Friday, December 19, 2014

IoT Market Won't Be as Big as Forecast, Near Term

Despite a recent change of terminology--”Internet of Things” being preferred over the original term “machine to machine,”--it is likely that most of the incremental application and access revenue generated in the broad IoT markets will be created by M2M applications such as sensors.

Perhaps notably, Gartner in 2014 named “Internet of Things” at the peak of the hype cycle, after noting in 2012 nd 2013 that the peak of  unrealistic expections was approaching.

What that suggests is that observers soon will become aware that progress is not as rapid as once believed, deployments occur much more slowly than expected and many even begin to doubt the size of the market opportunity.

Eventually--and that could mean a decade or more--IoT has a shot at being as transformational as many now expect. But it is almost certain a period of disillusionment is coming: it nearly always does, when new technologies appear.

Important innovations in the communications business often seem to have far less market impact than expected, early on.

Even really important and fundamental technology innovations (steam engine, electricity, automobile, personal computer, World Wide Web) can take much longer than expected to produce measurable changes.

Quite often, there is a long period of small, incremental changes, then an inflection point, and then the whole market is transformed relatively quickly, but only after a long period of incremental growth.

Mobile phones and broadband are among the two best examples. Until the early 1990s, few people actually used mobile phones, as odd as that seems now.

Not until about 2006 did 10 percent of people actually use 3G. But mobiles relatively suddenly became the primary way people globally make phone calls and arguably also have become the primary way most people use the Internet, in term of instances of use, if not volume of use.

Prior to the mobile phone revolution, policy makers really could not figure out how to provide affordable phone service to billions of people who had “never made a phone call.”

That is no longer a serious problem, and the inflection point everywhere in the developing world seems to have happened between 2002 and 2003.

Before 2003, one could assume that most people in the developing world could not make a phone call easily.

A decade later, most people use mobile phones. That would have been impossible to envision, in advance of the reaching of the inflection point.

That likely will be the case for IoT as well.

On a global basis, manufacturers will invest $140 billion in Internet of Things solutions between 2015 and 2020, a study by Business Insider suggests.

Likewise, the Internet of things and the technology ecosystem surrounding it are expected to be an $8.9 trillion market in 2020, according to IDC.

Those forecasts, history suggests, will prove inaccurate, in the near term.

IDC said the installed base of connected things will be 212 billion by the end of 2020, including 30.1 billion connected autonomous things (devices and sensors working independently of any human interaction).  

IDC estimates IoT spending at $4.8 trillion in 2012 and expects the market to be $8.9 trillion in 2020 and have a compound annual growth rate of 7.9 percent.

Manufacturers will be the earliest adopters of IoT solutions and will invest heavily in new IoT solutions for factory floors, IDC predicts.

About 17 percent of automotive companies are using IoT devices in the production of their vehicles, for example.

IoT likely will be quite significant, eventually. But near term progress is likely to disappoint.

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