The IoT platform market in flux: growth, fragmentation, evolutions and forecasts

One of the many components of an IoT solution is the IoT platform (other components of the IoT stack are connectivity, devices, sensors and actuators, IoT gateways etc.). 

2018 IoT platform revenue will reach USD3.3 billion with increased purchasing from enterprises in manufacturing, automotive, logistics/distribution, utility and smart cities sectors (MachNation)

Although it’s only a few years old, the IoT platform market is hot, too hot really. Organizations are increasingly moving to IoT platforms as they continue to or further invest in larger IoT projects and solutions in a more ‘mature’ way, beyond the pilot stages. Yet, the IoT platform market is increasingly crowded and confusing for buyers. On the other hands, the larger generic IoT platforms have matured and across several verticals, ranging from smart cities to Industrial IoT (IIoT) and Industry 4.0, there are clear leaders and innovators, also in specific niches within these IIoT environments such as smart manfacturing (smart manufacturing platforms), utilities and energy, smart buildings and facility management, oil, gas and the overall resources industry and so on.

The IoT platform market is growing and crowded but leaders and innovators offer mature solutions for specific customer needs in a market that will reach USD3.3 billion in 2018

The IoT platform market is growing fast and in coming years we’ll continue seeing consolidations and companies leaving the market as competition continues to grow and there is no single IoT platform that offers an all-round approach, making the big players look at others who have more specific solutions or capabilities in their solutions.

The IoT platform market opportunity

An IoT platform combines several software functions into one solution to enable companies to develop and deploy Internet of Things solutions faster, better and cheaper.

IoT platforms represent €15 billion of the €250 billion that will be spent on IoT in 2020 — but platforms play a pivotal role in a much larger strategy (Akash Bhatia, Boston Consulting Group)

Although the existing platforms do have many of these functions in common (the core IoT platform features) there are quite some differences in the various offerings with sometimes very different features. No IoT platform is the same. However, the term IoT platform is also used for many types of platforms.

Most IoT platforms are really IoT Application Enablement Platforms (AEP).

There are hundreds of players in this space now. Just some examples of companies and solutions which are probably better known (the vendors at least), although this isn’t some judgement on quality of the many others out there: Amazon (AWS IoT), AT&T (AT&T IoT Platform), Bosch (Bosch IoT Suite), Ericsson (Application Platform for IoT), Gemalto (SensorLogic), HPE (HPE Universal IoT Platform), IBM (Watson IoT Platform), Microsoft (Azure: Stream Analytics, IoT Hub, IoT Suite), PTC (ThingWorx Technology Platform), SAP (SAP HANA Cloud Platform for the Internet of Things), relayr and Software AG (Cumulocity IoT).

SAP HANA Cloud Platform for the Internet of Things -image source
SAP HANA Cloud Platform for the Internet of Things –image source

The IoT platform market challenges

One of the major issues with IoT platforms is that there simple are far too many.

In recent years the number of new entrants has continued to increase in a staggering way. In the Summer of 2017 IoT Analytics, which keeps track of the market with a database, announced there were 450 IoT platform vendors, or at least vendors saying they have an IoT platform. By way of comparison: in 2015 the company counted 260 IoT platforms and in 2016 its database contained 360 IoT platforms.

The market for IoT Platforms continues to get more crowded and fragmented. However, the dynamics are shifting: While we continue to witness a constant stream of new startups entering this space, most of the larger vendors seem to have made their bets by now – organic new entrants by multinationals are becoming rare (IoT Analytics MD Knud Lasse Lueth)

From an IoT platform type, IoT Analytics structures its list around the follow parameters:

  • Application enablement
  • Device management
  • Analytics
  • Cloud storage
  • Connectivity backend

This is more or less in line with the way IDC defines an IoT platform, namely as offering “some combination” of the following parameters or capabilities:

  • The management of IoT endpoints and connectivity
  • Access, ingestion, and processing of IoT data
  • Visualization and analysis of IoT data
  • IoT application development and integration tools

Or as IDC describes in its Worldwide IoT Software Platform Taxonomy 2017: “While IoT Software Platform architecture varies greatly from vendor to vendor, at a basic level these products connect devices, collect and manage vast amounts of data, and expose new insights to enterprises’ back-end systems or to third parties”.

As you can see that’s pretty overlapping with how IoT Analytics structures it whereby we need to emphasize the application enablement dimension.

The IoT platform market keeps growing with more players but for how long - source and more information IoT Analytics
The IoT platform market keeps growing with more players but for how long – source and more information IoT Analytics

IoT Application Enablement Platforms: the fastest grower

MachNation is one of many who studies the IoT platform market with its annual MachNation IoT Platform ScoreCard (and since 2018 the MachNation IoT Edge ScoreCard). According to MachNation, total IoT platform revenue will reach USD3.3 billion in 2018, a growth of 89 percent in comparison with 2017.

The company, which has an IoT test environment, MachNation MIT-E, to dive deeper into the various IoT platforms, testing them against a range of criteria, announced the forecast at the occasion of its fourth IoT Application Enablement Platform (AEP) ScoreCard for 2018.

That IoT Application Enablement Platform ScoreCard rates the big AEP players of which many have also been tested in the mentioned environment.  According to the MachNation report, application enablement platforms (AEPs) are a key IoT enabler and a critically important component in IoT deployments today.

Enterprises should evaluate AEPs based on requirements in four areas: a focus on the developer persona; having a flexible and scalable deployment model; operational sophistication; and a well-executed partnership strategy and platform ecosystem (Dima Tokar, Co-Founder and Head Analyst, MachNation)

Using an application enablement platform, among others, leads to a faster time to market; ensures a high-quality, reliable, secure offering; and enables enterprises to build competitive advantage in their markets the company says. IoT application enablement platforms reduce development time and costs.

In a previous edition of the report MachNation expected IoT platform revenue to reach USD2.0 billion in 2017. That was a whopping increase of 116 percent in comparison with 2016. In that edition MachNation also expected global IoT application enablement and device management revenue to reach $83.4 billion by 2025.

Looking at the chart below from its 2018 update it seems that growth on the longer term is somewhat slower than previously expected, which is in line with revised IoT 2018 spending forecasts by IDC. Nevertheless, it clearly shows an acceleration through 2025 as organizations increase their investments in IoT deployments.

Worldwide IoT Application Enablement and Device Management Platform Revenue through 2026 - MachNation forecast 2018 - source
Worldwide IoT Application Enablement and Device Management Platform Revenue through 2026 – MachNation forecast 2018 – source and more information

IoT platform vendor and solution dynamics

There is one thing everyone agrees on: the market is fragmented, complex, far too crowded and confusing as ever more players want a piece of the pie and, except for the established players who are clearly formulating their strategies and roadmaps in ecosystems of collaboration and partnerships, it’s hard for buyers.

The confusion, along with the fact that, broadly speaking (with the mentioned exceptions such as maturing generic IoT platform providers and clear leaders with mature strategies and offerings across several verticals), the IoT platform market is still relatively immature and too crowded, is most probably one of the reasons why it’s growing somewhat slower. Moreover, more vendors means more competition and thus more players going after companies deploying IoT projects.

This doesn’t of course mean that new players have no place and the race is over, well on the contrary. Several new vendors have a fresh and different approach, often within a specific vertical or several areas in the above mentioned lists of parameters and capabilities where IoT deployments need capacities that only emerged in recent years and become more important now.

IIoT platform providers need to deepen and broaden the capabilities of their platforms to support and integrate emerging transformative technologies such as augmented reality and artificial intelligence (ABI Research, Smart Manufacturing Platform Assessment report PR)

Typical examples include the movement to edge intelligence with edge computing and fog computing, the increasing importance of artificial intelligence and machine learning (depending on use cases and industries) to unlock full value of IoT data and enable the types of applications you would find more in specific markets and so forth.

Obviously it’s not just new vendors who are specializing in a niche and/or specific use cases and/or support of more technologies and applications. Established vendors have taken important steps in that same direction. Many of them clearly are focusing on the use cases, preferences and needs of buyers on various levels, whereby integration is a key one.

To dive deeper into those evolutions it’s important to distinguish between the various IoT platforms from an industry focus. On top of the large generic IoT platforms there are, for example vendors who focus on smart city IoT platforms where we see all the above mentioned evolutions happening as well.

As the mentioned IoT Analytics update confirms the largest chunk of IoT platforms is focusing on manufacturing and industrial, followed by smart cities.

IIoT platforms taking the lead in the IoT platform market as most platforms focus on industrial segments says IoT Analytics - source and more information
IIoT platforms taking the lead in the IoT platform market as most platforms focus on industrial segments says IoT Analytics – source and more information

IoT platforms for manufacturing and industrial, energy and supply chain (and the typical Industrial IoT and Industry 4.0) markets are hard to compare with platforms in Consumer IoT environments of course. It’s especially in IIoT platforms and in smart city IoT platforms that we see quite some evolutions on the level of supported/integrated technologies and use cases.

Some IIoT platform vendors are integration IoT, blockchain and AI (IoT and AI without the blockchain is becoming ubquituous), others support/integrate capabilities for digital twins and augmented reality, still others increasingly go for a cloud service provider agnostic approach while there are those responding to open source demands, the list goes on. And, of course, some combine several of these evolutions/capabilities.

On a more generic level, MachNation points out that rather than building their own platforms, enterprises are choosing to purchase cloud-based offerings from best-in-class IoT AEP vendors.

In a previous edition of its IoT Application Enablement Platform (AEP) ScoreCard the company found that service providers and enterprises become more interested in open-source IoT AEP technologies.

Western Europe and North America lead the pack in the fast growing market of IoT edge platforms according to MachNation 2018 IoT edge ScoreCard.jpg
Western Europe and North America lead the pack in the fast growing market of IoT edge platforms according to the MachNation 2018 IoT edge ScoreCard – source and more information

While from an overall IoT platform market perspective there is already quite some consolidation going on and some players have left the market (according to the mentioned IoT Analytics update, more than 30 of the companies included in the 2016 edition of the list have ceased to exist, meaning either out of business, been acquired or listed separately in the database), expectations are that a lot of players will follow and be forced out of the market.

This is, among others, because the leaders continue to mature and look at filling potential gaps in their offering (acquisitions), because there simply isn’t enough space (even if an integrated multi-cloud and multiple platform approach for various use cases is a growing market reality)  and, overall, because of evolving and maturing roadmaps of leaders and innovators with strong industry backing and partner ecosystems on the level of technologies, go-to-market strategy and those partnerships, support of increasingly important applications in several verticals, important shifts on technological/architectural levels and a customer-centric approach around the goals and value which buyers seek to realize – fast – are on top of the list of leading providers.

Or, as Gartner puts it in the summary of its Competitive Landscape of IoT Platform Vendors (May 2017): “Despite its immaturity, the IoT platform market is extremely competitive, with hundreds of companies offering solutions. To succeed, technology product marketing leaders need to sharpen their IoT go-to-market strategy and evangelize and educate the market on the art of the possible”.

Moreover, IoT platforms fit in a broader strategy of vendors. In an article on LinkedIn Akash Bhatia, partner at The Boston Consulting Group points out that the real money isn’t in the IoT platforms. He emphasizes that IoT platforms represent €15 billion of the €250 billion that will be spent on IoT in 2020 and play a role in a bigger strategy to gain market share in the rapidly growing top layers of the IoT stack: IoT applications and analytics.

Amazon AWS IoT platform - image source
Amazon AWS IoT platform – image source

IoT application enablement platforms

According to IoT Analytics 92 percent of IoT platforms have a core focus on application enablement, which also takes center stage in the forecasts and approach of MachNation. 

MachNation distinguishes between two types of IoT application enablement solutions and vendors.

IoT Application Enablement Platform (AEP)

AEP vendors (we quote) have a technology-centric offering with the goal to deliver a best-of-breed, industry-agnostic, extensive middleware core for building a set of interconnected or independent IoT solutions for customers, MachNation says. AEP vendors rely on a flexible deployment model; a comprehensive set of device and enterprise backend connector SDKs and APIs; and a set of well-documented developer resources.

Platform-Enabled Solution (PES)

A PES is not technology-centric but solution-centric. It is optimized to reduce the time to deliver a fully-enabled, end-to-end, vertical IoT solution to customers, MachNation writes.

The IoT Software Platform market has evolved significantly over the past few years but is still a complex and fragmented space. IDC believes it is important to define common IoT platform architectures to properly segment and size this crowded market (Stacy Crook, IDC)

At the occasion of its 2018 manfacturing IIoT platform report, ABI Research also focused on AEPs and dove deeper into application enablement platform approaches. Quote: “AEPs provide a solution for importing data, but they often require partners to provide gateways. Some AEPs provide a ‘one-stop-shop’ that can take the data from a least some devices and might also work like an operating system with an app store. If they keep app development open, they can feature apps built by the AEP provider, apps from partners (which may also call themselves a platform), end users or independent developers, much like smart phone app stores. Some ‘one-stop-shops’ focus more on the extraction of data and getting it to the cloud, while others focus more on delivering the data to enterprise systems or the operating system. Other IIoT platforms specialize in a specific piece of application enablement or microservice such as fog computing or processing raw sensor data”.

More resources, analyst findings and articles on IoT platform evolutions and vendors

For a deeper dive into the evolutions in the IoT platform market per target industry, application enablement platforms and so forth you might want to check out following posts:

Top image: Shutterstock – Copyright: TippaPatt – All other images are the property of their respective mentioned owners