How eSIMs could totally disrupt the smart-device market

Omate Nanoblock
Image credit: Omate

Omate’s partnership with Tata Communications for its Nanoblock kids’ smartwatch demonstrates the power of eSIMs to disrupt the smart-device game – and not necessarily in favor of cellcos, writes Charles Reed Anderson.

MWC 2018 has come and gone, and it seems the news that generated the most headlines was HMD Global relaunching the iconic Nokia 8810 device. While this product brings back fond memories of the late 1990s (who doesn’t reminisce about playing Snake during the dotcom bust?), I tend to like the announcements that focus on driving future industry transformation. Besides, I wasn’t any good at Snake then, so I doubt I’ll be any better at it now.

The MWC announcement that did catch my eye was the launch of the Omate x Nanoblock children’s smartwatch. The fact that this was my MWC highlight will baffle those who know me. First, I don’t have children, so I’m not a potential customer. Second, I have never been a huge fan of smartwatches and regularly comment on how the business model needs to change.

So that begs the question – why was this launch so intriguing? In this edition of the IoT Watch List, I will examine how the business and operating model behind Omate’s partnership with Tata Communications has the potential to deliver wide reaching impact across the IoT ecosystem and transform the go-to-market strategy for hardware vendors. This is great news for hardware vendors and “brands” that can leverage it, but could be bad news for mobile network operators (MNOs).

The basics

At first look, the Omate x Nanoblock looks like another step in the evolution of a children-focused smartwatch. The partnership with Japan’s Nanoblock adds a new twist – instead of a normal watchband, this device comes with a Lego-like band that allows kids to play with the removable bricks.

The smartwatch itself has alarm, stopwatch and pedometer functionality, as well as a low-res camera for selfies and video. The device is linked to a parent’s phone and allows the parent and child to have a “two-way, walkie-talkie-like” voice chat, and also allows parents to locate their child’s location via the smartphone app.

The functionality and feature set are a good next step in the evolutionary process of a children-focused smartwatch, but that is not why I find this intriguing.

To take this product to market, Omate partnered with Tata Comms and will leverage its MOVE – IoT Connect platform. The watch will come with an embedded SIM (eSIM) that allows it to connect to Tata Comms’ global virtual network system, and this is the differentiator. The built-in 3G connectivity connects to any of the 600+ MNOs Tata Comms has relationships with globally. That means that when a new customer first turns on the smartwatch, it is instantly connected.

nanaoblock tata omate eSIMs
Image credit: Omate

Why it matters

eSIMs simplify connectivity

eSIMs are destined to become a hot topic in 2018. At CES, Acer launched its “connected” Swift 7 laptop with an eSIM and bundled 1 GB of free data. Then Microsoft and Qualcomm followed up at MWC by announcing the Always Connected PC platform, which leverages 13 MNOs in nine countries to support their eSIM push. Three Microsoft laptops (ASUS NovaGo, HP ENVY x2, Lenovo Miix 630) will ship with eSIMs and the MNOs will, in theory, make it easy for consumers to purchase and “turn on” the laptop’s data connectivity.

But these examples leverage eSIMs for laptops – I’m more interested how eSIMs can impact other connected devices.

Omate’s smartwatches, for instance, require connectivity – and if they had to negotiate with MNOs in each country, it would slow their market entry strategy to a crawl. By working with Tata Comms, Omate was able to negotiate a single contract and they now have the capability to launch “born connected” devices globally.

As soon as the consumer turns on the device, it will automatically connect to one of Tata Comms’ local MNOs relationships for local (not roaming) connectivity. And the consumer experience is enhanced by the consumer not having to purchase their own data plan separately.

This means built-in connectivity, lower connectivity costs, improved user experience and simplified global go-to-market capabilities. This is disruptive.

Overcoming the security risks

One of the major challenges for children’s smartwatches is the security risks. Europe governments in particular have taken a hard stance, with Germany’s telecoms agency banning children’s smartwatches in late 2017. In fact, it went as far to ask that parents destroy them based on concerns the microphone functionality could be turned on remotely by parents or hackers.

The European Consumer Organization also jumped on the security risk bandwagon, citing that the GPS-enabled smartwatches could be hacked, and attackers could track a child’s location.

Omate’s partnership with Tata Comms mitigates those risks since all the location, messaging and video data is carried over an end-to-end encrypted VPN to maximize the security protection.

This is a valuable security feature for a kid’s smartwatch, but it is just a matter of time before we see similar solutions that leverage a smartwatch to assist in the healthcare industry (e.g. remote patient diagnostics for a chronically ill patient). Healthcare use cases in particular would be hindered if the provider could not guarantee device and data security.

A kid’s smartwatch is just the start

My interest in this partnership model is about more than just the smartwatch. This same model can be applied to numerous consumer, enterprise and industrial IoT use cases that all share the same fundamental requirement – secure connectivity.

My favorite example of how this model could be leveraged case also comes from Omate, who recently launched an Elderly Care Management smartwatch solution with platform provider SafeMotion and French banking and insurance firm Crédit Mutuel Arkéa. I view this cross-industry collaboration as a shining example of how new business models can transform the smartwatch industry.

The one concern I had was that Omate would need to negotiate individual MNO connectivity contracts in each country and that would lead to delays and higher data costs. By partnering with Tata Comms, these concerns can be eliminated and allow Omate to increase the pace of its global product launches.

In addition to the use cases mentioned above, this model could also support other use cases that would operate in multiple countries, including:

  • Lone worker protection (e.g. high risk countries/locations)
  • Employee safety tracking and monitoring (e.g. construction sites, mining, oil & gas)
  • Employee health monitoring (e.g. heavy equipment drivers)
  • Connected VR headsets
  • Bike-sharing schemes.

Why it’s a game changer

What excites me about this partnership is the opportunities it creates to disrupt the IoT ecosystem. And let’s face it, disruption can be fun to watch.

Streamlined global go-to-market strategies

Hardware start-ups share common challenges. They can design cutting-edge products, but if those products require connectivity at the point of sale, they must negotiate a deal with an MNO.

Partnerships with companies like Tata Comms that provide eSIMs and global connectivity help alleviate the bottlenecks, secure the device and data, and improve the customer experience. I expect to see the Taiwan and Shenzhen hardware start-up communities leveraging this model to differentiate and secure their product offerings, thereby increasing their chance of success.

I doubt Tata Comms has any aspirations to create a smart connected device accelerator program, but those types of accelerator programs should look to companies like Tata Comms to ramp up the go-to-market capabilities of their start-ups.

The ‘Big Brand’ opportunity

It is worth considering how some of the world’s biggest brands could leverage this model to create disruption, but don’t assume this model is appropriate for every brand. A smartphone brand (e.g. Apple, Samsung) that relies heavily on the MNOs as a distribution channel would not risk the wrath of the MNOs by going direct to the consumer. But what about some other strong consumer brands like Amazon, Facebook or Google?

These brands already have strong relationships with consumers globally. They could use this model to take a smartphone, connected VR headset, smartwatch, etc. directly to the market and bundle low-cost global (aka “no roaming”) connectivity as part of the monthly service fee.

I’m not convinced these big brands are ready (yet) to take this gamble, but we would be naïve to think that they wouldn’t consider it in the near future. After all, who would have thought a few years ago that a company like Amazon would go into the grocery and healthcare industries? 

Impact on mobile operators

If start-ups leverage this model, it won’t have significant impact on the MNOs. However, if big brands start to leverage this model and cut out the MNOs, it could. Yes, they would still receive some revenues for the local data usage on their network, but far less than if selling direct.

A bigger risk would be if one of the global brands that has a strong enterprise business (e.g. Google, Amazon through AWS) decided to partner with Tata Comms and leverage its MOVE platform to launch a global MVNO targeted at the lucrative enterprise customer market, which is the cash cow for many operators.

It is still early days, but if one of those big brands has even moderate success creating a new business model around eSIMs, the floodgates could open. MNOs already face increased pressure – and while they may think eSIMs will create a new revenue opportunity, it is equally likely that new eSIM business models will emerge and become yet another thorn in their side.

charles reed andersonWritten by Charles Reed Anderson, founder of CRA & Associates | Originally published at

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