Welcome to Analysys Mason’s monthly blog post on trends and happenings in the Internet of Things (IoT) world. When Bosch asked me to write this blog series, I was excited. I have known Bosch in my home and my car, and now I get to have my name on the Bosch website. I am going to try to convince Bosch to name a new high-powered, electric hand drill in honor of me, but I do not know if I will be successful.

Over the next 12 months I am going to write a series of blog posts and respond to your comments about all sorts of IoT topics. I will discuss various industry sectors’ adoption of connected devices and applications; look at new business models for IoT; ponder some M&A activity; talk about platforms; and highlight some solutions adopted in various regions of the world. Certainly let me know if you have ideas or thoughts for blogs as well.

Machine-to-machine (M2M) is a technology that uses a device attached to a machine to capture an event which is relayed through a mobile phone or fixed line network to an application that translates the event into meaningful information.

The Internet of Things (IoT) is the next generation of the Internet based on the Internet Protocol (IP). In addition to today’s Internet it facilitates via end-point devices the automatized use of data generated by sensors or devices and access to actors. IoT solutions are deployed in sectors including automotive, transportation, smart homes, energy, utility, security, surveillance, public safety, financial services, retail, healthcare, industrial, warehousing, and distribution. Sometimes IoT is used synonymously with the term machine-to-machine (M2M). Undoubtedly there is some overlap, but I will attempt in this blog to show the progression from an M2M to an IoT world.

How large is the market for connected things?

The number of device connections worldwide will increase from 100.4 million in 2011 to 2.1 billion by 2021, growing at a compound annual growth rate (CAGR) of 36% during the forecast period (for more information see Analysys Mason’s 2011–2021 M2M worldwide forecast report). We forecast M2M rather than IoT, because generally we are still in an M2M world. But it still gives us an indication of the magnitude of the industry.

In 2011, 69% of these devices were in developed regions of the world although we expect this percentage to decline to 59% by 2021 as enterprises in emerging regions start to notice increasing ROIs from adopting M2M solutions. In 2011, 80% of M2M connections were over mobile networks – primarily 2G and 3G –and this percentage will increase to 93% by 2021, because the ongoing costs associated with M2M over mobile networks are generally less expensive than fixed networks (see Figure 1).

M2M device connections, developed markets’ share of connections and fixed networks’ share of connections, worldwide, 2011–2021

Figure 1: M2M device connections, developed markets’ share of connections and fixed networks’ share of connections, worldwide, 2011–2021
[Source: Analysys Mason, 2012]

So we know this is going to be a large market opportunity. In fact, some of the largest industry sectors for IoT include the automotive/transport sector; various applications associated with the smart home including security; the industrial sector; and the utility/energy sector.

Now let’s talk about this movement from M2M to IoT. There are three layers of the M2M/IoT supply chain: hardware, connectivity and applications. See figure 2.

M2M/IoT supply chain [Source: Analysys Mason, 2012]

Figure 2: M2M/IoT supply chain
[Source: Analysys Mason, 2012]

As we move from an M2M world to IoT, each layer of the supply chain experiences a metamorphosis.

Hardware – M2M hardware has historically been specialized, expensive and possessing low processing power. There have been many specialty vendors creating a relatively small amount of this equipment. In an IoT world, we expect hardware will become more powerful with increased processing capabilities and intelligence. We also anticipate a heightened emphasis on device power management and an overall consolidation of the market.

Connectivity – M2M connectivity has historically been provided over a combination of fixed and mobile networks with pricing that has been undifferentiated from traditional residential or enterprise connectivity service. Levels of quality have varied greatly. In an IoT world, we expect solutions to take advantage of mobile ubiquity and increased network quality and speed. We also anticipate an increased reliance on global tariffing to help facilitate the roll-out of international solutions.

Applications – M2M applications have historically been customized, services-heavy deployments. Enterprises have had minimal data analytics capabilities and have sub-optimally been using the data flowing off M2M devices. In an IoT world, we expect cloud applications enabled by virtualization to make application deployment across common platforms feasible. We anticipate better data aggregation and analytic tools to drive increased cost savings and innovation for enterprises adopting IoT solutions.

Each of the three layers of the M2M/IoT supply chain will transform and this will enable a series of changes in the industry over the next 5-7 years. Let me provide a few.

  1. First, we are going to see a proliferation of new applications. These applications will change the way we track, monitor, evaluate, protect and improve the things in our lives. Applications might include home energy management, predictive maintenance, surveillance, online interactive laboratories, intelligent vending machines and interactive advertising.
  2. Second, we will interact with our automobiles, other vehicles and our homes in pioneering ways. Machine-based intelligence coupled with ever faster processing power and connectivity will make our homes and vehicles into epicentres of applications-rich interactions as the Internet crosscuts potentially all application domains.
  3. Third, IoT will drive businesses to innovate and create revenue-generating ideas. Today, many M2M solutions are focused on reducing an enterprise’s costs. But in the future, we will see embedded connectivity driving more product and service innovation.
  4. Fourth, we are going to see all sort of new partnerships between technology and equipment vendors; communications providers; application vendors; and services companies. IoT is going to encourage businesses to think “outside the box” and change business models. It is going to encourage equipment vendors to offer software and services. It is going to encourage services companies to price their offerings in new ways. It is going to encourage manufacturers to change their supply chain dynamics

What is your guess at some key trends in the IoT industry over the next 5-7 years? Any speculation about some of the new applications we will see in our homes, businesses and cars?

Thanks for reading this first post. I will be back shortly with a post on the market of IoT platforms and systems management.

About The Author

Steve Hilton

Steve Hilton

Steve Hilton is the founder and Managing Director of MachNation, an insight services firm covering the future of the Internet of things (IoT). Prior to founding MachNation, Steve has worked as lead analyst for Analysys Mason's Enterprise research program until December 2013. He has also held senior positions at Yankee Group, Lucent Technologies, TDS and Cambridge Strategic Management Group (CSMG). Steve’s primary areas of specialization, which focus on large and small enterprises, include IoT, fixed and mobile communications services, M2M, cloud services, and sales channels. He has 20 years' experience in technology and communications marketing, with an IoT specialization for 7 years. Steve holds a degree in economics from the University of Chicago and a Master's degree in marketing from Northwestern University’s Kellogg School of Management. Steve is a guest author for the Bosch ConnectedWorld Blog.