The IoT market has attracted a lot of attention in the last couple of years which has sent
the analyst community into overdrive. Huge forecasts for different parts of the market
are constantly being thrown about which almost seem farcical at times. However, there
is no analyst in the land which isn’t predicting a wild upswing in money spent, and
generated from, this market. The Channel has a tough job of trying to work out where it
fits into the value chain but their strong customer relationships stand them in good stead
to do well in this market.
What are the Analysts saying?
How big is the IoT market going to be? There are a number of analyst predictions out there, here are a few significant forecasts.
IHS forecasts that the IoT market will grow from an installed base of 15.4 billion devices in 2015 to 30.7 billion devices in 2020 and 75.4 billion in 2025.
McKinsey estimates the total IoT market size in 2015 was up to $900M, growing to $3.7B in 2020 attaining a 32.6% CAGR.
Bain predicts that by 2020 annual revenues could exceed $470B for the IoT vendors selling the hardware, software and comprehensive solutions.
Beecham Research predict almost 1 billion cellular M2M connections worldwide by 2020.
Hot or Not
There will be a time when pretty much every industry is touched by IoT technology in some way. For now, although the opportunities are growing, the really hot segments to be in are a handful. See Forrester’s heat map below to see where they put the best IoT opportunies.
Forrester predicts fleet management in transportation, security and surveillance applications in government, inventory and warehouse management applications in retail and industrial asset management in primary manufacturing will be the hottest areas for IoT growth.
Forrester’s research indicates that enterprises are currently far more likely to adopt IoT than smaller ones. One example of this is Lufthansa Airlines, they are using real-time aircraft, airport, and weather sensor data to improve on-time performance and optimize operations.
Beware of the Hype
Not all analysts are predicting outlandish figures when it comes to IoT. Beecham Research has preached a warning to the market of buying into such huge numbers at an early development stage.
“There is no doubt that the M2M and IoT markets are moving quickly and there are great new business opportunities, but with unrealistic predictions around the growth of connected devices, there is also the risk that companies will run out of time and money before they see a return on their investment,” said Robin Duke-Woolley, CEO at Beecham Research.
“What is important for the IoT market at this stage of evolution is that companies can make informed investment decisions based on accurate market information and achievable growth targets and timescales,” added Duke-Woolley. “We are already seeing some IoT start-ups close after getting carried away by the hype and large organisations are now looking more carefully at their IoT business plans, so we need to inject a degree of realism.”
We are seeing a polarised market still in which there are very few large volume opportunities and then a spread of a mixture across different solutions and sectors. To date, the market hasn’t changed the way everyone thought it would for one fundamental reason.
Ian Stewart, Director of Channel & Propositions at Arqiva said, “For the majority of product and service companies it’s not about technology or connectivity. It’s about digitising their operational and business models and the sheer change which is required. Uncertainty seems to be hampering volume adoption. What you have outside of the small number of big trading opportunities is a real mixed bag of proof of technology, proof of concept and commercial scale trials as people try and understand the value case.”
Show me the Money!
Getting paid in IoT has a lot to do with how much of the value chain you control. Unless you happen to land one of the very few ‘mega-deals’ with hundreds of thousands of connections resellers need to be careful they don’t end up taking a small cut of a small monthly revenue stream. Channel partners invariably control the end customers and so they must broaden their vision when looking at IoT deals. Hardware is often a great place to make margin during the install phase as well as remembering all the added benefits that come along with selling a long term contract into a customer.
There are currently several providers out there that are offering great commission structures for the Channel to get involved in IoT. For some, it’s as simple as offering a small percentage of the whole chain which may not sound like much until you realise £5million deals aren’t uncommon. For salesmen, this can be a great way to burst through your targets.
IoT will take off in spectacular fashion for the Channel when they are able to articulate specific use cases for their customers. It’s not an easy thing to do when you are used to selling the same product to multiple customers. As always, knowing your customer, their processes and systems will make the difference when it comes to selling IoT.
Key Markets
Industrial IoT- predictive maintenance and remote management for more efficient machine networks.
Smart buildings –monitoring and management of air quality, energy usage, people movement and security.
Connected Vehicles – networked bus and other vehicle fleets that share information between each other and central monitoring points.
Smart Energy and Utilities – intelligent grid solutions to tap into energy usage and wastage.
Data Centres – real-time monitoring of IT assets’ integrity and security.
Ed Says…
Should you be looking at IoT. Yes, absolutely. The problem many partners may be having is they are looking at IoT like they need to deploy huge SIM estates and to only make a fraction of the revenue generated. The truth is that the market has moved on, there are products being developed that the reseller channel will be able to sell almost immediately. It is really important that partners don’t let the apparent complexity in the market put them off. There are easy to execute solutions available which can act as a good toe dipping exercise. From there a more extensive portfolio can be built. However, I agree with Ian Stewart from Arqiva, understanding the business value of IoT is essential for the Channel to maximise the opportunity. By knowing your customers and their processes the true value of IoT will be unlocked. One thing is for certain, IoT opportunities aren’t just going to fall into your lap unless you are clued up and looking. Partnerships are going to remain critical to success so a good place to start would be having a chat with the growing list of suppliers.