IoT 101

Internet of Things (IoT) is a popular buzz word around town. What is IoT? Why now? What are the growth elements?  How do I even segment these IoT devices?

Too many questions and too many ‘things’ to answer.

Let’s start IoT 101.

Definition:

Internet of Things refers to the networking of physical objects using embedded sensors, actuators, and other devices that can collect or transmit information about these objects (excluding smartphones and computers). As humans directly interact with the device for information exchange, therefore smartphones and computers are not considered IoT.

Tesla’s self-driving car is considered a partial IoT device as it has thousands of sensors and motors which can move without human intervention and take people from one place to the next.

IoT Market:

Murphy’s Law can be helpful to describe the IoT concept with a little tweak: Whatever can be connected, will be connected.

  • By a recent estimate there are over 20 billion devices connected to the internet as of 2017 and that number is forecasted to reach over 75 billion devices by 2025.
  • According to AMI’s Global Forecast Model, small, medium and large businesses spend on IoT technology reached over $800 billion worldwide in 2017.
  • There is a huge potential for IoT in developing economies in terms of adoption. Also, nearly half of the value is expected to be generated from developing countries.

Growth Elements:

Technology, being the root of all development, is at the center of every new breakthrough. The driving factors behind the development and adoption of IoT is the widespread availability of all the technical components and infrastructure.

  • Hardware: Many IoT devices rely on multiple sensors to monitor the environment around them. The cost of these sensors has dropped 30-70% in the past decade and prices are expected to drop further leading to more cost-effective sensors.
  • Internet: The expansion of the internet is another major growth element of IoT. Approximately 45% of the global population is connected to the internet. This increase in connectivity is paving the way for higher IoT adoption worldwide.
  • Smartphones: Smartphones can be a major driver for this segment despite not being an IoT device. IoT relies heavily on “remotes” to monitor and manage IoT devices. Today smartphones account for over 65% of mobile phones sold globally. These can be used as remotes to control IoT devices. According to AMI’s Global Forecast Model, businesses have installed over 4 million smartphones and over 1.3 million tablets as of last year.

IoT Segmentation:

IoT is very tricky in terms of segmentation because of various components involved and there are many gray areas between just being another tech product and an IoT product. Also, in terms of market adoption, it is difficult to identify IoT penetration in businesses and hence difficult to track spending. Here at AMI, we have identified 3 distinct segments for IoT to simplify tracking.

IoT Hardware:

Hardware is considered a building block in the IoT ecosystem. IoT Hardware includes spending on standalone components as well as those installed in devices, sensors, appliances, vehicles, machinery and many more. According to AMI’s Global Forecast Model, hardware components within IoT accounts for 50% of overall spending within the IoT segment. As we are in the initial phase of IoT growth, companies are setting up the necessary infrastructure for IoT thus increasing hardware spend.

IoT Software:

Some areas included in IoT software spend are IoT OSs, platforms, end user applications and cloud services (which is still in the early development phase). Software provides an integrated set of capabilities including mobile application libraries, analytics, security and device/services management.

IoT platforms include Cisco Jasper, Windows 10 IoT, Azure IoT Suite, Uptake, and Ayala.

IoT Services:

IoT services include solution design consulting, implementation, deployment, and management services as provided by service providers of all sizes such as Datatrend Technologies, Softweb Solutions, Accenture, IBM, AT&T and Verizon.

The IoT services market has wide reaching potential for one simple reason: IoT in business is well connected with other disciplines like security, data management and other vertical specific elements. No company can do everything alone and that’s where IoT service providers can help these companies achieve efficient results.

Finally, IoT will give birth to all new business models based on technology. Remember the Tesla car? Now imagine, Tesla selling just car service and not the actual cars. Anything-as-a-Service, selling transportation service rather than automobiles.

In a nutshell, companies are spending more on infrastructure set up and deployment. This is due to the initial growth phase of IoT being hardware centric. In the next few years, the market will experience an incredible growth in the IoT Software and Services industry. We will see companies spending more on platforms, security and analytics because of IoT expansion.

~ Ankit Mehta, Associate