deep field - iot slide deck - ed maguire

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Deep FieldUniverses of Possibility from the Internet of ThingsEd Maguire

July 2015

The Internet of Things – Why Now?

CLSA – Research/Broker with reputation for top quality thematic research

2020 Draws Nearer… “Deep Field” as metaphor Converging forces Reaching “escape

velocity” Uber valued at US$50bn

Sizing a big market opportunity“Value at stake” – big numbers but what does it mean?

Cisco: A US$19tn opportunity – (US$2.2bn for Cisco in 2014 growing 45%)

GE: Industrial internet could add US$15tn to global GDP over 20 years. The power of 1%: 1% decline in jet fuel =US$30bn (GE)

McKinsey: $14-33tn potential economic impact by 2025

Incremental Hardware, Software and ServicesGartner - US$316bn by 2020 (incremental IT spend)Wikibon - US$514bn by 2020 (Industrial Internet spend) IDC – US$7.1 trillion by 2020 (global IoT solutions)

US$309bn in incremental revenue generated for product and service suppliers in 2020 (Gartner)

Investments pouring into IoTCorporate investments - “all in”

IBM’s $3bn IoT stake; IoT is core to Cisco, GE, PTC strategies

Capital is readily accessible for startupsBy one estimate, 10% of VC investments are IoT related. IoT - dedicated efforts from McRock, Motus, Frost Capital, Intel, moreVC investments in IoT companies was $1.1bn in 2013 (CB Insights), $1.6bn in 2014. Most investments are early stage.Crowdfunding plays a key role (IndieGoGo, Kickstarter)

Pace of M&A is accelerating~US$14.3bn total transaction value in 2014 across 60 deals (451 Group) – 8X the total spent by acquirers prior to 20143X increase from 19 deals 2013 - and 40X the amount spent

Technology forces convergeMoore’s Law (compute power) + Koomey’s Law (energy efficiency) + Metcalfe’s Law (value of the network)Innovations in hardware, software, networking and connectivity

Cheap sensors, components, open source hardware, modules (Arduino, Raspberry Pi)Open source software and IoT Platforms as a ServiceIntegrated hardware/software/services development platformsNew connectivity standards (6loWPAN, CoAP, MQTT)Mesh networks (ZigBee), Machine-to-Machine networks (SigFox)

Technology forces convergeIoT-native standards coalescing

Industrial Internet Consortium, Open Interconnect Consortium, AllSeen Alliance, Thread etc.

Software platforms the solution to interoperabilityForrester: “IoT Software Platforms will become the Rage in 2015” Frank Gillett’s Blog November 13, 2014

We track dozens of platform players public and privateNetworking evolves into “software defined everything”

Fog computing supersedes the cloudEdge analytics build on industrial architectures

Other technology drivers Robotics, Artificial Intelligence, Cloud computing, 3D printing, clean energy technologies, block chain (BitCoin)

Impact: Wearables1bn+ smartphones a year, wearables connect an “Internet of Things and Humans”Wearable media hype peaked in 2014 but reality catching up - Smart watches haven’t lived up to the hypeAggressive market forecasts attracted many entrants

Watches, trackers (FitBit), cameras (GoPro), clothing, moreLots of crowdfunding and VC investmentExpect fragmented, vibrant markets in specialized wearables for smart Watches, fitness trackers, cameras, clothing, Quantified Self, medical monitoring and vertical applications

Apple Watch, FitBit are litmus tests for investors

Impact: Smart HomeHome Automation moves from high end to mass market

The smartphone replaces expensive controllersCheap automation hubs (SmartThings, Revolv)Wireless connectivity standards (ZigBee, Z-Wave)

Google (Nest Labs), Apple Home Kit and Samsung (SmartThings) set to dominate smart home platformsGazillions of “enchanted objects”; Connected products will be “table stakes” over time

Impact: Autos, TransportationAuto industry is leading the way to connected “things”

Vehicle to Vehicle (V2V), Vehicle to Infrastructure (V2I) for safety, usage-based insurance, personalized services, over the air software updates (Tesla). Autonomous cars coming with breakthroughs (Quanergy)

Connected vehicles enable “sharing economy” business models: Uber, Daimler Cars To Go, BMW DriveNow Trains, planes and commercial fleets are active adopters of IoT solutions

Predictive maintenance for engines, switches, vehicles etc.Safety improvements (prevent derailments) Fuel efficiency gains

Impact: Healthcare, Retail, CitiesHealth care: mobile apps, patient monitoring, telemedicine, infant and elder care, “ingestibles” (Kinsa, Proteus Health)

Optimizing hospital process flow, emergency services

Retail operations: RFID matures supply-chain management, inventory, logistics, fleet management, Omni-Cart (Impinj) Customer engagement: personalized promotions, iBeacons for “geo-fencing” apps (Estimote)Smart cities: emergency response, municipal services, building automation, public safety, Lighting-as-a-Service

Impact: Energy, Agriculture, ManufacturingManufacturing lags IT adoption

Industrial control systems (SCADA) connected to Internet, connected product design, networked production systems, predictive maintenance, Germany’s Industrie 4.0

“Precision Agriculture” Yield optimization from soil analysis, seed/fertilizer mix, aerial drone monitoring (SlantRange, Edyn)

The Internet of Energy Exploration and extraction, autonomous mining, remote operations, pipelines, smart meters/grid, energy analytics and efficiency, networked “artisanal” power production

IoT will create new business models Major use cases enable new business models (Deloitte)

70% Cost reduction (predictive maintenance, inventory) 20% Risk management (usage-based auto insurance)10% New revenues (products become services, sharing economy)

Parallels early days of Enterprise ApplicationsOver time, value will migrate to analytics and vertical applications. Domain expertise is key, with value combining Industrial and IT skill sets.Everything as a Platform?

Autos, cities, smart homes, energy grids

Investing the IoT: A “Barbell” MarketStill early for horizontal “pure-plays” - potential IPOs possible in 2015-2016. Many ways for public company investors to play the theme:

Large cap: GE, Cisco, Google, Apple, Samsung, IBM, Salesforce.com, Rockwell Automation, FlextronicsMid-cap: PTC, Splunk, Red Hat, Tableau, QlikTech, Trimble, AkamaiSmall cap: Sierra Wireless, Telit, Skyworks, CalAmp, Atmel, Ambarella, ThinFilm, Atmel, Hortonworks, LogMeIn, Digi Int’lVerticals: Tesla, Fleetmatics, Monsanto, Caterpillar, Rio TintoAdjacencies: MobileEye, GoPro

Technology firms will benefit, but non-tech companies will see the more dramatic impact over time