Orange: Connectivity is 5% of Industry 4.0 spend – we’d rather talk apps and services
How does a mobile operator, in the business of airtime subscriptions, go beyond selling straight connectivity? Because this must be the goal, and the measure of ambition. There is no future in SIM cards, as we have argued – especially as technological innovation higher up the stack presents an opportunity for society to jump forward.
The operator community knows this, of course, even as their primary focus is taken with threading the world with wireless 5G networks. The same conundrum has vexed it for a decade, at least, as its members have sought ways to lodge themselves in the service stack, sprung by cellular and other technologies.
Their strategies, as they should, reflect their own supplementary specialisms, both horizontal (technological) and vertical (industrial). Let us consider the case of one: French telecoms group Orange, whose digital-change strategy is well articulated by its enterprise division, Orange Business Service (OBS).
‘This company will be very different in 2025’, Orange said (effectively; see write-up here) last month, as it unveiled a 2025 master-plan that placed data services for enterprises at the heart of its strategy in the 5G era. The company’s focus is shifting with 5G, it said, to drive new sales out of industrial transformation.
Enterprise IoT Insights caught up with Werner Reuss (pictured), in charge of Industry 4.0 at OBS, towards the back-end of 2019. In delayed playback of the conversation, he points to the rejig at OBS in the middle of last year, which saw the creation of a new Smart Mobility Services entity to forge tighter links between mobile workspaces and IoT activities.
Its strategy with IoT, he explains, used to be anchored in two business units, which separated the old discipline of connectivity (“everything that is traditional in the space”) and the newer one of IoT systems integration (“selecting hardware and software components”), layering in new-fangled data services on top.
The new Smart Mobility Services division within OBS – awkwardly acronymized as SMS; headed up by Valérie Cussac, who used to manage the division’s “traditional” sales in France – brings these entities together, and seeks to leverage its horizontal expertise in vertical markets where it has success, and where the IoT narrative is clearest.
Orange’s beyond-connectivity expertise has been bolstered in recent years with acquisitions of data specialists, targeted squarely at enterprise and industrial sectors. Via OBS, it acquired a controlling stake in France-based Business & Decision in late 2017, valued at around €62.5 million at the time. Its background is in business intelligence in IoT, cloud computing, and cyber-security, notes Reuss.
Six months later, OBS bought cloud infrastructure and services company Basefarm outright for €350 million, in the summer of 2018. Basefarm, in Norway, owns Unbelievable Machine Company, as well, an analytics outfit based in Germany. “It does data lakes and deep learning things, and works with Microsoft and AWS; they have some big projects together.”
But Orange’s chief specialism outside of airtime, arguably, is cyber-security, which is being wrapped into its new enterprise IoT consultancy practices. “OBS has 2,100 security specialists in Europe. We’re one of the biggest players. We want to make it a €1 billion business over the next couple of years,” says Reuss.
The question Orange has grappled with, as it has expanded its services portfolio, is how to take it to market. “The assets we have are so rich, and so relevant to verticals. And we need to extend our go-to-market strategy, and think how to address the customer.”
Hence the structural rejig at OBS, and the formation of the Smart Mobility Services division, orchestrating mobility and data as bass and tenor voices in its play of industrial transformation. The sales operation is split three ways, targeting Industry 4.0, smart cities, and connected products, alternatively.
Reuss heads international operations for the first of these, covering industrial IoT for process optimization and machine automation, mostly in discrete manufacturing. The second is the prototype for the others, as Orange’s focus on smart cities, covering everything from smart meters and utilities to urban data platforms and government services, is longer-established.
The last, loosely defined, has grown out of legacy SIM sales to car makers, for connected vehicles. It has been expanded to cover smart devices in retail and the home, as well, but it remains more focused, says Reuss, on loading traffic onto the mobile network, and less on the services component.
“Process optimization in the factory is very different from the connected cars, or connected products,” says Reuss. He is even more explicit, in fact. “Let’s make the distinction,” he says. “Connected products are for the time being focused on the SIM card and the whole connectivity story. Smart cities and Industry 4.0 are more about services.”
What about private LTE and 5G – just because it is such an emotive topic, and because we have to ask? Presumably when OBS goes to cities and factories, it is selling some form of dedicated connectivity, as well? “We will do that. But it’s not the major focus,” replies Reuss.
He adds: “It’s all about use cases and business cases – where we support customers to make use cases into business cases. For the Industry 4.0 space, you have to be able to articulate a very good business case, or else you just get stuck in proof-of-concept, or in pilot. It is the thing many vendors are suffering in that space.”
But just that comment, before, about yes-but-no private networking; is Orange seeing much demand for dedicated cellular from industry, and is it offering private LTE as a solution, like other tier-one operators in Europe?
“It depends where we are. If you want to have that [dedicated networking], then you need to have spectrum. We have discussions in France. But we also provide some big industrial customers [with private networks] already, as 4G private networks.”
And is that like a slice, or an equivalent LTE-based segmentation, of the public network? “Yes. We’re using our own spectrum there. It’s not a slice, because that’s a 5G term. But we are building the infrastructure, making sure there’s no interference. It’s a private network – a PMR (professional mobile radio) private network. That’s what we’re doing currently.”
But here’s the thing, and the reason Reuss is reticent about private networking as a driver for digital change, and as a headline act in the OBS portfolio. Connectivity is wrapped up as an enabling function in a broader offer, he says, which matches the solution, including connectivity, to the problem – rather than retrofitting the problem to an airtime sale.
He explains: “We’re talking about a solution. The connectivity is a means [to an end]. But we start with the solution. We have isolated a set of them – and actually a rather small set – and we are offering them where we see demand. And these use cases are mature; the business cases exist, which means they are more likely to end up as real projects and implementations.
“We are looking to put as many components as we can into the offer, to make it holistic. Because all of these components we’re talking about are crucial for Industry 4.0 – I mean, the security discussion is pretty much everywhere, and we have consulting and integration capabilities we’re factoring in as well. We want to be as complete a partner as we can be.”
This is telling; Orange is subjugating its legacy airitime tendencies in OBS to capture new business – and even just to be in the reckoning. It is not self-cannibalization, because its old cellular business has either no place at all in the conversation, or else is introduced later in the piece, as the solution is scoped out.
Reuss quotes unnamed analyses of enterprise spending on Industry 4.0 projects that says the estimated share for straight connectivity providers hovers somewhere between “three-and-a-bit per cent and seven and-a-bit per cent”.
It is not much, he reasons. “You end up with five per cent, as an average, which is about what we have found – €5 out of every €100 goes on connectivity. So we’re looking to get a bigger share.”
Which explains it, and clarifies the sense of the OBS strategy in the industrial IoT space to draw on its new cloud, data, and security expertise, plug in bits and pieces of cellular, and partner everywhere else. But what about those industrial IoT use cases, crossing over into smart cities as well, that it is pushing hardest?
This article is continued here.