Every new technology revolution
creates new technology company powerhouses and relegates others to the ashes of
history. The PC revolution gave us the
likes of Microsoft and Intel, the Internet revolution created companies like
Cisco, Google, and Amazon, and lately the mobile revolution has created market
giants like Apple, Samsung and Facebook.
We are in the early days of another transformative
technology revolution – The Internet of Things.
Connected everything to everything in a smart, data-rich world will
fundamentally transform businesses, generate enormous economic wealth and create
immeasurable social value. There is
immense opportunity for suppliers to help businesses to achieve these
tantalizing new benefits. But, who will be the winning suppliers in the IoT
revolution?
Despite the Internet (connectivity)
and Things (devices) being the key terms in the title of the next technology
revolution, this is not where the money will be made. It is estimated that there could be up to 50
billion connected devices in the next five years. But, these will be largely low cost, low
power devices with long replacement cycles.
We have all seen what happens in the device and hardware business – a
steep declining price curve. For
example, the cost of semiconductors on a per-transistor has plummeted 50
percent in the last 3 years.
Effectively, lots of volume but a low margin business.
Service providers are salivating at
the thought of connecting the estimated 50 billion inanimate objects to the
Internet. However, the vast majority of
these devices will require very low bandwidth as opposed to the demands of chatty
and data hungry mobile users. Equally,
most of these connections will be over unlicensed networks, like Wi-Fi, rather
the lucrative cellular networks. Chasing
value from connectivity effectively becomes a game of “trading mobile dollars for IoT pennies.”
While there might not be huge value
from chasing catchy IoT term itself, there are good opportunities to generate
good money from supplying the IoT revolution.
Success will result in the creation of the next tech giants of this new
era. There are three key areas for value
creation:
- Platform. Successful IoT implementations require a comprehensive business and technical architecture – the IoT Platform – to provide the building blocks of the underlying infrastructure. This platform is comprised of 3 broad areas: 1) Technical – cloud storage and compute, security, etc.; 2) Data Management – capture, management, analytics, etc.; and 3) Management – policy, device, API and application framework. These platforms are horizontal plays that can be leveraged across multiple industry verticals, allowing suppliers to reap the benefits of economies of scope and scale.
- Solutions. Implementing effective IoT systems is complicated and often requires considerable customization. Providers who can provide end-to-end solutions (hardware, software, data insights, implementation and services) will be clear winners. Successful solutions will have an industry vertical wrapper to make them relevant to the customer’s particular needs. These solution providers will create new business models to deliver “IoT as-a-service” and outcomes-based financial models. For example, IoT-enabled machinery as a service, or payments based on energy savings will be new models that will reduce the risk to businesses and ensure successful IoT implementations. Providers who can successfully deliver solutions, vertical expertise and new business models will create deep and enduring relationships with their customers.
- Business Integration. IoT is only as good as its successful implementation and adoption by the business. As we saw in the Internet revolution, there is a big need for outside providers to help companies to make this transition and to realize the promised benefits of the new technology. Key business integration needs include: 1) Business Consulting –identifying opportunities, creating the business case, re-engineering the business and change management; 2) Systems Integration – integrating IoT systems with existing systems, data and processes; 3) Management – program management, ongoing operations and outsourcing of key operation
Helping to deliver the IoT
revolution presents huge opportunities for business and technology
suppliers. The winners will be those
companies that bring distinctive technologies, innovation, new business models
and deep industry knowledge to the three key areas of IoT value creation.
