Internet of Things (IoT) trends and realities: what to expect in 2017

Internet of Things (IoT) trends and realities: what to expect in 2017

As part of our agenda of looking at the impact of technology and innovation on economic growth and development, we’ve written about the internet if things (IoT) for several years. In January 2013, we said:

‘Internet of things’ will have a huge impact on how businesses look at their business operations, efficiency and productivity – in the next few years it could actually help restore confidence after the global economic crisis, providing a leap forward in global productivity. Combine this with the need to interpret the huge number of data points that will be generated – the so-called ‘big-data – and automated business intelligence and reporting systems also become increasingly important. The next wave of innovation will therefore come around the internet of things, big data and business intelligence.

Fast forward to 2017, writing in the World Economic Forum blog, Dominic Gorecky and Detlef Zühlke of the German Research Centre for Artificial Intelligence (DFKI) say the internet of things (IoT) is already starting to affect environments of all kinds – homes, cities, travel, logistics, retail and medicine, to name just a few – and it will not stop at our factory gates, either.

According to a recent estimation by McKinsey, the potential economic impact of IoT applications in 2025 is between US$ 3.9 and $11.1 trillion, of which $1.2 to $3.7 trillion is allotted to IoT applications within the factory environment. Also known as smart manufacturing, or Industrie 4.0 in Germany, these are fully networked manufacturing ecosystems driven by the IoT.

Gorecky and Zühlke add that in smart manufacturing, where all ‘factory objects’ will be integrated into networks, traditional control hierarchy will be replaced by a decentralized self-organization of products, field devices and machines. Production processes have to become so flexible that even the smallest lot size can be produced cost-effectively and just in time to the customer’s individual demands. Customers are driving this development too, as they can design and order products at the click of a mouse. They can also expect products to be delivered within a few days – or even hours – and don’t want to wait weeks for goods to travel from far regions of the world where labor costs are lower.

Despite this huge potential, the introduction of IoT technologies in the rather traditional domain of manufacturing will not happen abruptly: investment cycles are long, and robustness of processes and technologies outweigh the striving for innovation. Too many questions have to be answered first.

As IoT technologies penetrate ever more deeply into our factories, down to the smallest piece of equipment, technology providers and factory planners must find solutions to four main problems:

  • How to assure the interoperability of systems
  • How to guarantee real-time control and predictability, when thousands of devices communicate at the same time
  • How to prevent disruptors, or competitors, taking control of highly networked production systems
  • How to determine the benefit or return on investment in IoT technologies.

To compensate for technological uncertainty and financial risks, adequate pilot environments are needed. Here, smart manufacturing technologies and strategies can be implemented, evaluated and showcased for the first time. Smart manufacturing is a network paradigm affecting wide-ranging areas from automation to IT, from digital planning of a product to its recycling, and from smart sensors to business applications.

There is no single-solution provider that can cover all of these aspects at once. So, for holistic solutions to emerge, there has to be a network of technology providers joining forces and competences to develop compatible solution blocks that fit the future requirements of technology users.

As a result of all of this in a broader context beyond just manufacturing, Mike Krell, an analyst at Moor Insights & Strategy, says that 2017 will be another year of growth for the IoT — and potentially some contraction. IoT is still in its infancy in terms of dollars and deployments, and that can’t last much longer, before market frustration sets in. He says 2017 must become the year where the focus on real deployment and monetization of IoT systems, including both software and hardware.

2017 will also be a year of contraction. There are way too many ‘platform’ and hardware providers trying to gain traction in the market. Small platform providers will either disappear or get swallowed up by ‘bigger fish’, and 2017 is likely to end with many fewer players than today. Hardware will continue to expand, but companies that only provide single or very narrow solutions will get swallowed up or disappear altogether, depending on the quality and security of their products.

Writing in Forbes magazine, he says these are key things to watch for 2017 in IoT:

  • IoT semiconductor and sensor volumes will skyrocket. 2016 was a year of consolidation for IoT semiconductor makers. There was Broadcom and Avago (and then Broadcom jettisoning their IoT business to Cypress) and then Qualcomm swallowing up NXP (and the former Freescale in the process). Krells says that NXP is one of the best positioned IoT semi vendors, and if a deal with Qualcomm is completed, the combined company has the breadth of technologies and capacity to dominate the IoT market. ARM cores will continue to dominate IoT, and sensor manufacturers will continue to see volumes rise. He adds that 2017 may see more consolidation –Silicon Labs could grow bigger or be gobbled up.
  • The IoT platform shakeout will begin. The year started with lots of noise from new vendors with a definite slowing as 2016 came to a close. There are just too many vendors trying to push undifferentiated solutions.
  • Changes in ‘edge’ or ‘fog’ architectures will become critical to implement. The edge or the fog is the part of the network between the devices (where the data originates) and the cloud. Traditionally this had been a simple aggregation point or gateway, but that just won’t cut it for IoT. The massive amount of data generated by IoT devices will put strains on the network, requiring edge devices to get much smarter. Mainstream vendors such as Cisco Systems, Dell EMC and Hewlett Packard Enterprise recognize this and are pushing smarter IoT edge devices. These devices are, in simple terms, a combination of a server and gateway. With the increase in computation, storage and networking capabilities edge-based analytics will become a critical element in the success of IoT.
  • Telco and communication choices will continue to be messy. Telecom operators’ strategies and business models for generating revenues from IoT will continue to develop through 2017—and won’t be set by this time next year. For telcos, the battle will continue between NB-IoT and LTE-M based on region and monetization models through 2017. Infrastructure providers such as Ericsson and Huawei will increase in importance, with strong portfolios of IoT hardware and software solutions. Alternative LPWAN (lo power wide area network) technologies will become increasingly strong in niches where the bandwidth, capacity and security of 3GPP standards aren’t necessary (or cost affective). These include LoRa, Ingenu and Sigfox.
  • Regulation and standardization continue to come into focus but will evolve continuously. 2016 brought us a little closer to standards interoperability with the merger of OIC and the Allseen Alliance into the Open Connectivity Foundation. Other collaborations including ZigBee, Thread Group and Z-wave continue to move the market toward more cohesive and simpler solutions. However, there will still be a great amount of fragmentation and no clear-cut winners. Apple HomeKit and Google Weave will play a role, but how this fleshes out is anyone’s guess going into and coming out of 2017. On the regulatory front, expect to see more government interest in 2017, as IoT becomes more pervasive in smart cities, the public sector and energy.
  • Security gets its due. Security was finally taken seriously in 2016, largely because of real IoT hacks. The big denial-of-service attack in October, and the potential of a drone injecting a malicious virus via lights (from outside a building), caused great concern throughout the industry. With all the new vulnerable devices now being put into service, 2017 will see hackers continue to exploit IoT systems. Expect large scale breaches, as hackers look for newly connected devices in the energy and transportation areas.
  • Smart cities will lead the charge in IoT deployments. The awareness of what ‘smart city’ means has begun to come to the attention of residents. They value safety (smart lighting), convenience (transportation, parking) and potential cost savings (smart meters, on-demand trash pickup), and cities can deliver. Cities will continue to be strained by the need for money to support the deployment of sensors (to gather data) and the integration of citywide systems.
  • Smart home technology will become, smarter, more secure and easier to use. Amazon Echo and Google Home made great strides in 2016, both becoming more mainstream appliances in the home. However, networking bandwidth and connectivity between devices and systems is still a major problem for consumers. Networking continues to be painful. Streaming video rules the home entertainment market, and the need for increased bandwidth has put strains on home network bandwidth. Expect new announcements on mesh or mesh-like products with simpler network management in 2017. There continue to be too many applications and too many technologies to choose from to make it all work together seamlessly. Hopefully there will be some real advancements in interconnection in 2017.

(Moor Insights & Strategy is a global technology analyst and advisory firm addressing the IoT, client computing, cloud, the software-defined data centers and semiconductors.)

[Photo credit: IBM Watson internet of things]

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