2021 in Review: Competing Segments, Strategies and Time Horizons

Much has changed over the last 10 years that I have published this annual review of corporate initiatives in the IoT sector. I do not track each and every development in the way that the professional market analyst firms do in this tracker of 1200 IoT start-ups [1]. 

Instead, I focus on industry patterns and structural developments that correspond to emerging market opportunities for new and established businesses. Continuing this approach leads me to reflect on three themes in this review of 2021 activities. The first theme touches on market structure and segments that are taking shape. Such specialization is a phenomenon that occurs when a market attains scale. The second explores strategies for different strategic horizons in a couple of key segments. The third theme deals with communities of interest and how industry players are tackling issues related to wider economic benefits beyond those delivered by individual IoT solutions. 

I conclude this review by touching on some of the emerging developments that adopters should factor in their system design and IoT procurement plans. These also carry implications for product development managers on the supply-side of the industry. 

Market Structure & Segments

Looking through some fifty corporate events over 2021, the supply side market challenge is to make it as easy as possible to bring new users onboard by tailoring distinct channels to market. Roughly a third of these events involve organizations lower down the solution stack partnering with service providers that operate higher up the solution stack. This type of arrangement provides the means for packaging a vendor’s offerings (hardware components or an IoT application) to gain access to new markets or to target the service-provider partner’s customer base. 

In terms of developing such channels to market, two segments are apparent. One involves specialist service providers whose pedigree can be traced back to M2M and mobile communications roots. These include businesses such as 1NCE, Eseye, Evrynet, Kore Wireless and WirelessLogic. In addition to building up operational scale, these service providers have also been the target of investor interest. Investment initiatives represent a mix of strategic stake building (e.g., Telus investment in Eseye, SoftBank stake in 1NCE) and scale-up ambitions linked to industry consolidation (e.g., WirelessLogic acquisitions of Com4 and Things Mobile). 

The second category involves cloud service providers such as Amazon Web Services, Google Cloud and Microsoft Azure. These providers acquired M2M connectivity expertise several years ago. In addition to commercial partnerships with established M2M service providers, Amazon acquired 2elemetry in 2015 while Microsoft acquired Solair in 2016. Since then, however, the cloud service provider segment has tended to focus more on tools and developer environments for the application of analytics and visualization as the driver of value. This segment’s strategy is a race to co-opt developer communities and to tie them to the different IoT platform environments.

Segment Strategies and Timing Horizons 

Structurally, the market is segmenting into groups of service providers that are looking at different ways to build scale. While the traditionalists, comprising M2M/IoT connectivity service providers and mobile network operators, focuses on connections, new-comers in the shape of cloud service providers are building scale around the concept of ‘walled gardens’ of IoT data. 

In the case of connections, an important driver of change is the eSIM. This technology enables new operating processes which help to streamline the stock-keeping unit (SKU) complexities associated with manufacturing devices for many different geographical markets. New operating processes also extend to managing connectivity and data handling charges that arise in large or regional deployments where several mobile network operators (MNOs) might be candidates for connectivity. eSIM technology helps connectivity service providers to mask the complexity of handling contracts with multiple MNOs. To some extent, the software option to switch connectivity providers also mitigates against provider lock-in and price escalation risks. 

By contrast, the cloud service provider strategies put a greater focus on data and data applications than connectivity. These strategies also appear to target a longer time horizon. There are two aspects to how these strategies manifest themselves in the market. One involves getting users familiar with each provider’s platform tools and environments. In the process, enterprise IT/OT teams accumulate expertise and become invested in one ‘home’ environment. This applies equally to developer communities that each cloud provider is cultivating through developer outreach efforts, on-line self-help tools and application development resources. The second aspect relates to the build-up of IoT data in a single environment. For large, user organizations, there are benefits from having a common interface to access a single (logical) repository of data that might span multiple IoT applications and several business units. In theory, this makes it easier to share data and to explore operational patterns that might exist in several manufacturing plants or locations. Easy access to data and to mixing-and-matching of data opens up new innovation possibilities. There is now an option value embedded in return-on-investment calculations because users have a pathway to developing second-generation IoT applications because they can access new data sources or implement solutions that tackle cross-silo business needs. 

IoT Communities of Interest 

For a different perspective on market scale, let us is to consider IoT communities of interest. One example is the Zigbee Alliance which rebranded itself to become the Connectivity Standards Alliance (CSA) around mid-2021. It also rebranded its Connected Home over IP (CHIP) project under the ‘Matter’ marketing label. This change is a good example of the need to shift the emphasis away from a technology, that would have been ground-breaking ten or so years ago. Now, the focus is on persuading adopters that those technologies are now largely mature and usable at scale. The investment in market development is also a sign that participating members see value in a collaborative initiative and neutral brand. 

Another community example involves the Industrial Internet Consortium which rebranded itself to become the Industry IoT Consortium. By evolving beyond a generic reference to the Internet, this community is now signalling the importance of solution approach that encompasses a wider set of technologies and business approaches associated with the IoT. 

The IoT technology-push of ten years ago is evolving to a market-pull now that IoT has grown to become a mainstream market. The change is down to adopters and users, including those at the margin, acknowledging the tangible benefits and value-potential of IoT solutions. A side consequence is that different industry participants are considering the impact of IoT systems not just in industry verticals but also for their impact on the wider economy. An example that illustrates this point is Filament STAC which is an IoT industry cluster in Scotland. This multi-company initiative was launched as an industry-government partnership aimed at producing Scottish IoT companies capable of scaling rapidly. It has a three-year target to create more than 25 IoT companies supporting around 750 jobs. In December, it announced backing from several, US tech businesses including Twilio, Plexus Corp, Intel Corporation, Keysight and Arrow Electronics. While this initiative focuses on a localized, geographic cluster it illustrates the growing importance of strategic, national initiatives. 

A well-known example that began several years ago is the UK’s Catalyst program which targets promising segments. Another is the business and technology ecosystem approach promoted by Business Finland which brings together local businesses and promotes complementary expertise and technologies such as AI and IoT. These examples suggest that government and regional development agencies will play a greater role in part-funding and orchestrating strategic areas of the IoT market. 

Developments To Watch 

While the journey to implementing IoT systems looks like a well-trodden path, it is not free of risk and there are still grounds for acting with prudence. Adopters and supply-side innovators need to weigh the long-term implications of initial design decisions and the opportunities that might be sacrificed against the allure fast-to-market strategies. The first issue is the extent to which a user locks itself into a vendor, solution-provider, or technology environment. How real are the switching opportunities in the future and, what might be the associated costs? Also, as a user’s needs evolve, is the underlying technology or supplier team capable of adapting to support deployments that might operate and evolve for periods of 5 to 10 years? 

One "Pane of Glass" (source IEEE, 2021)

A second development to manage stems from the vast opportunity space for IoT applications when considering combinations of data sources and applications. This is where businesses need to focus on interoperability. Consider an example from the early days of the M2M market. Then, application enablement platform (AEP) providers would talk about a single-pane view when overseeing a handful of applications. The metaphor comes from an operator avoiding the need to swivel their chair from one display unit to the next when supervising several applications. This remains an issue in today’s IoT market to the extent that it featured in a cloud computing standard that the IEEE announced in December to facilitate intercloud interoperability and federation [2]. 

In the wider scheme of things, there are multiple facets to the concept of interoperability. It can apply to the interchangeability of components sourced from different suppliers, or to the ability to switch connectivity across different communications networks. In the future, interoperability will apply to silo-applications and IoT data with the aim of making data discoverable, recognizable, and shareable in multi-user environments. While hardware and connectivity interoperability is important today, an important topic for the future concerns data interoperability which applies to combining data hosted in different cloud-provider environments to highly automated IoT systems that depend on semantic capabilities. 

A final consideration is about anticipating and positioning for continuing evolution in the IoT market. How do hardware providers deal with the value squeeze arising from economies of scale and impact on per-unit pricing? In a different segment of the market, connectivity providers have experienced many years of per-device revenue dilution. How do they position themselves to drive revenue and profitability growth through complementary services and entry into new markets linked to the rise of AI and data management? Unlike the start-up scene from the beginning of this article, established service and solution providers companies are higher up the IoT staircase. While they are up and running, there are many more steps to climb. 

[1] The 1,200 IoT companies that are creating the connected world of the future – IoT Startup Landscape 2021 https://iot-analytics.com/iot-startup-landscape/ 

[2] IEEE Approves Cloud Computing Standard - https://www.standict.eu/news/ieee-intercloud-interoperability-standard 

IMAGE CREDITS: Jukan Tateisi and Lindsay Henwood via unsplash.com

2020 in Review: Corporates Adapt Their IoT Business Models

This review of 2020 corporate initiatives in the IoT market builds on a history of tracking strategic industry developments for over a decade. Two sets of corporate events that bookended the start and end of 2020 provide instructive examples of the roadmap and dead ends that characterize today’s IoT market. In the intervening months, organizations in different parts of the industry ecosystem bolstered their IoT strategies. Some developed complementary capabilities through M&A while others addressed go-to-market issues through business reorganization and product-innovation initiatives. For many organizations, however, there remain challenges in balancing short term imperatives with strategic positioning goals. There is a degree of comfort in embracing the familiar. The risk is that this leads to an under-investment in properly integrating new business approaches and complementary technologies.

Looking up the IoT Value Chain

People are so preoccupied with everyday tasks that they often miss out on what is around them.

Walking down the street, how often do you catch people looking up at the features of old buildings or roof-level signage? The same is true in business life. Let’s consider how this plays out in the IoT market.

Recently, I heard a telco executive explain why mobile network operators (MNOs) focus on connectivity. He pointed to two factors. One is that connections and data connectivity are straightforward things to measure, with a well-established legacy from mobile phone sales. In effect, businesses manage what they can measure. The second is that it is easy to look down at the network from the MNO’s vantage point in the IoT technology stack. It takes an effort to lift one’s head and look up. That’s much like missing out on the architectural features and art work when we walk head-down (even without the excuse of a smartphone) along a street.

Occasionally, however, it makes sense to look up, not just to appreciate your surroundings but also to get a sense of whether the world is changing and how you might need to adapt.

New IoT opportunities: where's the big deal?

In a recent McKinsey article [1] entitled “What it takes to get an edge in the Internet of Things”, the management consultancy advised firms to focus on three habits:

• Habit 1: Begin with what you already do, make, or sell

• Habit 2: Climb the learning curve with multiple use cases

• Habit 3: Embrace opportunities for business-process changes

Industrial IoT Strategy

The combined activities of the Industrial Internet Consortium and Industrie4.0 alliance, culminating in the much expanded IoT Solutions World Congress in October seem to have given significant impetus to IoT adoption in the industrial sector. In several of my discussions over Q4-2016, I witnessed growing evidence that corporate executives have tasked their business development and strategy teams to formulate plans to integrate IoT more closely into their core operations.

The IoT takes most industrial organizations into a new operating domain and requires a process of self-education to begin with. Most of the questions I encountered began around the two topics of connectivity technology choices and approaches to justify the IoT business case.

Impressions from IoT Solutions World Congress 2016

While I often attend Mobile World Congress in Barcelona during February, this was my first experience of IoTSW Congress and seeing Barcelona in October. The show is growing impressively, doubling the number of exhibitors and attendees compared to 2015. If this pace holds up, IoTSWC could surpass MWC within three years, such is the growth potential for the IoT industry.

 In addition to three speaking slots – one for the Industrial Internet Consortium, another for Intel’s Corporate Strategy group and a third on main Congress track - I had several discussions with industrial businesses, investors and solution providers about the state of the market.

Here are a few observations that stood out from the event. 

Rumble in the IoT Jungle

I recently participated in a debate, hosted by the IEEE Communications Society, about the pros and cons of IoT standardization. My debating counterpart was the North Americas President of SigFox, a company that has so far raised over US$150m. SigFox is in the process of deploying its proprietary networking technology in 18 countries specifically for the purpose of energy-efficient and low-cost IoT applications.

Much of the debate and several of the audience questions focused on the worry about standards proliferation in the IoT market. This creates a confusing picture for business that have to make long-term product development decisions. My observations on the issue of IoT standardization were fourfold.

Amazon or Netscape strategy?

Last week, I attended the Industrial Internet Consortium’s (IIC) member meeting in Reston, VA. This gave me an opportunity to talk to executives from several companies about their IoT market objectives. In the prior week, I interviewed a C-level executive from an IoT infrastructure services provider on the same topic.

What struck me in all these discussions was the competitive tension between short-term and strategic IoT planning. The C-level executive put it best when he described how many of his clients’ sales plans for the coming year are based on implementing bespoke solutions; it’s a quick way to get to market. Where this model breaks down is when companies are implementing their third or fourth IoT applications.

IoT alliances and interoperability

I have recently been consulting on the topic of IoT Platform strategy with a particular focus on the recently issued oneM2M standard. As part of this work, I researched the activities of different IoT alliances and industry groups because there is a lot of industry discussion about competing standards.

In discussions with company executives, a recurring theme is that nobody wants to take a bet on any single ‘standards’ approach. As a result, many companies choose to hedge their bets and participate in multiple initiatives. Having examined several of the leading initiatives from different dimensions, it’s debatable whether companies are getting a strategic, product-development return on their participation (setting aside brand-building and corporate networking benefits).

There are many different ways to look at each of initiatives. For this post, let’s begin by concentrating on their mission and primary objectives.

What do we know about IoT developers?

A couple reports published in recent weeks have touched on the topic of the IoT developer community. The first one, from Vision Mobile [1], is entitled IoT Megatrends 2015. Based on research involving over 4,000 IoT developers, Vision Mobile identifies four seismic changes that will shake up the IoT market; one of these changes is that 'everyone can become a developer'.

According to Vision Mobile, this development is quite likely to occur in the consumer portion of the IoT market. This is because IoT platforms, such as Pebble, Razer, Android Wear and Apple WatchKit in the smart-watch segment for example, will evolve in ways that allow developers to orchestrate data streams into valuable scenarios for users. Soon, the ability to manipulate data streams will become so easy that everyone can become a ‘developer’. Or, to use a term that I introduced in an earlier post [2], we should expect a data 'taker' class of user to emerge, paralleling the ‘makers’ of the hardware world.

The second IoT developer survey comes from the Eclipse Foundation [3] and this draws on a small (about a tenth of the Vision Mobile sample) sample of real IoT developers (Eclipse eliminated respondents who did not meet its criteria for IoT developers).

The study author admits to a skewed sample base because of factors such as the channels used to recruit participants. Nevertheless, amongst details about the most popular programming languages, protocols and use of open-source technology there was a surprising revelation about the highly visible industry alliances that are evangelizing interoperability and the IoT market.