2023 in Review: Connectivity Dominates but IoT-system Gaps Remain

Two investment themes bookended 2023. In January, the European Union backed a $100m venture capital fund, managed by Momenta Partners. In December, Softbank announced its EUR473m ($514m) investment for a 51% stake in Cubic Telecom. This development more than drew the eye as
exemplified by the analyst commentary around the high (16x) revenue to implied enterprise value multiple. 

In between, the level of corporate activity in the IoT sector continued at roughly the same pace in prior years, albeit down on the years of heightened activity going back five or so years ago. There were several developments among the vendor and network operator communities, but less so among the IoT platform providers. Governments became more active with an emphasis on security and protections for the consumer sector. 

Against the backdrop of 5G developments and 6G pathfinding, IoT is becoming a part of the fabric of enterprise operations and national infrastructure. Established players continue to emphasize connectivity, a relatively small portion of IoT value chains, while enterprises focus on quick-to-market solutions enabled by cloud providers and systems integrators. Both approaches risk leaving ‘system of systems’ issues for later consideration. 

Long term prospects for IoT and 'digital'

Last month, I was invited to chair a panel for the eponymously named company, Apigee. Although it was billed as an API event, Chet Kapoor (Apigee’s CEO) opened the 2-day conference by framing today’s market in terms of the transition to ‘digital’, with APIs being a key implementation enabler. His opening remarks summarised the situation as follows:

• Every business is a digital business

• Every business needs a digital platform

• Every business has a Chief Digital Officer 

In the past, I have written on the topic of telecoms operators launching ‘digital’ strategies [1]. It was therefore reassuring to hear this development being so firmly validated. It was also positive to witness several enterprises discuss their digital strategies and early implementation successes.

As the market develops, enterprise demand will continue to drive demand for enabling services. These are opportunities that telecoms operators and specialist M2M/IoT platform providers can capitalise upon. There is early evidence of this trend in the recent investment activities of companies like SingTel and Telstra.