Who Will Be the Winners in the IoT Revolution?

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: 

1. 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.
2. 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.
3. 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.

Building the Platform for the Internet of Everything

We are embarking on a new technological journey that will fundamentally change forever the economy, society and the way that we live.  Wired magazine described a new era where “the most mundane items in our lives can talk wirelessly among themselves, performing tasks on command, giving us data we’ve never had before.”  The Internet of Everything (IoE) is a world where up to 50 billion things (or devices) will be connected to the Internet by 2020; or, the equivalent of 6 devices for every person on the planet.

Businesses are beginning to completely re-design their processes, operations and business models to benefit from this new era.  We are already starting to see the emergence of smart cities, connected utilities, connected railways, connected factories, connected cars, and even connected mines, to name but a few.  All industries are looking to IoE as a breakthrough technology to help them optimize their business, enter new markets and enhance their relationship with their customers.  This is why industry analysts, like IDC, estimate that businesses will spend up to $20 trillion over the next three years to realize the promise of the Internet of Everything. 

But, The Internet of Things is More Than Just “Things”.  As I described in this recent article, the Internet of Things is really a short-hand for the four technology pillars (mobility, cloud, big data and things), wrapped in security, that are forging a revolutionary new, and revolutionary, connected world.  Successful IoE implementations don’t happen in isolation or independently.  We are discovering that successful implementations require a technical and business platform into which different solutions can be easily plugged to efficiently and effectively achieve the promised business benefits.  The cornerstones of this IoE platform include a robust connectivity and technology infrastructure, operational and management services and a range of vertical and horizontal solutions. 

In our experience, all IoE implementations require all of these technical and business elements to be successful.  Our vision is that effective IoE deployments will build an IoE platform that can be extended across the business, or even entire industries, to deliver a range of unique, value-added IoE solutions.

Starting from the bottom, the layers comprise:

 

1.    Network Connection – connecting all of the solutions, data and applications through fiber backhaul or licensed cellular.

2.    Network Access – a managed Wi-Fi, or other unlicensed wireless network, to connect all of the sensors and applications.

3.    Technology Platform – a platform to allow new devices and solutions to readily and securely “plug and play” into the overall architecture, and to connect to cloud storage and compute services.

4.    Vertical and Horizontal Solutions – the combination of devices and applications that deliver the unique solutions for different vertical and horizontal industry segments/.

5.    Platform Monetization – in some verticals, like smart cities and B2C, opportunities exist to leverage the platform and network to create new sources of revenue.

6.    Shared Operating Platform – a shared platform to consolidate the management, customer care and service issues across all of the solutions.

7.    Professional Services – services to support areas such as systems integration, planning and design.

8.    Program Leadership – services to program manage the entire implementation, operations and partner ecosystem. 

Successfully deploying and capturing the tremendous potential benefits of IoE is not just about cool things and applications.  A comprehensive technical, operations and management IoE platform is required to turn vision and promise into reality. 

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