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Roundup of commentary from industry analysts.
By Straight Talk Editors
In January 2016, almost a quarter of the companies exhibiting at CES demonstrated Internet of Things products. For the third year in a row, the Internet of Things or IoT has dominated this premier electronics industry show, setting the stage for a flood of recent reports from industry analysts regarding the network that connects everything.
Here are the highlights of recent findings and analysis from the leading market research firms:
The overall health of the IoT market
Machina Research’s forecast for the total value of the IoT market in 2025 is $4 trillion, up from $892 billion in 2015.
While North America and Europe show modest current interest with 37% and 42%, respectively, reporting use of or plans for IoT, Latin America and Asia lead the pack with 52% and 72%, respectively, according to Forrester. IDC estimates that 40% of the worldwide total IoT spending in 2015 came from Asia/Pacific. Machina research predicts that in 2016, Chinese players will shake up the IoT landscape, increasing market share significantly across semiconductors, software platforms, smart cities deployments, and integrated solutions.
Most of the 19 IoT technologies identified in Forrester’s Tech Radar report, are in “Survival and Growth phase today,” and the development of standards and robust security is key to their success: “Standards are nascent, as vendors are only a couple of years into the process of creating general-purpose interoperability standards. And IoT security technologies are still in the Creation phase, with no established products.”
Gartner predicts that 6.4 billion connected things will be in use worldwide in 2016, up 30% from 2015, reaching 20.8 billion by 2020. IDC predicts that by 2018, there will be 22 billion IoT devices installed, driving the development of over 200,000 new IoT apps and services.
The IoT is moving to the mainstream in many enterprises
The Internet of Things will move toward mainstream adoption in 2016 for many industries, according to the findings of a recent survey by Gartner. Although less than a third (29%) of responding organizations are currently using IoT, an additional 14% are planning to implement IoT in the coming 12 months, with an additional 21% planning to implement after 2016. In other words, the number of organizations adopting IoT will grow 50% in 2016, reaching 43% of organizations overall. In aggregate, the majority of organizations (64%) plan to eventually implement IoT. However, it is also important to note that another 28% have no plans to implement IoT, and that 9% see no relevance whatsoever in the technologies.
For those organizations that have already implemented IoT, the focus has been on internal operational improvements over external customer-facing objectives. To date, the primary business case for IoT is internally focused, namely improved efficiencies, cost savings and enhanced asset utilization (52% of total) versus the externally facing IoT benefits of enhancing customer experience or increasing revenue (40%).
Forrester says that the IoT is a “business-led trend,” and reports that 23% of enterprises use the IoT, with another 29% planning to do so within 12 months. They use the IoT to transform their business models by moving from one-time product transactions to ongoing product-as-a-service relationships, optimize utilization of physical and financial assets, and to create new forms of customer engagement.
IoT adoption, says Gartner, presents a significant combination of technical and logistical challenges. Hiring key personnel, choosing an appropriate platform and database, applying appropriate analytics and cloud services, as well as managing the IoT devices themselves, must all be given careful consideration.
While Machina Research predicts that in 2016 the IoT push from the top will be met by at least one Fortune 500 company via the appointment of a Chief IoT Officer, Gartner observes that executive leadership is a major consideration, as enterprises adopt different approaches to the IoT. Many have no overall leadership approaches, or ad hoc approaches, at this stage of implementation.
There is a shift in the expectations of enterprises, says Gartner, to move from mostly internal uses of IoT to external uses: Current use cases have been based largely on efficiency and cost-saving motives. There is an expectation that enterprises will give more attention to customer-facing benefits that will result in new revenue streams and new forms of customer engagement. These are likely to require significant transformation to achieve the expected benefits.
For enterprises just dipping their toes in the IoT, Gartner recommends the following steps:
- Focus on understanding the business benefits that can be realized through IoT. A lack of this understanding is normally the main reason for no coordinated action on IoT across the organization. Look at use cases, even if these are from a different industry. They will act as a good source of ideas and information.
- Explore the internal efficiency benefits initially, as these are easier to identify — particularly if you operate in an asset-intensive industry.
- Cooperate with other executives in the formation of a multidisciplinary team to explore these possibilities.
Challenges for successful IoT implementation abound, specifically the threat of security breaches and the lack of IoT standards.
Gartner predicts that by 2020, more than 25% of identified attacks in enterprises will involve IoT, although IoT will account for less than 10% of IT security budgets. Security vendors will be challenged to provide usable IoT security features because of the limited assigned budgets for IoT and the decentralized approach to early IoT implementations in organizations. Vendors will focus too much on spotting vulnerabilities and exploits, rather than segmentation and other long-term means that better protect IoT. By 2020, Gartner predicts that over half of all IoT implementations will use some form of cloud-based security service.
The widespread adoption of the Internet of Things is driving platform as a service (PaaS) utilization. Gartner predicts that, by 2020, more than 50% of all new applications developed on PaaS will be IoT-centric, disrupting conventional architecture practices.
Most new IoT-centric solutions will be implemented on IoT platforms, a form of multifunctional comprehensive PaaS that is a hybrid, architecturally coherent integration of application platform as a service (aPaaS), integration platform as a service (iPaaS), IoT device management, orchestration and business process management services as a platform (bpmPaaS), database PaaS (dbPaaS) and analytics services.
Consumers are interested in the IoT but are still searching for the “Killer App”
Worldwide shipments of wearable devices are expected to reach 110 million by the end of 2016, a 38.2% growth over the previous year, according to IDC. An expanding lineup of vendors combined with fast-growing consumer awareness and demand will generate double-digit growth from 2015 to 2020, culminating in shipments of 237.1 million wearable devices in 2020.
The market will also be driven forward, says IDC, by the proliferation of new and different wearable products. Watch and wristband shipments will reach a combined total of 100 million shipments in 2016, up from 72.2 million in 2015. Other form factors, such as clothing, eyewear, and hearables, are expected to reach 9.8 million units in 2016 and will more than double their share by 2020. This will open the door for new experiences, use cases, and applications going forward. Still, the primary focus of the wearables market will be on smartwatches.
Forrester puts these numbers in a larger context. 14% of U.S. online adults are currently using a wearable, and only 7% use any smart home device. Usage of connected devices in smart homes or cars is even lower in Europe. Smoke and home security monitoring are the two smart home services U.S. consumers are most interested in, followed closely by water monitoring.
In 2016, says Forrester, 33% of U.S. online adults will use some form of IoT across home, wearables, and car. However, usage in the next two years will primarily be led by wearables and smartwatches.
Forrester also found in its surveys that half of U.S. online adults are concerned that the monthly service cost of smart home technologies would be too high, and 38% fear the initial cost of setup would be too high. 36% of U.S. online adults fear using smart home services could compromise the privacy of their personal information.
As for IoT applications on the move, 31% are interested in access to the internet while using the car (i.e., on-board internet) and access to an interactive voice response system (i.e., a digital driving assistant). Telematics-enabled usage based insurance (UBI) is emerging and will disrupt the car insurance industry.
IDC also conducts consumer surveys in the U.S. and estimates that more than 8 million households in the U.S. already use some kind of home automation and control. The home IoT applications consumers are interested in are networked sensors monitoring for fire, smoke, water, or CO at home; seeing and recording who comes to the front door using a video camera; and networked sensors monitoring doors and windows. Consumers are least interested in networked kitchen appliances.
IDC found the following reasons for purchasing a home control application: 30% cited solving a known problem, either recent or long-standing; 40% cited word-of- mouth, news about such devices; almost 20% said it seemed like “a neat solution to a problem I didn't know I had” and over 15% said that the device “was on sale.”
Among those interested in home control IoT application but haven’t purchased one: High concern around cost (which is common for new applications) and unusually (for new applications) high concerns around reliability and user experience.
Over the next 12 months, says ABI Research, sales of smart home devices will nearly double year-on-year, as the groundwork and service offerings developed over the past few years provide solid impetus for wider adoption. However, while hardware sales will continue to drive smart home revenues over the next five years, a transition to recurring service revenues is well underway. In fact, by 2020, recurring service revenues will account for close to a quarter of smart home revenues, up from under 20%.