The Internet of Things (IoT) in 2018 and beyond – towards monetization, tangible value and an increasing focus on IoT in a holistic context of transformation, strategy, multiple complementary technologies and larger deployments.
While for many organizations IoT is still new and most investments happens in IIoT, the narrative changes.
The focus is shifting from what the IoT could do to what it does, how it fits in business goals and how it generates value
Today it’s increasingly about value instead of potential, about the combination of IoT, AI and other related technologies to derive insights, decisions and revenues from sensor data and about IoT monetization, as scalable, IoT-enabled projects become part of less limited business objectives and digital transformation projects with a focus on services and applications.
Although a majority of organizations overall are only beginning, there is a clear shift from the age-old focus on the number of connected devices towards this broader vision in which business goals, people and value take center stage.
This shift also encompasses an understanding that IoT really needs new or enhanced technologies such as forms of artificial intelligence and machine learning, advanced analytics and many others, depending on the project (from a broader range of wireless IoT standards and options to blockchain in some cases). Moreover, newer system-level architectures such as edge computing and fog computing are on the rise in many larger IoT projects with critical data. The evolutions in the market of IoT platforms clearly show all these changes.
Towards a new IoT definition – moving beyond the what to the why
On top of a shift in terms of thinking about and understanding IoT there is a shift in the actual usage and deployment of it among leading organizations.
The essential IoT definition still holds: IoT is a network of connected devices with 1) unique identifiers in the form of an IP address which 2) have embedded technologies or are equipped with technologies that enable them to sense, gather data and communicate about the environment in which they reside and/or themselves.
However, in the broader scope and amid the mentioned shifts the definition of IoT doesn’t matter that much if it isn’t put into a larger perspective.
Still, now is not the time for definitions and semantics anymore. Now it’s time for business, value, monetization, evolutions and IoT in action. And if we want definitions, to broaden them in order to finally encompass the why instead of just the essential what of IoT, would make more than sense.
IoT in the real word: the road ahead
Since more or less 2015-2016 there has been an acceleration in the adoption of IoT. As we reported previously, based on IDC data, IoT projects increasingly left the stage of proof-of-concept and the number of actual deployments increased.
This fast growth has been confirmed in September 2017 data on large scale projects. The IoT journey has been one of proof of concepts, solving challenges, learning curves, trial-and-error, occasional mistakes (the best learning school, it is said), wait-and-see attitudes and adoption, let alone deployments, at different speeds.
The first big movers in IoT, mainly found in the mentioned industrial markets of IIoT (with IoT in manufacturing and IoT projects in an Industry 4.0 scope accounting for the largest chunk of IoT spending), are moving further along their journey, having reported clear benefits and positive outcomes, while discovering new possibilities as they went along.
This is typical for all technological phenomena and their adoption in practice. Some industries and organizations move first and the slower movers wait and see until they are convinced – and in some industries – forced to move ahead as well, having seen the results of actual outcomes and examples of what worked and what didn’t. The road ahead for IoT is still one of hurdles, choices, business cases, different speeds, mistakes and many challenges.
The shortening of the road from IoT concept to deployment
However, as adoption, the number of real-life projects and the maturity all increase the journey from concept and vision to actual deployment shortens.
As organizations seek ease, speed and solid end-to-end IoT deployments, recognizing the complexity and required skills, system integrators are their preferred partners for large projects and becoming part of the ecosystems of system integrators and vertical specialists is paramount
This has a consequence for the later movers who operate on a larger scale. They can act faster than many pioneers did. On the flip side, again depending of context, project, region, industry and so forth, they might have some catching up to do. Maturity in this scope includes several levels such as the business cases, the technologies, the many elements to build scalable projects, the required skillsets, the strategic frameworks, the ecosystems of knowledgeable partners, the integration of IT and OT, the industry and architectures, etc….
So, looking at the IoT journey ahead many challenges remain. Standardization, security, required skills and so forth. Yet, the picture of both the possibilities of IoT and the stronger partners and required elements to make a project work has become far clearer.
IoT isn’t new, the move towards real value across applications in business and society in an integrated context, is newer and has – finally – started.
It’s important to note that IoT value is not just a case of large organizations. On the contrary, ample evolutions and parameters show that small and medium businesses are taking steps to reap the benefits as 1) there is a lot of low-hanging fruit, for instance with regards to cost savings, and 2) a lot of possibilities to move towards real strategic or transformational value exist in smaller companies as well. Many players on the vendor and services side have understood this and offer solutions and ecosystems that enable smooth deployment, just as is happening in the landscape of larger vendors and integrators.
An IoT 2018 business reality check
Although there are more devices active, more large scale IoT projects and a growing de facto usage of IoT, with the mentioned shifts in mind, there is still quite some work for both suppliers and organizations in reality.
Blockchain, AI, the movement to the edge and the increasing importance of LPWAN have a higher impact in 2018 than in 2017, confirming our 2017 IoT trends overview
- While the narrative finally starts to shift towards value and business, many organizations still don’t know what IoT is or can mean for them. You rarely talk about IoT with a business executive, you talk about it with CIOs and people who already kind of know it, leverage it (which could be the CIO but also many others, depending on project) or are doing their homework. How do you explain IoT to those who take the big business decisions and do they even need to know what it is? Go at a random IoT event, you mainly see people who are involved in the industry or already look at the possibilities and have a decision-making or advisory role but far less people who sign off the project on a management, let alone board level.
- Related with the previous point: IoT decisions are taken on a business level. Yet, they are not IoT decisions, they are business decisions in which IoT has a crucial role. This is a challenge for the market: on one hand you need to explain what IoT is and does but on the other hand it’s key to talk about business whereby the Internet of Things is part of bigger picture of many related technologies (once more, depending on project and scope) and an enabler, not a goal (as no technological reality ever is).
- While IoT is highly transformational in nature (more below), digital transformation is not a matter of IoT or any technology alone. In some industries there isn’t a real case for IoT projects. In others it’s about pure tactical goals. Cost cutting, data (which is acquired and used for some insights or simple goals but often remains underutilized or even unused as has always been the case with data), automation, you name it. It’s time to go beyond selling the benefits of IoT and focus on the industries and use cases where advanced analytics and IoT really make a difference. On the other hand, it’s also important to realize that in some industries there isn’t a case for it yet and that de facto strategic and tactical goals are far higher than transformational ones. Leading project partners know how to help organizations do far more with data.
- A large portion of companies simply isn’t ready for IoT because there are issues that should be long solved. The way in which you get the most out of your data as just mentioned is one example. Although there is IoT network coverage pretty much everywhere, there is a range of platforms offering plenty of ways to get IoT projects rolling and there are ample frameworks such as the Industry 4.0 vision for industrial markets, reality shows ample challenges in a far broader perspective. If you visit an average factory you often see they’re still dealing with paper-based processes, legacy systems and so forth. IoT deployments will continue to happen at different speeds because of the fact that in some use cases and industries there is far more value and readiness than in others.
- Many organizations who want to start with IoT projects don’t know how. It is one of the reasons why system integrators, who know the business of their customers inside out and are their long trusted partners, often take the lead in projects where IoT is involved (as is the fact that, as previously mentioned, some organizations want to leverage the Internet of Things but have to solve other challenges first in order to be ready). The end-to-end vision and full understanding of the markets and technologies, as well as the hurdles, is key. Many companies simply don’t know where to start, where to end and how to get from start to end. Why to start is something else. Given the fact that IoT is increasingly embraced by small and medium enterprises or for very specific use cases there certainly is a market for more vertical and SME-oriented trusted partners as well.
Moving from a narrative of IoT and smart to a narrative of value
Even if we are moving towards ever more IoT projects that generate real business value, we’ll still keep talking about IoT for some time, certainly in the industry.
The key goals of IoT projects in 2018 remain on a tactical and internal level, followed by strategic use cases with clear and fast benefits, rather than transformational purposes
The question remains if we want to reach the industry of course. On this site we do both. If we’re really focusing on executives it’s probably better to focus on solutions and, even more important, business solutions. The same dilemmas exist regarding anything ‘smart’. We want to realize smart factories in an Industry 4.0 perspective, we want to have smart buildings, smart homes, smart parkings, smart cities, smart supply chains, smart lighting, smart grids, smart logistics, smart manufacturing, smart anything really.
Yet, for business executives smart isn’t what they seek. They want to save costs, enhance efficiency, increase customer satisfaction and improve customer experience (read: remain relevant and save costs while doing see) and generate revenues, with digital transformation also meaning changing business models and realizing new revenue sources. That latter part is what we ultimately seek in more mature environments of digital transformation, Industry 4.0 and so forth. But we aren’t there yet, except for those early movers with their success stories. That’s a business reality to keep into account, certainly when looking at the best opportunities for advanced (read: high-value) projects.
Evolutions in the IoT market 2018
The IoT market as such has been changing a lot in 2017 whereby ample initiatives and launches show that some companies are really working on the realization of business projects fast, at scale and in an end-to-end way with the proper ecosystems of integrators and specialist firms.
Organizations are embracing IoT platforms for their deployments with major buying decisions in 2018 and an impact on the crowded platform market with clear leaders as a result
At the same time the picture becomes clearer on who are or will be the winners in many Internet of Things sub-markets such as the IoT platform market.
The leaders are pretty much those companies you know very well since years, with the traditional exceptions here and there. The ability to connect the dots in a landscape with many protocols on all levels and still a serious lack of standardization, will be crucial and, as organizations in various industries (continue to) move towards projects that generate business value, several IoT markets where there are a lot of players will be disrupted themselves with acquisitions, specialization and the occasional bankruptcies as a consequence. That too is the sign of a maturing market.
IoT as a tactical, strategic and transformational given
IoT is a highly transformational given for various reasons. Yet, also in 2018 we predominantly see a key focus on strategic and tactical outcomes with internal business goals remaining the major sought benefits.
This has been the case for quite some time and, with the usual exception, is poised to remain like this for now in most organizations. However, as companies move to more mature transformation goals, also the goals of projects change and in several cases the opposite goes too, driven by an ongoing need for actionable intelligence and differentiation, as well as the experience that organizations acquire and the opportunities they see as they move further in IoT adoption and maturity.
It is a proven fact that, as organizations go for larger scale projects, they also ‘discover’ and see more transformation benefits which might not have been present in an initial roadmap, plan or project. Obviously transformation and innovation are also more sought in some industries with, for instance the pharmaceutical industry where a multitude of sensor-generated data and ever more available health data meet genetic data in a perfect storm enabling innovation and inventions at scale.
Organizations with IoT projects in place are poised to widen the gap with laggards as they detect new opportunities to create value through experience
Ample research confirms this ‘discovery’ of new benefits as companies move along their ‘connected’ journey. In the edition 2017-2018 of its IoT Barometer, for instance, Vodafone found that:
- 66 percent of responding executives state that there is no digital transformation possible without the Internet of Things.
- As we see more larger IoT projects, we also see how the perceived IoT benefits are multiplying and moving to more mature goals such as improving competitiveness and increasing revenue streams or finding new ones.
It’s also in this scope whereby projects ultimately often go beyond the boundaries of the single organization and are leading to IoT data exchanges to develop new services and revenue streams, even including the transformation of business models, that various initiatives to build standards and architecture reference models for a secure exchange of data should be seen.
One example is Industrial Data Space, built to connect stakeholders, existing platforms and ‘smart’ devices to develop new business models and revenue streams. These are the most mature stages of any digital transformation project.
Last but not least – and we can’t continue to emphasize this enough – IoT covers many technology layers and underlying realities but it also can’t be seen in separation from other technologies that enable digital transformation goals. In this perspective it’s important to realize that the application of, for instance, artificial intelligence (AI) in IoT opens up entire new possibilities. Moreover, the integration of IoT, AI and big data analytics, to name a few key ones lead to next generation applications and thus transform the technological landscape itself.
Where IoT value is created – from intelligence to action
In the mentioned Barometer 2017/2018, which was presented end September 2017, a doubling of large scale IoT projects was found over the past 12 months. Large scale IoT projects were defined in terms of the number of active devices.
Small and medium enterprises become a far more important IoT market in 2018 as they have the opportunity and ecosystems to realize value from sensor data fast
While, as mentioned in our Internet of Things investments 2017/2021 article, IDC said in its June 2017 second Worldwide Semiannual Internet of Things Spending Guide, there is a de facto shift away from talking about the number of IoT devices, the number of active devices remains an indicator of the evolutions in the market ahead.
It is clear that IDC also wanted to emphasize a more holistic value approach in which IoT value is a result of hardware, connectivity, software, services, partner ecosystems and so on are being joined with a focus on not just data (especially if they serve basic goals as mentioned previously) but on the actionable intelligence and ultimately actions which are taken into any IoT-intensive project.
Starting to look where this is the case in your business might be a good idea for 2018 and beyond.
IoT 2018 trends and evolutions
Across this overview we’ve already mentioned (the roots) of many evolutions in IoT for 2018. In fact, all the blue colored boxes contain one each.
As always several of these evolutions are hidden in the evolutions as we see them in the here and now, in real-life projects, in vendor initiatives that respond to a clear and present need, in 2017 research and so forth, yet there are also changes that might be somewhat ‘unexpected’.
As we’ve been emphasizing the importance of business, value, outcomes, real-life challenges and solutions, projects and so forth throughout this article it wouldn’t make much sense to only focus on technology trends for 2018.
Most of them were already in the make:
- yes, blockchain and IoT becomes an important combination on various levels;
- indeed, it’s clear that artificial intelligence will be more important in IoT;
- true, LPWAN will continue to grow given new sensors, technologies and higher reach in combination with the nature of many Internet of Things projects;
- and, for sure, there is a growing evolution towards the edge (with edge computing and fog computing and AI and IoT across other areas as described below),where projects demand it.
As IoT technology moves to the edge, business (re)centralizes
The movement towards to the edge by the way is nothing surprising and, just as the increasing role of blockchain, among others, fits in the overall context of decentralization and movements towards to the edge which we’ve been emphasizing in so many areas, from document capture and security to information management and intelligence in the field since years.
However, make no mistake: we are mainly talking about technologies and applications here. It’s not because technologies, some business processes and applications move towards the edge that all business aspects do. Well on the contrary: we see a trend towards a full centralization of decision power and of previously decentralized ways of working in many organizations, just as several companies start to get some workloads out of the cloud again (also a token of maturity) as organizations look more at what matters in detail.
28% of companies consider NB-IoT and other LPWAN options for new IoT projects
With regards to IoT and centralization it needs to be said that the movement towards the edge provides more control and power in very centrally managed organizations who have found ways to eliminate, for instance, local service and support teams. We’ve seen plenty of, ironically, IT companies, fully centralize about everything they do again, all the way up to customer service and marketing.
With cost cutting as the eternal reality behind so many initiatives and the large majority of IoT projects focusing on internal goals and tactical purposes do not expect too many initiatives whereby the business model as such is turned in a distributed transformational model. In a world where everything gets connected and data platforms enable exchanges, more business focus will be on reducing the costs of expensive personal interactions in customer-facing operations as well, just as is the case in retail banking transformation. Consider the (re)centralization of decisions and business power thanks to, among others, IoT, as one of our forecasts that in some areas is poised to face a backlash as people start to see the impact of ever more decentralization in technologies already highly impacting trust in technologies and political tendencies across the globe. The role of blockchain, AI and ongoing movement to the edge (not just in analytics and fog computing but also in autonomous decision-making at the edge of for instance manufacturing processes and in building automation controls where the intelligence is moving to the edge too as you can read in our interview on building management and IoT) are others we’ll cover more in depth.
The importance of business evolutions and realities
The fact that most 2018 trend reports we came across so far, is partially a sign of the fact that we’re only at the verge of seeing IoT in its broader business and value context.
The importance of IoT data exchanges and IoT monetization platforms continues to increase and drives the development of new services
Still, we’ll also tackle Internet of Things technology and business trends for 2018 as, and it’s about time, finally quite some of the other forecasts out there do look more at the integrated and holistic perspective in which IoT, no matter how transformational it is and will be, is part of a bigger enabling technology puzzle that can look different per individual project per individual company. A second reason why we’ll look at predictions and forecasts regarding the technological IoT trends 2018 craze is because there are some that offer utterly wrong predictions or data out already. As recent as early October 2017 we saw predictions that there would be close to 50 billion IoT devices in 2018. Beware of sources, dates and so forth.
Many of the trends we’ll emphasize were already in our Internet of Things 2017 trends overview and in the coverage of reports such as the previously mentioned research by IDC on IoT investments (June 2017), the Vodafone IoT Barometer, the Internet of Things spending 2017-2020 article based upon January 2017 predictions by IDC and many more, including several which we added to our 2016 Internet of Things guide throughout this year, spiced with a bunch of own forecasts and takeaways from interviews and analysis of what companies and partners are doing.
IoT spending 2018 – approaching the $800 billion mark
According to IDC, total spending on IoT in 2018 will reach $772.5 billion in 2018. It is slightly less than was expected in previous forecasts of the firm but the main trends and evolutions haven’t changed.
There are various possible reasons why these forecasts get revised of course. Moreover, there are some evolutions which here and there could lead to a slower than expected investment. These don’t even have to be related with the usage of IoT as such. The increasing attention for changing data protection and privacy rules, for instance, are on the mind as risks for ample organizations. Moreover, these new personal data and privacy rules require budgets. And these budgets need to come from somewhere.
With, for example the ePrivacy Regulation in the EU and the need of corporations to focus on GDPR compliance, being able to comply with those regulations and other data and information laws and regulations, does have an impact on the priority list of business executives – and also on large IoT projects whereby for instance data protection impact assessments are likely to be sought before new IoT projects and thus IoT data processing activities are launched.
Yet, that’s certainly not all. Moreover, we don’t want to exagerate these revised forecasts. It is know expected that the $1 trillion IoT spending mark will be surpassed in 2020 instead of (end) 2019.
Some takeaways for IoT spending in 2018 are that also this year IoT in manufacturing globally continues to rank first from the spending perspective as mentioned and that, as was expected the Consumer IoT spending category is moving up whereby mainly smart homes, which includes home automation, along with security and smart appliances, lead in this consumer segment.
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