As networking vendors and telecommunication companies try to capture a bigger slice of the Internet of Things, many are trying to sell to their traditional buyers in IT―and it’s limiting their ability to fully capitalize on IoT opportunities (see Figure 1).
Top equipment vendors earn only 2% to 3% of their revenue from the Internet of Things, and telcos get less than 2%
For decades, sellers of networking and telecommunications equipment and services nurtured relationships with their primary customers in the IT department. The door to the CIO’s team was the right one to knock on to sell, for example, networking gear or connectivity services that bring companies online and keep them connected with suppliers and customers.
Meanwhile, sellers of industrial equipment and services―things like manufacturing robots, oil well drill bits and packaging machines―built their relationships with the operational technology (OT) teams in the lines of business, because that’s where purchasing decisions about industrial equipment and services have always been made.
Increasingly, as industrial equipment has continued to be fitted with sensors and connections, the companies that sell networking and telecom equipment and services have recognized and pursued the opportunity to enter that market and offer connectivity and other services related to the IoT.
Unfortunately, too many have tried to use their existing commercial relationships with IT to make the sale, rather than investing in developing new relationships with the OT buyers who make purchasing decisions. Research from Bain finds that for 85% of IoT purchasing decisions, people in operational technology were the key decision makers or influencers. The remaining decisions were made jointly by IT and OT leaders working together.
To gain more traction with IoT solutions, network vendors and telcos need to build up their relationships with these operational technology buyers. One important way to do this is by forming partnerships with manufacturers and other vendors that have deep experience in those industries, and already have relationships with the decision makers in OT.
These selling partners with their industry expertise can help vendors develop the right offers combining equipment and services to help them capture greater share. In fact, these industry vendors are where customers go first when exploring their IoT options. Bain’s survey of operational technology customers found that 60% to 70% of the time, their first point of contact in exploring or initiating IoT projects is with device manufacturers and system integrators, contacts that would have more specific domain expertise than the network vendor that may be orchestrating the sale.
In addition to these sales partnerships, IoT sales models will continue to evolve in several ways, depending on the use case, and the needs and capabilities of the customer. Some offers will require zero touch from the vendor, such as pure connectivity offers that are sold to customers through channel partners or online. Other solutions may require a light touch, working with system integrators or other intermediaries that can sell to customers at the right place along the stack.
Some sales will demand much more, and for those, vendors will need to continue building up their teams and their capabilities, improving their ability to partner with industry experts and locate the right decision makers within customer companies. In some cases, these teams will also need to master the art of cocreating solutions with customers who are confident in their understanding of their business, clear on their needs, and less willing to invest in technology for its own sake.
Building and deploying these teams won’t be easy, given the challenges of finding the right talent. But those network and telecom companies that move quickly should find themselves out in front, working with the customers that can help them learn the new skills they’ll need to succeed.