For Internet of Things (IoT) designs, the consumer segment is a sexy siren call, but enterprise applications are where the money is, according to a top analyst from IDC. Vernon Turner, senior vice president of enterprise systems and IDC Fellow, said consumer whims coupled with volatility among providers — due to mergers and acquisitions — make IoT far less lucrative in the near term than the enterprise. The latter segment is where companies want to drive more efficiency into their operations and nurture loyalty among customers by leveraging IoT technology.
Turner said that by 2018 the consumer sector will account for 30 percent of the installed base of IoT devices, while the enterprise will account for the rest. However, the consumer sector will generate just 10 percent of the anticipated spend in that year, he noted. “The real value for IoT is in the enterprise space,” Turner said during an IDC online webinar Thursday (July 23).
Between now and 2020, the global IoT market will grow nearly 17 percent per year, with western Europe growing faster than the average, North America growing at about the average rate and Asia growing just slightly below the average, Turner said. “Asia doesn’t look back,” he said. “It’s growing slightly less than the market as a whole, but it’s the biggest market and slowing down is not a problem for Asia.”
The global IoT market will generate $1.68 billion in revenue in 2020 compared with $780 million this year, he noted. In 2014, there were 10.3 billion IoT devices installed around the world; by 2020 that will grow to 29.5 billion or a compound growth rate of 19.2 percent, he added. The rate of end points connected will almost double from about 4,800 per minute today to 7,900 per minute in 2020, according to IDC’s forecast. This is great news of course, but who will be driving this in the enterprise segment? Not surprisingly, larger companies, which have budget and motivation to invest in IoT. What kind of motivation? The two biggest are:
Indeed the larger the company, Turner said, the more those two factors motivate investment. The two biggest barriers to IoT adoption are concerns around security and cost. The first is important for all companies, but particularly acute for larger enterprises, according to IDC research. The second (cost) is more of a concern for smaller companies, which are often less resourced.
Some business segments are much keener to embrace IoT solutions than others, according to IDC’s research. Telecommunications, banking, utilities, investment services and process manufacturing companies are more likely to put aside budget for IoT investments in the coming years compared with organizations in government, education and construction, Turner said. Turner highlighted a dynamic that’s not yet getting wide notice: How company cultures are responding to IoT technologies. IoT is often seen as a disruptive threat inside companies due to, among other things, fears around job security, he argued. This can affect how companies invest in IoT solutions. This has led to a movement to crowd-fund IoT development outside companies. He called out Sony’s First Flight development effort, launched July 1, for crowdfunding and e-commerce solutions. This is fairly new in the market space. We’re seeing a lot of ‘phantom’ startups out there,” Turner said. “This is similar to ‘spin in’ companies. IT can’t develop something because of its culture, so they create a separate company and it gets spun in or goes public.”