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What is Happening?
Recent announcements of Internet of Things (IoT) product introductions, acquisitions, and partnerships attracted our research team’s collective attention — not so much because of their quantity as because of their substance and magnitude, together which raise the question: Do the level of investment and activity suggest that the IoT (and its industrial-strength cousin, the IIoT) are developing more, and more rapidly, into mainstream IT and business assets and exposures?
SoftBank Group Corp. (SBG) laid out (some suggest “overpaid”) $31 billion to buy ARM Holdings plc, the designer of low-power chips often used in wireless devices. Governments around the world are investing billions collectively in Smart City initiatives, one of the latest being the city of Philadelphia. GE and China’s telecom titan Huawei announced some specific investments in their partnership focused on the Industrial Internet of Things (IIoT). And the Pokémon Go phenomenon has catapulted augmented reality into the fronts of business minds in many industries (Why You Should Pay Attention to Pokémon Go).
But is it mainstream yet? Has it reached a tipping point? We’ve covered the IoT for years as an emerging category, looking at applications, technologies, collaborations, and partner ecosystems. All the well-known technology providers have made splashy IoT product, acquisition, and partnership announcements including Amazon, Apple, Cisco, Dell, IBM, Intel, GE, Google, HPE, Microsoft, Oracle, PTC, Salesforce, Samsung, SAP, and Sony. But provider announcements do not equate to industry adoption.
To evaluate whether the IoT and its underlying technologies such as augmented reality are reaching a tipping point, we decided to look at parallels with Cloud market development in terms of signposts or markers. Saugatuck covered emergence of the Cloud from its early days, beginning in 2003. We see enough similarity with the IoT to indicate it is time for businesses and providers to take the phenomenon seriously, or fall behind competitively.
Why is it Happening?
There are several markers for whether a set of technologies and applications are at the tipping point of mainstream industry adoption – markers that indicate serious progress into the mainstream. These include the following:
- Infrastructure capability and ubiquitous presence
- Wide global usage
- Notable/Master Brand technology provider partnerships and acquisitions
- Service provider practice development
- Industry survey projections
- Standards initiatives backed by major players
- Widespread recognition of emerging technology underpinnings
We’ve previously discussed the importance of communications networks and devices that support the IoT; not only broadband, but short-range connections such as Bluetooth and RFID. These networks aren’t everywhere, but are prevalent and growing in most urban areas. Mobile devices and sensors are in use almost everywhere in the world, and are a key underpinning of large scale IoT deployments.
Two recent announcements reflect that IoT / IIoT applications are important in many regions and markets:
- SoftBank specifically referred to the IoT as justification for its acquisition of ARM. Masayoshi Son, Chairman and CEO of SBG, said, “ARM will be an excellent strategic fit within the SoftBank group as we invest to capture the very significant opportunities provided by the ‘Internet of Things’”. While we share the IoT optimism, and we do agree that this is a strategic improvement for SoftBank, we also believe that Softbank significantly overpaid for ARM; we expect it will take several years – at the earliest – for the acquisition to pay off. Even so, strategic investments like this are signals of impending mainstream acceptance and integration.
- GE and Huawei announced planned strategic, IoT-focused joint investments last year, including GE’s expansion of Predix development in Shanghai. We think the deal will help GE’s digital business because of China’s rapid manufacturing sector growth and affinity to new technologies.
Other notable partnerships and acquisitions in the IoT include the following enterprise IT Master Brands:
- Edge analytics: IBM-Cisco, Dell with VMware, Nokia and others
- Smart buildings: IBM-ISS, GE-Schindler, and Cisco-PointGrab
- Acquisitions: Microsoft buys Solair; Cisco spent $1.4 billion on Jasper, an IoT platform provider.
Meanwhile – importantly – standards are progressing to address the diversity of technologies and interfaces. We’ve seen much over the past year, with new IoT-focused groups such as the Industrial Internet Forum as well as initiatives from established standards organizations including the IEEE, the Object Management Group (OMG), and the Open Geospatial Consortium (OGC).
Net Impact
Once the enterprise IT industry accepts the IoT / IIoT as mainstream, barriers such as the perceptions of risk drop, and scaling can occur. The key is business value: does the new technology and its applications warrant investment?
Clients familiar with Saugatuck Technology’s Cloud market adoption research will recall our multi-wave model of Cloud development, adoption, and business value. The final model incorporates four waves, as follows:
- Wave 1: Early Adoption. Limited standalone-style applications with focus on rapid deployment and ROI;
- Wave 2: Mainstream Adoption, which brings integration with business operations and associated systems, as well as technology integration and interoperability (which breeds customization of solutions);
- Wave 3: Ubiquity, with solutions optimized for specific markets, standards-based development platforms, and widespread infrastructure; and
- Wave 4: End-to-end integration with business processes based on increasingly intelligent and platforms and data management.
Wave 1 (early adoption) is where the IoT is today. Wave 2 (mainstream adoption) for Cloud meant integrated business solutions and integrated platforms – we certainly do not see those yet in the IoT, but we do see the beginnings of ecosystems and integration initiatives. But there is no clear boundary to the crossover from early adoption into the mainstream; such movement is gradual. We see the marketplace in that period of crossover now.
During the transition to mainstream, we expect diversification in terminology and the emergence of more focused IoT solutions. Just as cloud broke down in the IaaS, PaaS, SaaS, and BPaaS markets, with vendors targeting different industries and vertical applications in each category, IoT too will follow such a path. So IoT remains a catch-all term today, and its maturity will result in solid subcategories as we saw in Cloud computing.
While Cloud had a fairly clear value proposition for any company with a data center, IoT is applicable to a more limited set of opportunities. For enterprises in certain sectors, they should explore the IoT as competitors appear to be finding decent business cases in manufacturing, retail, transportation, energy, and government. Because the IoT is not yet mainstream, enterprises can’t yet rely on single providers or one-stop shopping. Right now, companies will still need to rely on their own ability to assemble the right mix of vendors and service providers to build a tailored IoT solution. An experienced service provider can help enterprises plan and execute such combinations.
Providers should consider how they will approach the IoT and IIoT strategically, via partnerships, acquisitions, internal R&D investments, and targeted marketing initiatives. For IoT to approach mainstream, customers will be seeking solutions that can be bought and configured to match their needs, rather than assembled and customized. End-to-end solutions configured to meet the needs of various industry verticals to market will be a key signpost of increasing market and vendor maturity, but will only develop once repeatable ROI can be attached to specific business problems. IoT remains right now in the era of custom-made rather than mass production.
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