The Road to Zillions of Connected Things (IoT)

Fresh out of topping Gartner’s most hyped technologies list for the second year in a row, the Internet of Things (IoT) has kept its buzz going over the last couple of weeks with a series of announcements and new market analysis reports. First, here’s a sample of recent announcements:

• September 20: Dialog Semiconductor has agreed to acquire Atmel Corporation for approximately $4.6 billion, combining forces in the mobile power, IoT and automotive markets, and addressing a “market opportunity of approximately $20 billion by 2019.”
• September 18: Orange announced it is building a Low Power Wide Area (LPWA) network covering the whole of France, in line with its “ambition to become the number one operator for the Internet of Things.”
• September 17: Alcatel-Lucent announced the acquisition of Mformation to provide service providers and enterprises with a secure, scalable, application-independent IoT security and control platform for use across multiple industries.
• September 16: HCL Technologies announced it will jointly develop with IBM Internet of Things solutions and that the two companies will set up for that purpose an incubation center in Noida, India.
• September 15: Salesforce has entered the Internet of Things market with its IoT Cloud.  Marc Benioff, Salesforce CEO, told the attendees of its Dreamforce annual conference: “With the Internet of Things, I’m more connected than ever. It’s truly a customer revolution.”
• September 14: GE announced the creation of GE Digital, a new business unit led by Chief Digital officer (CDO) Bill Ruh, with the mission to “win in the Industrial Internet” (GE’s term for the Internet of Things).
• September 14: IBM also announced a new business unit dedicated to conquering the Internet of Things market, led by new-hire Harriet Green.

We also learned more this month about the state-of-the-market for IoT and its potential impact from a number of new reports:

IDC (also here) shared the results of its survey of 2,350 IT and business decision makers in (mostly) large and medium-size enterprises worldwide:

• Enterprise decision makers see the IoT as “strategic” (58%, especially in the health, transportation, and manufacturing industries) or “transformative” (24%, especially in IT and professional services); 13% are still ”considering” it (especially in government and financial services) and 4.1% think it’s “not important.”
• IoT momentum is real and quantifiable:  17% of participants in the survey have already deployed IoT and 31% plan to do so this year. Less than 5% “have considered but decided against it.”
• IoT strategies are global in scope, with enterprises in Asia/Pacific leading other regions with almost 55% of survey participants (compared, for example, with about 45% in the North America).
• B2B is considered by survey participants as the place IoT will grow, a reversal from last year where a majority of survey participants thought the consumer IoT is where the action will be.
• Shift in the location of processing the data: More survey participants this year will process the data generated by IoT sensors at the ”edge” rather than in the data center, a reversal  from last year’s survey.
• Top drivers for creating an IoT strategy:  Increased productivity (14.2%), time to market (11.8%), and process automation (10.1%).
• Top challenges for the IoT: Security, upfront costs, ongoing costs.
• IoT is anyone’s game in 2016: Hardware and networking vendors have lost ground in their perception as “leaders,” while software vendors, analytics vendors, and device/component vendors have gained in market awareness/perception.  “Industrial Internet companies,” while not a category that was asked about last year, is at less than 10%–GE and other companies using this term have their work cut out for them to make it synonymous with IoT.

Gartner reiterated its forecast of more than 30 billion installed IoT units and estimated it will result in a 20% increase in potential revenue generated from software for manufacturers running ‘intelligent devices’.  The Internet of Things (IoT), in Gartner’s view, turns every manufacturer into a software provider, a transformation which will have profound impact on application strategy, architecture, development and integration.

Gartner recommends that manufacturers differentiate with software, increase the intelligence in their devices by adding software, and ensure they have the licensing and entitlements tools to manage the software.

Accenture estimates that based on current policy and investment trends, the IoT could add about $500 billion to China’s cumulative GDP by 2030. This would result in China’s GDP being 0.3 percent higher in that year compared with current projections. However, by taking additional measures to improve its capacity to absorb IoT technologies and increase IoT investment, China could boost its annual GDP by 1.3 percent by 2030, cumulatively adding $1.8 trillion to the economy by that time.

Last but not least, Harvard Business School professor Michael Porter and PTC CEO Jim Heppelmann published in the Harvard Business Review “How Smart, Connected Products Are Transforming Companies.” They describe the impact of the IoT on the organizational structure of manufacturing companies and conclude that “Smart, connected products reshape not only competition, as we detailed in our previous article, but the very nature of the manufacturing firm, its work, and how it is organized. They are creating the first true discontinuity in the organization of manufacturing firms in modern business history.” They also see broader benefits of the IoT, including changing consumption patterns: “Smart, connected products will free us to purchase only the goods and services we need, to share products that we do not use much, and to get more out of the products that we already have. Instead of tossing out old products for the next generation, we will hold on to products that are continually improved, upgraded, and modernized.”

Originally published on Forbes.com