Summary Bullets:
- Early forecasts for the IoT suggested that we would have 50 billion global devices connected by 2020, but in reality, we have only reached about 2 billion devices globally.
- What are the reasons to be optimistic about the next five years when it comes to the growth of the IoT? What are the reasons to be pessimistic?
In 2010, we started to see huge excitement about the IoT from a diverse ecosystem of suppliers, ranging from operators and MVNOs to infrastructure vendors, module manufacturers, integrators, and solution providers. Early forecasts from companies such as Cisco and Ericsson suggested that by 2020 we would see from 20-50 billion devices connected.
What Went Wrong?
Early forecasts suggested that once we had ubiquitous global connectivity, everything that could be connected would be connected. In the consumer market, projections were based on a huge rise in the number of connected cars (which we did in fact see), as well as in segments such as consumer electronics, wearables, smart watches, smart cities, and health monitoring devices. In the business segment, utilities, insurance, retail, industrial fleets, and manufacturing were (and still are) the primary verticals assumed to significantly benefit from IoT connectivity. The opportunity for IoT was also supposed to be a global one – not only from local/regional deployments across the world, but also from inter-country deployments where connections required roaming agreements and single-SKU global SIMs.
While the industry remains optimistic about the growth of the IoT, these early projections have been rolled back considerably. Issues about the lack of data security and privacy, the cost and complexity of deployments which rely on a fragmented ecosystem of suppliers, the lack of interoperability of solutions, the lack of internal company expertise, the friction between internal IT and OT organizations, the need to have buy-in from multiple constituencies as well as belief in a solid ROI from upper management – these all emerged as reasons why IoT might not be embraced by corporations. Cities with stretched budgets and a lack of centralized systems for security, parking, lighting, water management, etc. have struggled with a whole-hearted embrace of IoT. Operators are also struggling to monetize their IoT investments, as ARPU is notoriously low while roaming fees have become much lower due to EU regulations, deterring their excitement about global deployments. Value-added beyond-connectivity services such as consulting, deployment, integration, and managed services are increasingly sought after as growth opportunities by other members of the supplier ecosystem, which tend to have deeper relationships with businesses and key vertical stakeholders.
What Has Gone Right?
It’s not a dismal picture even if early forecasts were too optimistic. For example, some segments have grown beyond where we thought they would, while new use cases no one could have anticipated have emerged. Pilots have grown to large deployments. New connectivity types and technologies have been and will continue to be enablers of growth. Particular regions, such as Asia-Pacific, are seeing large increases in IoT connections due to government sponsorship and regulation, environmental and sustainability concerns, and the desire to excel in technology products, including use of connected robotics and other types of industrial automation.
Global connectivity has improved due to global SIMs and eUICC technology, which provide, respectively, single SKUs for devices regardless of where they are located and embedded SIMs offering remote management and the ability to change networks while goods or fleets are in transit. Permanent roaming agreements and EU roaming fee caps also make roaming easier and less expensive. Connectivity management platforms are mature and provide connection and device management and visibility, as well as provisioning, billing, and other BSS functions for mobile operators. Connectivity has also gotten less expensive as NB-IoT and LTE-M networks were launched in 2017/2018 which increase the battery life of devices and lower the cost of modules.
5G, along with edge computing, is expected to stimulate ‘massive’ IoT connectivity because the opportunity to provide real-time, low-latency connectivity with high availability and reliability (and in future, network slicing) will drive new use cases in verticals from healthcare to manufacturing, smart grid, smart cities, private networks, and autonomous vehicles. AR and VR are expected to eventually become widespread in both consumer and business segments, while autonomous vehicles, which are highly dependent on 5G and require ultra-low latency, are in pilots across the world.
What Are the New ‘Right-Sized’ Forecasts for IoT?
GlobalData’s forecast for IoT connections predicts that by 2023, there will be approximately 4.5 billion connections, of which the majority will be from cellular (2G/3G/4G/5G), LPWAN (LoRa, NB-IoT, LTE-M), and short-range network types (including WiFi, Bluetooth, and ZigBee). The CAGR during the period from 2018 to 2023 will be 27.9%, with LPWANs seeing the highest growth rates.
Source: GlobalData
While this isn’t as impressive as some of the earliest forecasts for IoT, it still represents a significant growth opportunity for the supplier ecosystem, which supplies not only connectivity, but also a wide variety of additional software, equipment, consulting, deployment and integration services, and end-to-end solutions. In addition, the advent of ubiquitous 5G towards the end of the period will drive further adoption, as will the overcoming of many of the initial objections of business customers. New security solutions, supplier interoperability and integration, and help for business customers in achieving satisfactory ROI need to be part of the growth plan for vendors and operators.
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