Integrated Connectivity: A Cost-Benefit Analysis 

Differentiating into integrated connectivity can be a murky market venture for OEMs and hardware manufacturers. The benefits of integrated connectivity with device modules, hardware, gateways, and more can seem like a ripe opportunity to see evergreen revenue, but there are undoubtedly key risks involved. 

Understanding where the benefits intersect with the risks when considering this new venture is important. 

The Benefits of Integrated Connectivity

At the end of the day, when a hardware sale is made, that is typically where the buck stops. Still, integrated connectivity allows for greater market expansion into the world of IoT, as well as a continued revenue source and reselling opportunity. Overall, benefits include:

• Expansion into IoT Markets: Cellular connectivity is crucial for the Internet of Things (IoT) devices, which require reliable and widespread network access. By integrating cellular technology, hardware manufacturers can tap into various IoT sectors, such as smart cities, agriculture, transportation, and healthcare, where connected devices are in high demand.
• Enhanced Product Offerings: Adding cellular connectivity can make hardware products more versatile and valuable. For example, smart devices like sensors, trackers, and cameras can become more functional by providing real-time data transmission and remote access, appealing to both consumers and businesses.
• New Revenue Streams: Manufacturers can explore new revenue models, such as offering subscription-based connectivity services or data plans. This creates ongoing revenue opportunities beyond the initial hardware sale.
• Competitive Differentiation: Hardware with integrated cellular connectivity can stand out in the market by offering unique features that competitors may lack. This differentiation can be a significant selling point and attract more customers.
• Global Reach and Mobility: Cellular connectivity enables devices to work across various geographic locations without relying on local Wi-Fi or Ethernet connections. This is particularly valuable for devices used in remote or mobile environments, such as fleet management systems or remote environmental sensors.
• Improved Customer Experience: Integrated cellular connectivity can enhance user experience by providing seamless connectivity and reducing the complexity of setting up and managing connections. This can lead to higher customer satisfaction and loyalty.
• Partnerships and Ecosystem Integration: Manufacturers can form strategic partnerships with mobile network operators and service providers to offer bundled solutions or joint ventures. This can open up additional markets and customer bases.
• Data and Analytics Opportunities: Cellular-connected devices can generate valuable data that can be analyzed for insights into usage patterns, performance, and customer behavior. This data can be used to improve products, develop new features, and inform business strategies.
• Regulatory and Compliance Advantages: In some industries, such as automotive or healthcare, integrated cellular connectivity can help meet regulatory requirements for data transmission and safety. This can be a selling point for customers who need to comply with these regulations.

The Challenges with Integrated Connectivity

While the benefits can seem extremely positive, the drawbacks can have significant business and financial consequences if a manufacturer cannot integrate connectivity successfully. These include:

• Cost: Adding cellular connectivity involves costs for components (such as modems and antennas), certification, and ongoing data services. These expenses can impact the overall price of the hardware and affect profitability, especially in competitive markets.
• Complexity of Integration: Incorporating cellular technology into hardware requires technical expertise and careful design to ensure compatibility with different cellular networks and standards. This adds complexity to the design and development process.
• Regulatory Compliance: Cellular devices must comply with various regulatory standards and certifications. Meeting these requirements involves time, expense, and rigorous testing.
• Network Compatibility: Ensuring that the hardware is compatible with multiple cellular networks and bands can be challenging. This requires understanding and supporting various network technologies (e.g., 4G LTE, 5G) and ensuring global compatibility.
• Management and Costs: Managing data plans, handling data usage, and ensuring connectivity reliability can be complex. Manufacturers may need to offer support for managing data costs and addressing connectivity issues.
• Firmware and Software Updates: Cellular-connected devices often require over-the-air (OTA) updates for firmware and software. Managing these updates securely and effectively is essential to ensure that devices remain up-to-date and functional.

The complexities of connectivity can drain existing resources within an organization and can negatively impact customer relationships moving forward, which makes it a risky endeavor. 

Quick stats and numbers

The Financial Impact of Creating a Connectivity Infrastructure:

According to a recent Analysys Mason report, two of the main options for integrating connectivity are to purchase or acquire an MVNO or to create an MVNO within operations, both of which carry significant costs. 

Financial Impact of Downtime

An IBM study by Forrester Consulting, which surveyed 100 IT directors from major U.S. enterprises, revealed that unplanned downtime due to power outages or other system-wide failures costs, on average, 35 percent more per minute compared to planned downtime. This can quickly blow back onto the OEM or hardware manufacturer, creating a negative reputation, lost sales, and more. 

Financial consequences for GDPR noncompliance, for example, are:

Lower-tier fines: A maximum of €10 million or 2% of the previous financial year’s annual global turnover, whichever amount is greater.

Higher-tier fines: A maximum of €20 million or 4% of the previous financial year’s annual global turnover, whichever amount is greater.

A Viable Option for Integrated Connectivity

Without having to acquire or construct the necessary MVNO infrastructure for delivering connectivity services, OEMs and hardware manufacturers can leverage existing relationships with a leading connectivity provider. 

Want to learn more about how a relationship with a connectivity provider can add a unique value proposition to hardware manufacturers and OEMs? floLIVE will be at embedded world in Austin, Texas, October 8-10.

Reach out to schedule time to speak with our team on how to take device modules and hardware to the next level.