Internet of Things (IOT) “Market” in principle, is connecting non-computing devices (aka sensors) in order to automate and increase operational efficiencies using Mobile & Cloud technologies. IOT opens up several new business models as it provides the ability to digitize and automate operations across different industry verticals, enhancing productivity and thereby creating a significant tangible value in the echo-system. In order to derive value from the Internet of Things (IoT), it is necessary to have a platform on which to create and manage applications, to run analytics, and to store and secure end user/device data. Like an operating system for a computer system or a network, an IOT platform does many things in the background that makes it less cumbersome for developers and end-users of IOT. IOT Platforms key functional components include but not limited to: Device Management, Identity Management, Security, Analytics & Predictive Machine learning, OTA Software updates, Cellular Service functions, Topology & Dashboards, WebApp & Mobile Apps along with IOT Agents that run on Devices/Things/Gateways.
Category of IOT Companies
Given the large size of the IOT market (US$ 200B by 2025 – Source: Analysys Mason Report) and the exponential growth, there are several IOT platform companies that have sprung up in the last 3 years. Furthermore, the report dissects the total US$ 200B into 3 areas with- 25% of the revenues coming from IOT Device hardware modules, such as Smart Meters, SIM terminal modules etc; 14% of the revenues coming from Connectivity services, such as new mobile connections; 61% of the revenues coming from Application software to perform tasks and manage the data collected by the sensor, including Tools and capabilities for IOT solutions, hosting, system design and integration. The application software requirements, the largest portion (61% of the potential revenues) created the necessity for an IOT platform market.
In my assessment the IOT Platform companies can broadly be classified into 5 categories. The business intent of each category is to some extent self-serving to these entities in the category and some have intentions to drive adjacent and new revenue streams by introducing an IOT platform, since it compliments their core business. Below are the categories and business strategies behind entering IOT.
1. Cloud Computing Companies (CCC)
The Big-4 CCC’s – Amazon AWS, Microsoft Azure, Google GCP, IBM Softlayer and 50+ Tier2 data-center companies will benefit from selling more “CNS- Compute, Networking & Storage” (Virtual Machines, Containers, etc). These companies are developing loosely coupled IOT PAAS (platform services), that their customers can use to create IOT Service & Application Platforms. The Big 4- Amazon, Microsoft, Google, IBM have made several acquisitions to jump start this effort over the last 3~4 years. Examples: Amazon – 2lemetry, Blink, Google – Xively, Microsoft – Solair, Maluuba, Dees. Their primary business intent is to drive their CNS business by having IOT customers use their IOT Cloud Platform services and sell more CNS, which is their core business.
2. Industrial Manufacturing Companies in different Verticals
These Companies really benefit from the automation and operational efficiencies of IOT. The existing technologies such as SCADA are expensive and do not easily adopt into the Internet, Mobile & Cloud technologies, which can give them huge cost advantages and economies of scale. GE Predix, Bosch IOT Suite, Siemens Mindshpere are some examples in this category. Given the number of verticals in this sector (Manufacturing, Transportation, Defense, Finance, Banking, Agriculture, Smart Cities, Healthcare, Power Utilities, Solar Plants, Oil, Gas & Mining etc) the number of IOT platforms this category will evolve into a long list, some having a dependency on CCC vendors. Not to quell these initiatives in these companies, but my prediction is that these vendors will be challenged to keep up with the rapid changes in new Internet, Mobile and Cloud technologies and eventually may be acquired/consolidated by some IT or Networking giants (say IBM, Cisco).
3. Established Networking & IT Infrastructure Companies
Cisco Jasper, VM Pulse IOT Center, IBM Watson, Alcatel-Lucent mFormation are some examples here. Given that these vendors have Networking and IT software businesses they are well positioned to sell IOT platform & associated services. So far Cisco Jasper has been successful in fleet navigation vertical and is rapidly expanding to other industry verticals. Other Infra vendors can eventually acquire an IOT platform company to jump on the growth trend. Since IOT knowhow and systems integration is perceived to be complex, (and is certainly a complex area) these vendors can bring expertise to the table. These vendors will derive services revenues along with product revenues. It is both complimentary and adjacent to their core business.
4. Service Providers/Mobile Network Operators
Connectivity amounts to 14% (~$28B) of the IOT market, and in the present situation most Service Providers are challenged with top-line growth as SIM connections are saturated. IOT will open up new venues for growth for the Mobile Network Operators(MNO’s). In addition to connectivity revenues, MNO’s can tap into the 61% IOT applications revenues, hence their interest to jump into the IOT Platform market. Telco’s have a unique advantage of having a stable and scalable backoffice billing systems and great customer service relationships with end-users that they can carry into the IOT market. Several Telco’s also invested in their own Data-Centers further justifying driving the CNS business. Examples of Telco’s entering the IOT market with their own platforms (some with small acquisitions) – Telefonica, Verizon (acquired Thingspace), ATT, Telstra.
5. IOT Specific Companies & Startups
There are a few legacy IOT vendors migrating to the new Cloud Platform technologies. Several IOT platform startups have been funded by Silicon Valley investors among other funding entities, Vitalpointz being one of them. The current investment range from $5M to $40M rounds, putting these companies at post valuation north of $25M+. A large number of the IOT platform (PAAS) companies might be acquired at a some level of premium and as usual the rest will cease, particularly those who are overcapitalized (meaning over-valued in VC terms).
Choosing an IOT platform
Platforms have a great potential for creating a monetizable echo-system (Android, IOS, Centos, MS-DOS, MS-Windows, Cisco IOS, JunOS, Solaris, AristaEOS, Calix AXOS, to name a few) that sustain for over decades. Organizations and companies seldom switch platforms often as platform migrating costs are significant and therefore platform choices persist for many years. Non-USA network operators are not very happy with 2 USA companies- Google & Apple, having a commanding control over the Operating Systems on worldwide Mobile Handsets, which not only takes away a significant technology & commercial advantage from them, but also having access to customers sensitive data. Non-USA companies might be very reluctant to get into a binding business relationship with the Big-4 Cloud Computing companies (Amazon, Microsoft, Google, IBM) and in particular due to the Data-privacy and GDPR issues in the evolution of the IOT application landscape.
Now a trifling value pitch about Vitalpointz – Most of the IOT platforms do not address the Mobile Operator specific requirements. They have to be customized for Mobile operations and backoffice OSS systems. Vitalpointz IOT platform while addressing the Mobile operators needs, also offers a differentiated data security layer, with an hardware crypto add-on module making any IOT device secure, unique and trust worthy, providing end to end comprehensive secure service. Most platforms offer IP based service connectivity, while in reality the IOT network scene is crammed with non-IP access technologies such as NB-IOT/LTE-M, LoRa, Sigfox etc. Vitalpointz IOT Platform will support both IP and non-IP networks and provide a uniform access to data to end users/ app developers.