Nov 13, 2020

Where the IoT Market is Heading

I delivered a presentation some weeks back at an online conference for the managed-services industry. My talk was about the implications of IoT for digital transformation [1]. To prepare for the presentation, I began by looking back over the past decade of market developments, joining a sequence of past and present developments to see into the future of IoT. This exercise provided useful insights into the evolving pattern of customer needs, consequences for where the market is heading and, implications for strategy and business innovation.

Ten years ago, the communications industry fixated on connections and connectivity. The then CEO of Ericsson wrote about a forecast of 50 billion connections by 2020. Ericsson and others, such as Cisco and Intel, did much to publicize their forecasts for the connections and connectivity opportunity, thereby laying the ground for a thriving IoT analyst community. 

If we fast-forward to 2017, the narrative had evolved. Organizations started to recognize the importance of data, much of it personal but an increasing amount sourced from connected devices. Now, there was a rival to connectivity as cloud providers sought to carve out a position in the overall IoT value chain. Many readers will recognize the Economist article showing a set of drilling rigs under the headline that “The world’s most valuable resource is no longer oil, but data”. 

 It turns out, however, that the accumulation of vast data troves has its limitations. Unless you are accumulating massive and multi-perspective data sets, your data can always be enhanced by combining it with data that somebody else holds. An example is a new Amazon program that pays consumers for sharing information about what they are purchasing outside of the Amazon.com walled garden. In telecoms, parlance, this is a mechanism for capturing data about ‘off-net’ activities [2]. 

 Over the past few years, the Open Data Institute (ODI) has pioneered research into the use of data. One of the ODI’s research studies addresses the need for businesses to recognize how they can benefit from sharing business-held data, as well as making use of third-party data [3]. In a sign of how the issue of data affects business priorities and takes some organizations beyond what many consider to be their core activities, here is a quote from Theo Blackwell. He is the Chief Digital Office for London, a large, municipal authority. He says that “Data of every kind – open, closed and from sensors – has become the ‘core business for our city’” [4]. This notion is far removed from the provision of education services or the maintenance of clean streets. 

To understand how these developments will shape IoT strategies in the communications industry, look no further than recent research from the GSMA [5]. Their estimate of global, IoT connectivity revenues for 2018 is about $25 billion. They expect this to grow at about 10% per annum to just under $50 billion by 2025. However, that will represent just 5% of the total addressable opportunity for the mobile industry. The remaining 95% takes the form of professional services and, a mixture of applications, platforms, and other services. 

Not surprisingly, the key players that are jockeying for a share of this market are IoT platforms provided by the large cloud service providers and systems integrators. To illustrate the point, this recent IEEE paper introduces a theoretical framework of twenty-one key factors for use in choosing an IoT platform. The authors apply this framework to general, cloud services providers including Amazon Web Services, Microsoft Azure, Google Cloud IoT, IBM Watson IoT and Oracle IoT [6] as distinct from platform providers that grew out of the M2M market. 

Several of the large, cloud providers are also helping to support virtualized network functions for different mobile operators [7]. This raises the prospect of a structural, industry risk. If mobile operators make technical and operational concessions to these platform providers, they may inadvertently stifle mobile operator ambitions beyond the 5% connectivity market opportunity. 

If we look forward to where the IoT market is heading, however, there is growing evidence that users are wary of locking into single-vendor solutions and the loss of control over the data their assets and customers produce. Manufacturing sector research by the Dutch agency, TNO, highlights the shortcomings of systems integration and single-provider platform strategies. Integration involves custom work and is costly while single service provider platforms create a dependency on an entity that can have access to all data transactions [8]. 

The alternative is to move towards open standards that treat data sharing as a horizontal enabler, thereby ensuring data sovereignty. It is also important to work with partners to establish the right level of control for innovation, manufacturing and market making. TNO representatives point out that this can occur in the portion of the industry value chain where organizations such as the GSMA are well positioned to enable coopetition. The question remains as to whether the mobile industry will rise to the challenge. 



[1] IoT and Digital Transformation presented at Managed Services Live II – The Challenge of Change - https://live.mshsummit.com/ 

[2] Amazon launches a program to pay consumers for their data on non-Amazon purchases https://techcrunch.com/2020/10/20/amazon-launches-a-program-to-pay-consumers-for-their-data-on-non-amazon-purchases/ 

 [3] – ODI: Sharing Data to Create Value in the Private Sector - https://theodi.org/article/report-sharing-data-to-create-value-in-the-private-sector 

[4] Theo Blackwell - https://diginomica.com/smart-cities-time-crisis-london-calling-open-data-focus 

[5] GSMA Intelligence: Operators Need To Up Their Game in the IoT Market https://www.telecomtv.com/content/access-evolution/operators-need-to-up-their-game-in-the-iot-market-39470/ 

 [6] Twenty-One Key Factors to Choose an IoT Platform: Theoretical Framework and Its Applications, IEEE Internet of Things Journal, Vol 7, No. 10, October 2020. 

 [7] IBM Unveils 5G Cloud for Telcos https://www.reuters.com/article/us-ibm-cloud/ibm-unveils-cloud-for-5g-telcos-gets-nokia-and-samsung-as-partners-idUSKBN27L1QK 

 [8] IDSA/TNO: Design Principles for European Data Spaces - https://www.internationaldataspaces.org/wp-content/uploads/2020/10/201029-Data-Spaces-Dialogue-4.pdf (slides 15 and 21)

2 comments:

  1. 22 Nov 2020

    Prof. Aija Leiponen presents her paper on "Discovering Firms' Data Strategies: A Topic Modeling Approach"

    Do data strategies enable competitive differentiation?

    https://youtu.be/gXXFcsuF2i8

    NOTES FROM PRESENTATION:

    The accountancy profession is starting to look at the issue of data assets. see CPA Journal 2019: "Firms need a strategy to leverage data assets"

    ReplyDelete
  2. 24 Nov 2020 update

    The top five industrial IoT platforms – Microsoft and AWS make their moves

    https://enterpriseiotinsights.com/20201105/channels/fundamentals/top-five-industrial-iot-platforms-microsoft-and-aws-make-moves

    ReplyDelete