d iot o t o w · 2017-02-07 · d iot o t o w introduction the internet of things (iot) market...

Driving the IoT Journey: 10 Trends to Watch

INTRODUCTIONThe Internet of Things (IoT) market continues to gain momentum both growing in total connections and into new business and

consumer application segments. Overall connection growth in 2015 was 26% for things connected over short-range wireless technolo-

gies and using cellular, satellite, and fixed line access services. The average net new IoT connected devices per day grew from 640K EOY

2014 to 1 MM EOY 2015. While these are impressive numbers, more impressive is that the IoT market is still relatively immature: in a 3Q

2015 survey of IoT end-users and suppliers asking them the development stage of enterprise IoT projects, the results showed that 70%

of companies were either in the investigative stage or early design phase.

But the IoT journey for all companies will be shaped by the future. In fact, some of the innovations set to change the IoT landscape

were introduced over the past year. Demonstrations of augmented reality (AR) technologies showed how valuable IoT data becomes

when it is visualized using a smartphone or even smart glasses. New IoT data and analytics offerings came to market, such as platforms

that speed application development and automate predictive and prescriptive analytics. IoT supplier segments also changed to better

serve customers by specializing, adding new services, or offering innovative new products such as IoT marketplaces.

This whitepaper intends to show how these technologies and trends will impact the IoT market for the rest of 2016 and into 2017. It will

also project some of the more interesting new opportunities and challenges that will shape the future of IoT.

www.abiresearch.comDRIVING THE IoT JOURNEY: 10 TRENDS TO WATCH

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ANALYTICS AUTOMATION SEPARATES THE LEADERS FROM THE FOLLOWERSAnalytics on collected IoT data is the goal of most, if not all,

connected things and products. In analysis by ABI Research, by

2020, businesses will spend more than 26% of their entire IoT

solution cost on technologies and services that store, integrate,

visualize, and analyze IoT data, nearly twice what is spent today.

However, analytics is still a very manual activity, particularly in the

more valuable predictive and prescriptive analytics services. At the

onset of any IoT analytics project, data scientists have to spend time building, testing, and refining data models. But because machines

age and business processes evolve, as well as availability of new types of contextual data, data model adjustments become a periodic

activity. Based on ABI Research data, the very manual nature of data scientists activities are seen in analytics professional costs that

are expected to remain over 33% of enterprise IoT data and analytics spend through 2021.

What can improve data scientist efficiencies and lower the enterprise professional services costs is automation of many of the more

manual activities – i.e., analytics automation. However, this is not an easy proposition because it requires a platform that can easily

ingest new data, make adjustments to analytics models in real time, and even automate prescriptive analytics.

Analytics automation is in its infancy today, but its impact will be profound. The efficiencies it provides to data scientists effectively

democratizes analytics, allowing more problems to be solved and analytics use by more employees and business units. Analytics

automation separates the leaders from the followers; it lowers the total cost of analytics ownership and raises the bar on best-

in-class offerings.

IOT EXPERIENCES - AUGMENTED REALITY DRIVES THE NEXT PHASE OF ENTERPRISE GROWTH IN IoTAR is the superimposition of data in the form of text,

graphs, images, and even video, onto a live image of the

physical world. Facilitated mainly through smartphones

and tablets, most AR applications today serve consumer

markets. But the real revolution in its use and value will be

in enterprise markets when AR technologies are paired

with IoT and other application data.

Technicians are the near-term beneficiaries of AR and IoT. A technician can view a machine through a smartphone or tablet and quickly

find parts, view use history, gain instructions on removal and installation, and even order the parts. AR and IoT applications also facilitate

AlgorithmNew DataChanging Model


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efficient knowledge transfer to new workers. And when paired with wearables, such as smart glasses, additional synergies are gained

by freeing workers’ hands. Smart glass applications will be a major driver for overall enterprise AR adoption, expanding value to new

occupations, including surgeons and nurses in healthcare, and firefighters and ambulance workers in public safety markets.

When combined with IoT data, and wearables technologies, AR’s potential lies in its ability to personalize our interactions with the

physical world—effectively creating IoT experiences. Dashboard controls in cars, trucks, and other equipment can be augmented or

even substituted with digital overlays. Workers in manufacturing environments can build personal workspaces for tool use, job tasks,

and parts location. In smart home markets, AR technologies can assist seniors in finding necessities and medications.

Today, AR supplements our visual senses but future AR technologies could serve all human senses including tactile, auditory, and

olfactory (smell). ABI Research believes that this market is set to take off; enterprise AR software and services revenues are forecast to

exceed $12 billion by 2020.

INDUSTRIAL IoT MAKES STRIDES IN STANDARDS BUT THE SMART FACTORY IS STILL AN OEM BATTLEGROUNDIoT is providing industrial markets, such as oil and gas,

utilities, transportation, and manufacturing with the technolo-

gies and services for their next phase of growth. IoT is a core

component driving the vision of the next industrial revolution,

called Industry 4.0. In Industry 4.0, industrial processes and

the associated machines become smarter and more modu-

lar, driving higher levels of utilization and greater flexibility

for meeting customer demand.

Achieving the vision of Industry 4.0 requires developments of standards, and steady progress has been made. OPC-UA, standardized

by the IEC in 2011 and recently updated in 2015, is a vendor-independent protocol that allows diverse pieces of control equipment to

communicate with each other, effectively enabling a hyper-connected network across multiple industrial ecosystems. The AvNu Alliance

working group is driving development of the Time Sensitive Networking standard, a low-latency industrial communications protocol

that can interface and deliver data over standard IEEE 802 IT networks. Other initiatives that will contribute to smart industrial systems

include OneM2M, which provides a common service layer for monitoring and updating device and sensor software. The Bluetooth

Special Interest Group is developing Bluetooth mesh that will enable robust wireless communications for industrial sensor networks.

However, the benefits offered by these promising standards are challenged by key issues that characterize many industrial markets.

Equipment replacement and upgrade cycles are long; industrial firms are slow to swap out equipment or augment networks if legacy

equipment runs sufficiently and can meet production KPIs. Equipment in industrial settings has not typically been designed for sensor

augmentation or even additional forms of connectivity to enable standard IoT services such as condition-based monitoring. As well, due

to security and operational reasons, many pieces of industrial equipment lack ports for extracting processing data for analysis.


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These challenges become even more pronounced for manufacturers seeking to evolve to the smart factory. The reason is manufactur-

ing involves multiple processes from raw material ingestion, to material processing, assembly, and packaging, each served by multiple

OEMs using their own proprietary solution. As a result, ABI Research expects that over the next five years, IoT connections in manufac-

turing will grow, but primarily from OEM solutions siloed around their equipment.

In this environment, successful IoT suppliers targeting industrial markets will be those that help OEMs build their own IoT initiatives as

specialists, but at the same time also offer services and platforms to bridge the various siloed IoT solutions. One-stop shop IoT suppli-

ers are well-positioned to capitalize on both sides of the opportunity; however, only if they can satisfy two conditions: their services can

be disaggregated and offered as micro-services; their specialist services are best-in-class. In this way, OEMs and manufacturers can

more easily participate with the goal that early successes will lead to customers integrating into a broader supplier portfolio.

APPLICATION ENABLEMENT PLATFORM ECOSYSTEM EVOLVES INTO SPECIALISTS AND ONE-STOP SHOPSApplication enablement platforms were created to ease extraction of data from a device or machine, transmit the data efficiently

over a network, and get it into a form that is easily consumable by an IoT application. In a world of legacy devices, proprietary

protocols, and a highly fragmented “thing” market of sensors, devices, and machines of all levels of sophistication, AEPs bundle a

suite of capabilities to simplify this integration effort. AEPs effectively try to solve the “IoT plumbing” issue, blending the worlds

of OT and IT.

Today, AEPs fall into two groups: specialists and one-stop shops. Specialists are those that are focused on one or a few services, such

as messaging or application management typically agnostic to vertical market. Specialists also include AEPs that offer a complete set of

services, including application development; however they tend to “specialize” in serving particular industry segments.

One-stop shop providers are integrating either up or down the stack seeking to become the lead in an IoT engagement. There are

two sub-groups in this segment. The first subgroup is suppliers who are offering hardware, connectivity, and AEP services. These

suppliers eliminate the task of selecting a communication module or gateway supplier, as well as the telco for connecting the assets.

Companies selecting these suppliers then use their own resources or outsource services for application development, analytics, and

systems integration.

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The second group offers AEP services plus other value-added services, such as application development, data management servic-

es, analytics, and other consulting and professional services. More advanced companies in this group will bundle their services into

a broader IoT partner portfolio, including access to hardware and connectivity via an “IoT marketplace.” An important benefit of

suppliers in this group is that products and services are pre-integrated, which eliminates many of the integration activity time and

costs, facilitating faster time to market.

The significance of this evolution is threefold. It demonstrates a healthy marketplace as suppliers try to innovate via technology

development or offer expansion. Second, it shows that the “thing” ecosystem continues to expand, needing suppliers who are expert

in not only extracting data from any “thing” but also merging data from different “thing” ecosystems. Finally, it demonstrates the

complexity enterprises feel when combining the physical and digital worlds. AEPs, both specialists and one-stop-shops, are on the front

line of this march to a smarter connected world.

THING IDENTITY AND MANAGEMENT SERVICESAs the base of things in IoT grows from tens of billions

to hundreds of billions, it is inevitable that things will

want to participate in multiple ecosystems, interact

with other things, and be accessible to new services. We

already see IoT device and services suppliers in smart

home, connected car, and mobile healthcare beginning

to tap into each others’ markets.

Critical to facilitating these opportunities is thing

identity. Thing identity facilitates creation of thing

management services and other new value-added

services in such areas as security and analytics.

Developing thing identity services requires network addresses provided by the up to 7.9 x 1028 IP addresses of the IPv6 protocol.

The second critical component is a thing’s description and what it can do – the thing’s attributes. Companies and suppliers building IoT

solutions today are already defining the attributes of their devices, machines, and things to both manage them and create services.

But two challenges arise from these siloed efforts. The first is that the descriptions of attributes for things will develop non-linearly and

vary significantly. How one manufacturer describes the function of its switch will be different from another manufacturer. The second

challenge is that the types of things getting connected will also grow, compounding the variation in attribute types and descriptions.

There are already initiatives to help address these issues. The physical web, where anything can have a web address, is one option.

IoT frameworks from the likes of the OIC and AllSeen offer options for describing things to facilitate interactions across diverse thing

ecosystems. But these tools may not simplify interactions between legacy and new devices, nor be acceptable to enterprises that closely

guard access to their connected products.

CONNECTIVITY

SERVICE MANAGEMENT

IDENTIFICATION


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Under these conditions, there is a strong case to be made for development of third-party services to help manage a variety of

connected things for authentication, access, software updates, Over-The-Air (OTA) management, and security, as well as expose and

translate device attributes. All these opportunities will be facilitated with thing identity and management technologies and services.

THE RISE OF IoT MARKETPLACESOne of the biggest challenges facing the IoT market today is supplier

diversity and offer complexity. There are literally hundreds of suppliers to

choose from to create an IoT solution. The numbers of SIs and VARs that

help integrate the pieces of an IoT solution are vast mainly because they

tend to be companies of 50 employees or less. Connecting the assets can

be provided by a range of technologies, which are offered by hundreds of

hardware vendors. The middle part of the value chain is equally complex

with more than one hundred suppliers offering AEP services.

Not only is the IoT supplier base vast, but even finding a singular entity

to help navigate the technology and supplier choices is a challenge, as

discovered in a recent ABI Research survey. Survey respondents were

asked what are the challenges for IoT end-users with IoT professional

services? Thirty-seven percent stated lack of suppliers with end-to-end

technology know-how; 30% stated lack of suppliers with knowledge of

vendors and partners serving all parts of the IoT value chain.

Some of the more forward-looking IoT suppliers are addressing this challenge through a new offering called “IoT Marketplaces.” IoT

Marketplaces aim to provide enterprises with a portfolio of hardware, software, and services to simplify assembling an IoT solution.

A key benefit of the more advanced marketplaces is components and services that are nearly plug-and-play. Pre-integrated components

are a major benefit because they tighten overall solution security and enable fast time-to-market.

IoT marketplaces are relatively new, with only a few offering a full set of products and services to build, run, and manage an IoT solution.

However, ABI Research expects this channel to grow as suppliers seek to “take complexity out of the possible.”


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IoT DATA GOVERNANCE AND EXCHANGE SERVICESIoT data sharing is a relatively uncommon activity across

enterprise markets. Most activities around enterprise IoT

data are for internal activities of governance – who, what,

why for access and disposal; and for storing, processing,

analyzing, and visualizing IoT data.

While enterprises are far from exposing and sharing

their IoT data with external parties, it is worth exploring

the opportunities and challenges. The best example of

thing data sharing and its impact on all markets is thing

locations exposed in mapping software. Digital access to the locations of roads, cities, towns, places, and businesses has facilitated

the development of applications that we use every day. The most recent example is the development of the billion-dollar online

transportation access industry, which includes companies like Uber, Lyft, Arro, and others. Interestingly, taxi location in these apps is

not a shared piece of data outside of the applications themselves. However, vehicle location data sharing will need to become more

accessible if the world hopes to achieve the potential for self-driving cars and intelligent transportation systems.

Enterprise markets, particularly industrial, will be slow to expose their IoT data for reasons of security, IP protection, and market

competitiveness concerns. But as their IoT business models mature, enterprise markets will look to understand how they can

expose their data to improve their own operations and generate new revenues. Clearly, most enterprise IoT data would need to

be anonymized, but doing so and then exposing it to a huge developer community could lead to an avalanche of new services,

including marketing programs, support services, and new analytics services.

Like thing identity and management services, the potential for data governance and exchange services will be handled best by third

parties. Their services may be as simple as providing outsourced IoT data governance services. Or they can be as extensive as data

exchange services that anonymize data ownership, translate meta-data, and act as settlement agents handling both the financial and

operational aspects of data sharing. IoT data governance and exchange services are a longer-term opportunity, but the potential is huge

for taking IoT to new levels of value and market collaboration.

IoT DATAEXCHANGE

IoT DATAEXCHANGE

IoT DATAEXCHANGE

THIRD PARTY

DATACENTER

EDGECOMPUTING

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EDGE COMPUTING CONTINUES ITS MARCH TO RELEVANCEThe norm today with data and analytics services is that most IoT data is sent back to

a cloud environment from which it is either stored or acted upon using business rules

or sophisticated analytics. For some industries, regulations require storing activity and

use data of their machines. For others, deep analysis of IoT data is used to create new

products and services, as well as perform predictive and prescriptive analytics, both of

which require cloud computing power and access to other data.

However, market forces both on the supplier side and from customers are driving

more use of edge computing in which edge analytics are applied on the device itself

or on the network edge. Edge computing helps limit the amount of data transmitted

back to the cloud, which reduces connectivity costs over metered networks, and data

storage/integration costs. In some applications, edge computing is needed because the

application cannot wait for an analytics response for a round trip from edge to cloud

and back. An example is a car that senses a dangerous lateral rotation and uses analyt-

ics in the car’s computer system to make the necessary braking, suspension, and speed

adjustments to avoid an accident.

Suppliers are also driving more access to edge computing features. Analytics in gateways have been steadily improving

through improved hardware and application development toolsets. Computing power and memory in semiconductors and

modules is increasing, allowing simple sensors to offer some level of edge computing, including advanced encryption and certificate

security services.

Network infrastructure and services providers are also seeing the opportunity for deploying analytics near the edge. CDN providers

are contemplating IoT analytics services since they already offer server capacity close to users’ devices. Mobile network infrastructure

OEMs are also a potential new entrant for analytics services from network base stations.

The combined effect of both customer-driven and OEM-driven edge analytics is enablement of more futuristic IoT applications, such

as delivery services using drones and autonomous transportation systems. Edge analytics will also greatly accelerate innovation in the

data and analytics markets, helping IoT realize the potential of ambient intelligence, where products learn from their surroundings and

get smarter over time.

IoT DATAEXCHANGE

IoT DATAEXCHANGE

IoT DATAEXCHANGE

THIRD PARTY

DATACENTER

EDGECOMPUTING

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LPWA TECHNOLOGIES DEMONSTRATE THE POTENTIAL FOR MASSIVE IOT CONNECTIONS AND BUSINESS MODEL DISRUPTIONLow-Power Wide-Area (LPWA) technologies are the latest in a portfolio

of connectivity technologies that include cellular, short-range wireless,

satellite, and fixed line. They fill a gap in the market for application segments

that only have batteries or energy capture for power, require low costs for

connectivity hardware and services, and seek the simplicity of a wide area

connection rather than architectures that use gateways and short-range

wireless connections. All of these factors lower the total cost of ownership

of IoT solutions. Proprietary LPWA technologies exist today but equivalent

standardized versions will become available in 2017.

Besides opportunities in established markets, such as smart metering, smart home, and commercial building automation, LPWA

technologies make IoT solutions affordable for nascent markets of asset tracking, agriculture, and environmental monitoring. In fact,

the concept of the sharing economy, where personal assets are loaned to individuals for a fee, is greatly accelerated with LPWA

technologies. In sharing economies, anything from lawn mowers, to surfboards to the kid’s saxophone can be tracked and monitored

using LPWA technologies for much less cost than with existing wireless technologies.

The sharing economy whether for consumer or enterprise products is an example of a new business model enhanced by LPWA

technologies. But the significance of LPWA is that now the addressable market for connected products, and by extension innovative

business models, is massively increased. Even more products can be “servitized,” which today is in the tens of billions but with LPWA

could increase to the hundreds of billions and even trillions. LPWA technologies help facilitate not only massive numbers of connections,

but also massive access to the new IoT business models that will shape the IoT market of the future.

ENTERPRISE OUTSOURCING AND MVNOS FIND LIFE WITH IoTIoT is about connecting a vast array of things and machines. Each thing requires different technologies to both

sense, connect, and transmit data. The data from each thing can be quite different and require a different set of

analytics. The security requirements on things can range from very limited security to highly secure. The services

required will be dependent on not only the thing but also the needs of the companies and partners involved in

the connected thing’s operation.

IoT marketplaces provide a one-stop shop to build an IoT solution where the enterprise then typically runs and manages its connected

equipment. But in some cases, it may make sense for an enterprise to outsource IoT activities, including building, running and managing

a suite of connected things. The reason is that some enterprises may not want to invest the time and CAPEX to connect their products.

Or IoT may be important but not the core part of their business. Regardless, the various connected things owned by businesses to

facilitate their operations provides an opportunity for suppliers who can build, run and/or manage the entire IoT solution.

IoT DATAEXCHANGE

IoT DATAEXCHANGE

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IoT DATAEXCHANGE

IoT DATAEXCHANGE

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Outsourcing IoT services is not unusual but very much a nascent market. ATM management includes companies that provide

connectivity, management, and/or cash-in-transit services for collecting and distributing money. Companies such as Ericsson are

offering Smart Metering as a Service (SMaas), and companies like Philips are offering smart street lighting management services.

Philips can be classified as a mobile virtual network operator (MVNO) if it buys the connectivity from mobile operators to enable the

connection. IoT MVNOs will become a viable option for outsourcing services as wide area wireless technologies become more

prominent in thing connectivity.

As more things get connected, industries that deploy a vast array of IoT technologies for their operations will eventually look to suppliers

to outsource not only their operation and management but complete cradle-to-grave services. No enterprise segments are excluded as

potential customers but the early opportunities will be with cities, manufacturing, retail, and healthcare.

SUMMARYWhy do these trends matter? Because a smarter, more connected world is upon us with real benefits for both enterprise and

consumer markets. More importantly, these trends show that enterprises have choices to address IoT solution enablement.

From connectivity using LPWA technologies, to application enablement using one-stop shop suppliers, to analytics automation, to IoT

marketplaces, innovative options are available. As well, by engaging today, enterprises will not miss future opportunities facilitated with

AR solutions, and thing identity and data exchange services.

As noted earlier from survey data, most companies are in the early stages of their IoT journey. Regardless of project stage, enterprises

need to engage customers, partners, and IoT suppliers and embrace the opportunities and change imminent in a smarter, more

connected world.

Published June 2016©2016 ABI Research

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