What is driving Telefónica's IoT strategy?

Friday, November 25, 2016

Telefónica has been one of the most proactive multinational telcos in exploring new business models based on M2M and the internet of things (IoT).

Through its Business Solutions unit, Telefónica offers IoT connectivity, smart cities, smart energy, smart mobility and smart retail solutions, as well as the new IoT Digital Business.

The company also has a chain of R&D centers that it operates via its Telefónica I+D unit through which the company tests and applies new concepts and products and services. The centers are located in Spain, London, Tel Aviv, São Paulo and Santiago de Chile.

The Santiago R&D center was set up in 2014 with state development agency Corfo and local university Universidad del Desarrollo (UDD) with a shared investment of US$24mn for a four-year project.

The thrust behind the center is to help diversify Chile's natural resource-dependent economy and develop added-value solutions that can be exported.

Now, two years on, the center is beginning to bear fruit in three key areas: agriculture, mining and smart cities.

BNamericas spoke to Telefónica's Chief IoT officer, Vicente Muñoz, during a recent visit to Chile to check on the progress of the center and how what is being developed in Chile fits into the company's global IoT vision.

BNamericas: Telefónica has been taking leadership in the area of IoT. Is this driven by the need to differentiate itself in this highly competitive industry and diversify its source of income?

Muñoz: The telecoms industry the world over has to adapt. We all have to, not just a few. We have to play a role in every scenario, every industry. It's a big opportunity.

Telefónica is taking IoT very seriously as a differentiator, as well as big data, cloud computing, open innovation and, of course, security. Our competitors are dabbling in those areas but none with the breadth and depth that we have.

BNamericas: How much is Telefónica investing in the area of IoT?

Muñoz: I can't give you a specific figure, but to give you an idea in terms of resources, we have more than 2,000 people dedicated just to security.

This is going to transform our company internally and externally. We can't talk about digital transformation to our clients if we are not doing it too.

If you want to know how important this is for our company you only have to look at what we're investing in Chile alone. To give you an idea, we have a person on Telefónica's executive board who's in charge of this entire digital world in terms of cloud, security and data.

BNamericas: How many customers does Telefónica have for its Smart Solutions portfolio?

Muñoz: We currently have 2,500 with some 15-20mn connected devices. We're aiming to reach 1bn connected devices by 2020.

In the industry we talk about a global IoT opportunity of US$3tn. Behind that is a concept of unicorns [a start-up valued at over US$1bn]. But unicorns have to do with valuation, not income. In the digital world it's all about creating unicorns, but the end goal is to generate income and we have an internal goal of generating 1bn euros in revenue from this business in the next four years.

BNamericas: Telefónica had a stand at the IoT Solutions World Congress in Barcelona at the end of October where it showed off solutions in four areas: Smart Mobility, Smart Retail, Smart Energy and Smart Connectivity. What were your takeaways from that conference?

Muñoz: Globally we have clients in 120 countries; we're growing 30% year on year. So we're focusing on the areas that help us grow.

We're focusing on the areas of mining and agriculture. We're focusing on mobility of people; not mobility per se, but rather from the point of view of mobile field management. In the areas of industry and infrastructure, managers are concerned with where their workers are, how they can make them more efficient; improving the levels of security and quality. We're looking at fleet management, connected cars and refrigerated container tracking. We're also focusing on smart cities, retail, and energy.

BNamericas: Does Telefónica have working solutions in all of these areas?

Muñoz: Yes. But that's why open innovation is important. Our role is to generate income for the company, to have real clients who we can learn from and wh0 are prepared to pay for these solutions. This is what our clients are asking for and we're going to see exponential growth in these areas.

BNamericas: How important has the work been at the Chile R&D center?

Muñoz: We're very proud of it. Several years ago carrying out innovation was like espionage; you did it behind closed doors. But today we share our innovations with others; we have open APIs on which others can generate value. This is important to give Chile visibility.

BNamericas: What research have you seen done at this center that has stood out?

Muñoz: I'm seriously looking at several projects to take them to Spain or Germany. For example the research they're doing in energy efficiency, predictive systems in the treatment of copper. The basis of projects like these can be taken to other industries, not just mining.

BNamericas: One of the key factors to make IoT widespread is the development of standards for Low-Power Wide-Area Networks [LPWAN]. These allow long-range communications at low bit rates for all of these connected things. How are the standards developing?

Muñoz: There are different standards evolving for low power and data consumption communications. One is the development of 5G, another is LPWAN. We're connectivity agnostic. You use the technology that best suits the environment. For example in the Atacama desert you'll most likely need a cheaper and simpler network given that traditional cellular networks consume a lot of energy. Things will accelerate a lot in the next two years. We used to talk about these standards being ready in 2019. Now some people are saying 2018 and others the end of 2017. Everyone is working hard for this to happen as quickly as possible.

About Vicente Muñoz

Vicente Muñoz heads the Internet of Things business at Telefonica Group. The IoT Business División encompasses IoT connectivity solutions, Smart Cities, Smart Energy, Smart Mobility, Smart Retail, as well as the new IoT Digital Business.

Muñoz has held C-level positions, across the financial, travel, media, telco and retail industries.

About the company

Telefónica I+D is the R&D arm of the Telefónica Group. Founded in 1988, its mission is to convert ideas and concepts into workable products.

The unit currently collaborates with technological leaders, organizations from 40 countries; among which there are more than 150 universities.

In Spain, Telefónica I+D has R&D activities in Barcelona, Granada, Huesca, Madrid and Valladolid and worldwide in Tel Aviv, London, São Paulo and Santiago de Chile.