Whether you are in the technology industry or not, the subject of the ‘internet of things’, or IoT, comes up a lot. It’s no surprise, given that more and more objects are connected and sending back data to whoever is collecting it. It’s not just the remit of the wireless or telecoms industry any more, and many more players beyond the carriers or equipment providers are coming into the ‘ecosystem’. It’s gone beyond just an asset tracking exercise, going into health, manufacturing, the enterprise and many more areas.
A major firm, Avnet, has even appointed a vice president, Internet of Things, whose remit is to develop and roll out a strategy to design, develop and drive edge-to-edge IoT offerings. So what’s in store for IoT and its wider ecosystem for 2016? We present a forecast from the industry leading analyst and provider of strategic advice in the newly emerging M2M (machine to machine communications), IoT and big data markets, Machina Research. Below are their predictions.
At least one Fortune 500 company will fundamentally change how it values, underwrites or trades assets based on the data generated by IoT. ‘Servitization’ is the ability of companies to switch from selling products to providing service. During 2016 we’re expecting the aftershocks of servitisation to begin to impact the world of corporate finance. As an example, constant asset monitoring means a fundamental change in how we quantify risk, with substantial implications for the insurance industry.
At least one Fortune 500 company will appoint a Chief IoT Officer. We have, over the last few years, tracked the growing understanding amongst enterprises of the importance of IoT. There is a clear message that to truly drive transformational (rather than just incremental) IoT initiatives within enterprises requires a push from a C-level executive. IoT provides the competitive differentiators of the 21st century. The specifics of that will vary by company.
Corrective analytics will emerge as a fail-safe approach across a range of sectors. You’ve heard of predictive and prescriptive analytics. Corrective analytics will emerge as a fail-safe approach. Corrective analytics is a security option to apply automated corrective measures (based on actual real-time outcomes rather than predicted or prescriptive actions). Corrective analytics has already been seen in aerospace, but as William Gibson said “the future’s already here, it’s just not very evenly distributed”. 2016 will be the year in which this particular bit of the future gets more distributed.
A household name in IoT will file for bankruptcy while at least one will be bought for a price that breezes through the 100x revenue multiple. No-one’s playing it safe in IoT at the moment. One or two of the new breed of IoT-focused start-ups whose strategies proved to be overly gung-ho will go bust (or get picked up very very cheap).
Vodafone will buy a systems integrator and an SI will buy a major platform player. The role of the SI is critical and central to delivering IoT (now that everyone’s worked out that the enterprise side of IoT is really about integrating sensor data with enterprise IT systems). For any company serious about delivering IoT services directly to enterprise customers having that capacity for SI-style customization will become critical. Some have it already, others will seek to build professional services capability.
Others will dig deep in their pockets to speed the process through acquisition. Vodafone is an obvious potential example here as it has some funds, has no fear of acquisition to bolster its enterprise offering (which is its strategic growth centre), and currently has no SI capability. We’ve seen a bit of M&A activity by Vodafone in the IoT space to date but it’s generally been modest in ambition. We expect a lot more. And our expectation as a target: Tech Mahindra or Wipro would be decent bets.
Enterprises will stop using security as an excuse for not delivering. The IoT security issue will become bigger and uglier, but less threatening. There will be more leaks, more idiocy such as hard coding default passwords, and more data breaches, and more hacking. But there will be a realization that not all potential security problems need to be solved ‘now’. Real world security in the IoT is going to be about incremental changes, not fundamental challenges.
At least one of the major LPWA (low power wide area) technologies today will effectively be rendered redundant but there will still be more technology fragmentation. During 2016 we’ll see quite a shaking out of the LPWA space. As a result of regulatory, standards, commercial and/or technology developments we’ll see one significant LPWA option fall by the wayside. We would expect no more than two mainstream nationwide deployments of non-3GPP LPWA networks per country, which will limit opportunities. At least half a dozen dedicated non-3GPP LPWA network technologies will be deployed in multiple countries. For our take on the current status of the LPWA market, see our Strategy Report “LPWA: disruptive new networks for IoT” (November 2015).
We’ll see a discernible shift in IoT from technology- or vendor-specific solutions to agnostic ones. There will be a general realization that the only really viable approach to IoT is connectivity-technology- and connectivity-vendor- agnostic. The former will particularly apply to mobile network operators, many of which will see a conversion to the merits of technology agnosticism, and some notable shifts to be carrier-agnostic even to the extent of some MNOs handing their nominal rivals large contracts to support global deployments.
Chinese players will shake up the IoT, increasing market share significantly across semiconductors, software platforms, smart cities deployments, and integrated solutions especially. The major Chinese vendors have been slow to exert their influence in the IoT space worldwide, although they’ve been doing plenty in China. The likes of Huawei and Xiaomi have already made waves also in the IoT context, and in 2016 the IoT space will become familiar with a further set of Chinese vendors that start emerging as global players.
Their growth will affect the competitive landscape in two ways: by muscling international competitors out of China and by bringing fresh competition into international markets. The combination of the two will be felt particularly in the semiconductor industry, which can prepare itself for another year of mass consolidation. In the platforms space, Huawei has been working with the Chinese operators and will doubtless seek to productize the solutions that they develop and take these to other markets around the world. The same applies to smart city solutions and integrated IoT solutions, where we expect more productized solutions to be brought to the global stage.
Telecommunications is sexy again. Telecoms technology is back on the agenda, after a few static years. Of course we’ve seen the rise of LPWA over the last 2-3 years but there are all sorts of telecommunications topics to whet the appetite in 2016. 5G will be heavily discussed (and if past record is anything to go by we’ll probably see a US carrier launch some variant of LTE under the ‘5G’ banner), we will get much more transparency on 2G and 3G switch off plans, including we expect two more major operator groups making announcement on 2G and/or 3G switch off , and there will be a dawning realization that network function virtualization/software defined networks (NFV/SDN) will have a particular application for IoT.
We also expect there to be a shake-out in the smart home technology space, with Thread addressing the fragmentation. We recently published our initial views on the 5G opportunity in the research note “5G networks promise to expand MNOs’ capabilities in delivering IoT, but challenges await” (December 2015) and our views on 2G/3G switch off in the Strategy Report “2G and 3G switch-off: a navigation guide for IoT” (November 2015).
Everyone will start using Second Life again. Not really. However we’ll expect a similar thing to come to fore. Digital twins and digital avatars, virtualizing the real world will be incredibly popular. As a result we will see augmented reality move out of its niches and see much wider adoption. We recently covered the digital twin concept in the research note “Digital twins bring IoT full circle within manufacturing design” (November 2015).
More hype about Blockchain, but no actual products. We predict that there will be more interest in the idea of using the distributed ledger model embodied in Bitcoin’s Blockchain to manage and enable connected objects. This will inspire a number of proof-of-concept demonstrations but the absence of a clear business need or even the principles which could support a commercial deployment will ensure that there are no meaningful commercial trials of IoT implementations based on the Blockchain. The IoT needs to be a significantly more developed environment overall before Blockchains can find a role.
Regulatory issues will burn a lot of fingers. There are a lot of legal and regulatory issues swirling around in IoT at the moment. Recent months have raised issues about accident liability for connected cars, the legal implications for the accuracy of data (most notably in the case of Fitbit), and the safe harbour issue between Europe and the US. One of these issues promises to create a significant problem for at least one major player. And there’s lots more to come in regulatory terms including data transfer rules, copyright issues etc. this year. Companies are on the hook for compliance and those industries which shoulder the burden for legal responsibility (e.g. auto) will see faster adoption than those where everyone ducks the issue (e.g. consumer electronics).
To see the full predictions, click here.