Wireless Noodle where I’ll be delving into the break up of IBM, a couple of fascinating technologies in the form of DECT 2020 NR and the Digital Annealer, and a snapshot of some of Transforma Insights’ work on IoT forecasts and what they tell us about the market. Along the way I’ll give you one of the most cursory explanations you’ll ever hear of quantum computing, and further expand on the ideas around unicorns that I shared a few episodes ago.
First to talk about a big news item this week.
In an interesting move, one of the big companies that I watch, IBM, has decided to split its business in two.
Newco focused on “managed infrastructure services”, so legacy enterprise ICT infrastructure. IBM will carry on, focused on hybrid cloud and AI. That includes technology platforms (particularly based on the Openshift platform from the recently acquired RedHat). And digital transformation thrown in for good measure. Essentially it’s splitting between the mature legacy parts of the business, and the new growth ones. The markets liked it, with shares going up 6%.
And I like it too. There will always be friction in any organisation that is trying to maintain an existing product base while also going out to find new markets. One always ends up being sacrificed for the other. It’s analogous to the conversations I have with enterprises trying to implement new technology, IoT or whatever. If it’s left to the IT dept there are often problems. They’re responsible for keeping the wheels on. And everything else gets sacrificed for that. Which means that handing new initiatives to them can often mean slow progress. Better that there is a different group (a CTO office perhaps) that handles the new stuff.
Just as within a company you can only be responsible for day-to-day OR new expansion, I’m of the view that a company can only be a growth business, or sweat assets, but can’t really do both. Ultimately no business is organised to do both things.
Let’s talk about Kodak. That company usually gets trotted out as a cautionary fable for technology businesses. People often talk about Kodak as a failed company. Its market evaporated and it failed to pivot to digital, despite having made some interesting innovation in the space. But I have a different perspective. Perhaps what it did was rational. What are the chances that Kodak would have been a digital photography leader? Moderate. So it would have to go through radical upheaval, probably sacrificing its legacy business, and sinking in pots of cash, in exchange for a moderate chance of being a leader in a new market. This is survivorship bias from another angle. The assumption that Kodak would have succeeded if it had pivoted, obviously. But not obviously, of course. It was one of dozens of players, many of whom had much deeper pockets and much more of a heritage in consumer electronics.
The ultimate irony is that, as it turns out, digital cameras was a market that would be supplanted by phone cameras anyway. So, even with hindsight people think Kodak should have pivoted to a market (digital photography) that would evaporate within a decade.
I would argue that probably Kodak made the rational choice. Batten down the hatches, cut costs, sweat your legacy asset for all it’s worth, and write a poetic valedictory farewell. Very occasionally companies make effective pivots away from legacy businesses and towards new growth markets.
Which brings us naturally to IBM. It has a strong heritage of dropping (divesting, call it what you will) legacy parts of its business, PCs being the most obvious, which it did, what, 20+ years ago. And it is perhaps not too surprising that it has chosen to move away again from the legacy business, this time spinning it off into a new entity. There is a risk to this strategy. If you keep on rolling the dice, you’ll get a 1 eventually! But, sticking with a legacy business is a risk in its own right.
This brings me back to the idea of unicorn companies that I discussed in Episode 9. Often big tech companies try to imitate unicorns. They do this by imitating what they think is the characteristic of the successful company. Beanbags and pool tables, perhaps. But actually the main characteristic of a successful start up is that it has a lot of peers that fail. Big companies don’t have that luxury. As such they will generally be better off taking advantage of the one sure-fire advantage that they have and riding that as far as it goes. That might be scale and incumbency; it’s hard (but not impossible) to start a new car manufacturer. Or it may be a scarce resource, such as a mobile network licence. Those kinds of advantage guarantee a certain scale of success, and longevity. But not super-normal margins.
I come back to the telecoms industry time and again, not least because it’s the one I know the best. Telcos often fret about relatively low margins. And in part this is caused by strict regulation. But strict regulation is necessary where you have a triopoly as you do in most mobile markets, for instance. Barriers to entry there are very high. You need a permit from the government and a hefty chunk of a scarce resource (mobile spectrum). In exchange you’re guaranteed a big slug of revenue. And an almost cast-iron guarantee that you’re not going to go bust. 15 years ago Nokia, as a mobile phone maker, was huge. Today it doesn’t exist, other than as a licensed brand. And in the meantime the mobile operators have chugged along doing what they do. The brand names have changed a bit and there has been some M&A, but ostensibly it’s the same companies. Slow and steady won the race.
Which brings me back to IBM. Incidentally, I am currently writing a report specifically on the subject of its split for Transforma Insights. IBM is not in a safe space. It is in a highly disruptive space, and it is pursuing a strategy of cutting itself free from its low margin safe space. But it has the ability to adapt. But the biggest challenge is not so much which technology areas it focuses on, but the fact that it is trying to move from being a services company to being a products company. It has demonstrated the ability to shift from hardware to services. The next shift is from services to software products. This, more than any change in the technology focus, is the big change.
Now I want to introduce a new little segment to the podcast where I talk about a great new technology or vendor (or two) that I’ve come across recently.
The first is the rather dull sounding DECT 2020 new radio. Actually this could have dropped into the news section as they were involved in a fairly big announcement last week about ETSI announcing the standard. The standard operates in unlicensed spectrum in a dedicated frequency band at 1900MHz (although it can operate in loads of different bands). It uses all sorts of clever modulation techniques to deliver ultra reliable and low latency connectivity for low bandwidth IoT devices. Thanks to some clever interference management techniques it can operate as a mesh or a hub-and-spoke system even with incredibly high density of devices. The self-organising capability means any given node is able to dynamically adapt to performing either role.
All of this means that for dense IoT networks, for instance smart metering, you can drop in a cellular device every so often and then have the other devices mesh with it. It has all the self-healing benefits of a decentralised architecture. And all of this without any need for infrastructure, other than the occasional backhaul device. 5km range. There’s also good power saving functionality although obviously that depends on what role the device might be playing. Battery life could be 5 years though.
I think this genuinely looks like a fascinating new access technology. The big contributor to the standard has been a company called Wirepas, which has been offering effectively this technology for a while, using 2.4GHz spectrum. Genuinely fascinating as a technology.
The second today is Fujitsu’s Digital Annealer. Some of you will be familiar with quantum computing, or at least the concept of it. Specifically, that it’s a probabilistic system based on quantum bits (or qubits), whose state as a 1 or a 0 is rather more flexible, shall we say, than in traditional computing.
And what is a probabilistic system. Well it doesn’t ‘know’ what the answer is, but suggests what it probably is. This can be very effective. It’s much the same way that I used to be good at pub quizzes. I don’t *know* that many answers, but I’m a very good guesser based on how the question is phrased, the level of difficulty of the other questions, things that are likely to come up etc.
The Digital Annealer is described as being ‘inspired by’ quantum computing. Specifically, to solve what are called combinatorial optimisation problems. And what are combinatorial optimisation problems I hear you cry? It’s where you have a complex system with lots of moving parts which are interlinked. An example might be staff scheduling, or school timetabling, or supply chain logistics. There are probably lots of different ways of ‘solving’ a problem, but there are also probably some optimal ways of doing it. The Digital Annealer is used to optimise these systems, running many cycles to identify what is probably (and increasingly likely to be) the optimal configuration. Very interesting stuff, and useful in all sorts of fields of study that we have at Transforma Insights, such as system, workflow, transport or logistics optimisation.
That’s a couple of interesting techs that have come across my desk in the last few weeks, very abridged explanations. If you want to know more, get in touch.
Part of the reason why things have been a bit quiet on the podcasting front for a couple of weeks is that we at Transforma Insights have been publishing a set of press releases featuring our newly expanded IoT forecasts. And we’re going to be running a webinar about it on the 2nd November.
I just want to whet your appetite a little by sharing some of the areas that we’ve highlighted in the new research.
First up is 5G. I’ve talked about it a bit in the recent past. It’s a subject that gets a lot of attention at the moment, not least because a lot of companies are looking for a use case to justify huge investment. The people flogging 5G tend to speak about IoT as a killer use case a lot, so it’s worth us digging in a bit.
The message from our forecasts is that 5G in IoT will grow quite rapidly. But there’s a big caveat. Overall we expect cellular technologies, i.e. those rolled out and run by mobile network operators, to grow from 1 billion IoT devices at the end of 2019 to 5.4 billion at the end of 2030. Pretty healthy growth, but not exactly a hockey stick. Of that 5.4 billion, 3.3 billion will be 5G. Which sounds like a stonking win for the technology doesn’t it?
But (and it’s a big but), of those 2.7 billion (80%) will be using the Narrowband IoT and LTE-M technologies that already exist today, and have been dragged kicking and screaming into 5G as massive-Machine-Type-Communications (mMTC). As I said in the press release we issued, this is not an overwhelming rush for high bandwidth, low latency connections. This growth in 5G is predominantly a reflection of the re-categorisation of these mMTC technologies, and their successors, as 5G.
Ignoring the mMTC technologies, LTE remains the workhorse for IoT. More on which applications are using 5G in the press release.
On the subject of Low Power Wide Area (LPWA) technologies, of which the new mMTC technologies are one component, we also have some interesting findings on this. From just 220 million devices today, these will grow to 4 billion in 2030. The family of technologies are low cost, there is rapid network roll out happening and they have capabilities that are well suited to lots of IoT applications. We expect big things. About 2/3 will be the mMTC technologies I mentioned earlier. The other 1/3 will use other technologies, predominantly LoRa. About half of those will use public networks (i.e. where there is a network operator that sets up and runs the network), and about half private networks (where the organisation runs the network itself).
Which is a neat segue to the third topic I want to talk about, which is private networks. Specifically, actually, mobile private networks, so not the unlicensed LoRa networks that were relevant to LPWA. This is about, again, 5G networks. Mostly it’s for factories and ports and similar campus-style environments. And actually, as it turns out, quite a lot of use in agriculture according to the Transforma Insights forecasts. Which makes sense. Lots of mobile operators see private networks as a good opportunity in 5G. Although truth be told most private networks don’t really need the capabilities that 5G delivers. Nevertheless, there’s a lot of spectrum being made available for private deployments in various countries. In Germany, for instance, 74 licences were issued in September for Lokale Netze using 3.7-3.8GHz spectrum to companies such as BASF, Bosch, BMW and some companies not beginning with B.
Which reminds me of another piece of news last week. This whole episode could have just been based on news items of the week. The item was Verizon announcing that in conjunction with Nokia it would be offering mobile private network services in Europe and Asia-Pac. No reason why not. Good opportunity to extend services into non-footprint markets as far as I’m concerned.
Don’t forget to register for the webinar on the 2nd November when you can hear more from the team at Transforma Insights.
Next week, amongst other things, I’ll be sharing some of the interesting discussions from the Total Telecom Congress which is happening on the day that the podcast goes out. I’m chairing a couple of sessions. One looking at smart cities, the other focused on how telcos make money out of IoT. They’ll be available on demand and I’ll be talking about them and the great insights from the panellists on next week’s episode. I’ll also be digging into some more interesting news and some more interesting tech.
And another reminder about our webinar. It’s on the 2nd November at 8am Pacific, 11am Eastern, 4pm UK, 5pm for most of Europe. A link to register is on the Transforma Insights website on the events page, and I’ll also pop a link on the Wireless Noodle transcript.
I hope you can join me, both for next week’s podcast, and for the webinar.
Links to some of the research that I’ve refered to in this week’s show, as well as a transcript of the recording, will be available on the podcast website at WirelessNoodle.com
Thank you for listening to The Wireless Noodle. If you would like to learn more about the research that I do on IoT, AI and more, you can follow me on Twitter at MattyHatton and you can check out TransformaInsights.com.
Thanks for joining me. I’ve been Matt Hatton and you’ve been listening to the Wireless Noodle.