T-Systems recently held an analyst event which specifically covered the IoT capabilities of parent company Deutsche Telekom AG Group (DTAG) and its own Digital Division. Here are the key takeaways.

IoT Connectivity Services

IoT is clearly important for DTAG and for T-Systems for connectivity reasons: NelsonHall estimates that most of its IoT revenues come from traditional SIM cards and connectivity services over 2G, 3G, and 4G networks.

DTAG is accelerating its deployment of IoT-enabled networks. A priority is the existing 2G, 3G, and 4G networks in the 14 countries (mostly Eastern and Central Europe, along with Germany and Austria) where DTAG provides fixed and/or mobile communication services (‘Natcos’). DTAG is expanding its network through signing roaming agreements in Europe. In countries where roaming is not legally allowed or is a grey zone, DTAG is setting up local partnerships: Brazil and China are now live. The U.S., where DTAG operates through its majority stake-owned subsidiary, T-Mobile USA, is a work in progress.

IoT communication protocols bring an additional layer of complexity. DTAG has selected Narrow Band IoT (NB-IoT), rather than adopting other communication protocols such as LoRa, and Low-power Wide-area network (Sigfox). DTAG is accelerating its deployment of NB-IoT across eight countries in Europe and the U.S., and by 2018 should have completed its NB-IoT deployment in nine countries. Other Natcos will follow.

Next on the agenda is NB-IoT roaming agreements in geographies where DTAG has gaps: e.g. the U.K. and France. These will take more time to finalize, largely because the industry has not yet agreed on charge-back mechanisms.

Partnership Adoption

DTAG has IoT ambitions that extend beyond pure connectivity to the full IoT stack: from sensors and gateways, to data collection, analytics, and use cases. To achieve this, DTAG initiated an internal transformation three years ago and opened up to partnerships with other technology vendors.

An early consequence of this openness was around IoT platforms, evolving from a proprietary approach to a partnership with Cumulocity, a Germany ISV acquired by Software AG in 2017 under the Cloud of Things brand. T-Systems is now also standardizing around Microsoft for its Azure IoT Suite. Cloud of Things targets horizontal and also more standard needs, while with Azure IoT Suite the company is targeting the more complex requirements of large enterprises.

T-Systems is also transforming itself. Its Digital Division is now the organization driving IoT engagements and portfolios, and on the delivery side, it is using the capabilities of other DTAG units.

Digital Division is also looking at external partners, its first three channel partners for IoT, targeting large enterprises, being SAP, Accenture, and IBM. Digital Division also wants to expand its focus on the mid-market, initially in Germany, and also geographies where it has a telecom services presence. Digital Division highlights that this at an early stage, but has big hopes for the future.

Towards More Packaged Offerings

One implication of this extended partnership approach is that Digital Division is focusing increasingly on making its IoT service portfolio more standardized, with more packaged and repeatable offerings.

Verticals are a priority for DTAG, while Digital Division has created ten ‘industry solutions’ around three categories: mobility and fleet management, public & health, and smart city. The company intends to create solutions/semi-packaged applications that can be reused across clients.

DTAG is taking a project-led approach to these industry solutions rather than creating them upfront, with the intention of making the solutions more relevant to its clients. This does not mean that DTAG is becoming more cautious with IoT investments: for instance, it is deploying 10k beacons across parking spaces in Hamburg to assess where parking is available. Driven by client interest, Digital Division is now planning to roll out these beacons across major cities in Germany and across Europe (e.g. 27 cities in Hungary, 23 in Romania, 17 in Croatia).

A New Role for T-Systems?

The new structure and partnership approach that Digital Division is leading may be the prelude to a new organizational structure at T-Systems: the company recently announced it is moving its sales force to a separate unit and is carving out its IT Division. T-Systems is also progressing with its adoption of standard packaged offerings, a journey the company started with public cloud.

Looking ahead, a new T-Systems might emerge, where the company will become more of a software product/solution service company focused on digital, and developing its channel. To some extent, Deutsche Telekom is signaling this change, with the Deutsche Telekom/Telekom brand being more visible in digital and security. Things are moving apace at T-Systems, which is fast becoming a more focused company.