By Monica Alleven
Forecasting the market for the Internet of Things (IoT) is particularly vexing because there are so many "things" and moving parts. There's no single entity. It involves chipmakers, device manufacturers, software developers and so much more. Everything from the automobile to the thermostat is getting connected, not to mention objects that are yet to be invented.
Part of the difficultly in making market projections is the definition of IoT, which can vary wildly among forecasters. Some forecasts do not count smartphones, gaming console devices or other things that require human interaction.
Infonetics Research analyst Godfrey Chua said he's not sure anyone can truly put a number on the Internet of Things at this point. "What makes IoT so challenging is it's not one thing," he said. "It's a bunch of different markets. Depending on the point of view that you have, that really colors how you think about it."
However you look at it, the numbers are impressive. Gartner, which excludes PCs, smartphones and tablets from its IoT numbers, predicts the IoT sector will include 26 billion units installed by 2020, representing a 30-fold increase from 2009. Cisco and others peg the number of connected devices at 50 billion by 2020.
International Data Corporation (IDC) forecasts the worldwide market for IoT solutions will grow from $1.9 trillion in 2013 to $7.1 trillion in 2020. "The momentum is definitely picking up," said IDC analyst Carrie MacGillivray. IDC defines the Internet of Things as "a network of networks of uniquely identifiable endpoints (or things) that communicate without human interaction using IP connectivity – be it locally or globally."
According to a Raymond James & Associates report, for every Internet-connected PC or handset, there will be five to 10 other types of devices sold with native Internet connectivity. "In our view, the concept of the IoT will disrupt consumer and industrial product markets generating hundreds of billions of dollars in annual revenues, serve as a meaningful growth driver for semiconductor, networking equipment and service provider end markets globally, and will create new application and product end markets that could generate billions of dollars annually," the firm stated.
Although relatively small in revenue for wireless operators, connected devices and machines that talk to one another and the network represent a large and high margin-business, Raymond James noted. IoT applications typically use very little data, and traffic is not as time sensitive as voice, resulting in a margin-rich service opportunity that in effect can make use of excess network capacity and provide a recurring revenue stream for operators.
Infonetics expects revenue derived by service providers for the connectivity and other basic value-added services they provide to the automotive, transport and logistics (connected car) segment to more than triple from 2013 to 2018, to $16.9 billion worldwide. The connected car services market is growing at a 2013-2018 compound annual growth rate (CAGR) of 25 percent, nearly 21 times the growth rate expected for traditional mobile voice and data services during the same time period.
Preparing for take-off
While companies like Apple and Google inevitably come up in conversations about the Internet of Things, it's also easy to see how companies like Cisco and IBM will benefit in a world where everything is connected. "This holds the potential of just making them all the more relevant," Chua said.
"It really spans a wide gamut of businesses," he said. "Any business that is using communications and networking technology today can pretty much easily expand into the Internet of Things. The Internet of Things really applies to every sector out there, so who's going to be there first is going to be a function of regulation, market dynamics, competitiveness and the kind of pressures those factors create."
While traditional players like AT&T, Sprint, Cisco and Ericsson are well-positioned, some of the more successful IoT companies might come from different industries, like GE or Caterpillar, that are already reaping the rewards, said Chetan Sharma, founder of Chetan Sharma Consulting.
"The chipset guys like Qualcomm and Intel seem to be better placed, since it will be an essential component of whatever gets built on top. New players like Google are active in the space, but it is still experimentation," he said, adding that he believes the big money will be in services and data and not in hardware.
Chua said he doesn't underestimate the likes of Xiaomi, the Chinese company whose CEO is often compared to Apple's Steve Jobs. Xiaomi has a knack for making what some consider copycat products but does so at dramatically lower prices. It even launched a $13 fitness tracking wristband to compete with Fitbit's $99 product.
One of the things that makes the IoT so promising is it applies to such a wide variety of technologies, Chua said. "The kinds of use cases and services that can come out of that is tremendous," he said. "But that's also what makes it challenging and complex. There's so many different things you can do with the Internet of Things."
This article was originally published in the FierceWireless ebook, "Internet of Things: More (or less) than You May Think."