(BLOG): Steve Hilton, lead analyst for Analysys Mason‘s Enterprise research programme, shows the possible progression from a machine-to-machine (M2M) to an Internet of Things (IoT) world. (This is an edited version of a blog that first appeared on http://blog.bosch-si.com)
How large is the market for connected things?
The number of device connections worldwide will increase from 100.4 million in 2011 to 2.1 billion by 2021, growing at a compound annual growth rate (CAGR) of 36% during the forecast period (for more information see Analysys Mason’s 2011–2021 M2M worldwide forecast report). We forecast M2M rather than IoT, because generally we are still in an M2M world. But it still gives us an indication of the magnitude of the industry.
Machine-to-machine (M2M) is a technology that uses a device attached to a machine to capture an event which is relayed through a mobile phone or fixed line network to an application that translates the event into meaningful information.
The Internet of Things (IoT) is the next generation of the internet based on the Internet Protocol (IP). In addition to today’s internet it facilitates via end-point devices the automated use of data generated by sensors or devices and access to actors. IoT solutions are deployed in sectors including automotive, transportation, smart homes, energy, utility, security, surveillance, public safety, financial services, retail, healthcare, industrial, warehousing, and distribution. Sometimes IoT is used synonymously with the term machine-to-machine (M2M). Undoubtedly there is some overlap, but I will attempt in this blog to show the progression from an M2M to an IoT world.
In 2011, 69% of M2M devices were in developed regions of the world, although we expect this percentage to decline to 59% by 2021 as enterprises in emerging regions start to notice increasing RoIs from adopting M2M solutions. In 2011, 80% of M2M connections were over mobile networks – primarily 2G and 3G – and this percentage will increase to 93% by 2021, because the ongoing costs associated with M2M over mobile networks are generally less expensive than fixed networks (see Figure 1, below).
Figure 1: M2M device connections, developed markets’ share of connections and fixed networks’ share of connections, worldwide, 2011–2021 [Source: Analysys Mason, 2012]
So we know this is going to be a large market opportunity. In fact, some of the largest industry sectors for IoT include the automotive/transport sector; various applications associated with the smart home including security; the industrial sector; and the utility/energy sector.
Now let’s talk about this movement from M2M to IoT. There are three layers of the M2M/IoT supply chain: hardware, connectivity and applications (see figure 2 below).
Figure 2: M2M/IoT supply chain [Source: Analysys Mason, 2012]
As we move from an M2M world to IoT, each layer of the supply chain experiences a metamorphosis.
Hardware – M2M hardware has historically been specialised, expensive and possessing low processing power. There have been many speciality vendors creating a relatively small amount of this equipment. In an IoT world, we expect hardware will become more powerful with increased processing capabilities and intelligence. We also anticipate a heightened emphasis on device power management and an overall consolidation of the market.
Connectivity – M2M connectivity has historically been provided over a combination of fixed and mobile networks with pricing that has been undifferentiated from traditional residential or enterprise connectivity service. Levels of quality have varied greatly. In an IoT world, we expect solutions to take advantage of mobile ubiquity and increased network quality and speed. We also anticipate an increased reliance on global tariffing to help facilitate the roll-out of international solutions.
Applications – M2M applications have historically been customised, service-heavy deployments. Enterprises have had minimal data analytics capabilities and have sub-optimally been using the data flowing off M2M devices. In an IoT world, we expect cloud applications enabled by virtualisation to make application deployment across common platforms feasible. We anticipate better data aggregation and analytic tools to drive increased cost savings and innovation for enterprises adopting IoT solutions.
Each of the three layers of the M2M/IoT supply chain will transform and this will enable a series of changes in the industry over the next 5-7 years. Let me provide a few.
First, we are going to see a proliferation of new applications. These applications will change the way we track, monitor, evaluate, protect and improve the things in our lives. Applications might include home energy management, predictive maintenance, surveillance, online interactive laboratories, intelligent vending machines and interactive advertising.
Second, we will interact with our automobiles, other vehicles and our homes in pioneering ways. Machine-based intelligence coupled with ever faster processing power and connectivity will make our homes and vehicles into epicentres of applications-rich interactions as the internet cross-cuts potentially all application domains.
Third, IoT will drive businesses to innovate and create revenue-generating ideas. Today, many M2M solutions are focused on reducing an enterprise’s costs. But in the future, we will see embedded connectivity driving more product and service innovation.
Fourth, we are going to see all sort of new partnerships between technology and equipment vendors; communications providers; application vendors; and services companies. IoT is going to encourage businesses to think ‘outside the box’ and change business models. It is going to encourage equipment vendors to offer software and services. It is going to encourage services companies to price their offerings in new ways. It is going to encourage manufacturers to change their supply chain dynamics.
What is your guess at some key trends in the IoT industry over the next 5-7 years? Can you speculate about some of the new applications we will see in our homes, businesses and cars?
— Steve Hilton
Steve Hilton is the lead analyst for Analysys Mason‘s Enterprise research programme. His primary areas of specialisation, which focus on large and small enterprises, include fixed and mobile communications services, M2M, cloud services, and sales channels. Steve has 18 years’ experience in technology and communications marketing. Prior to joining Analysys Mason, he managed the Enterprise and SMB team at Yankee Group. He has also held senior positions at Lucent Technologies, TDS and Cambridge Strategic Management Group (CSMG). Steve is a frequent speaker at industry and client fora, and publishes monthly articles in several respected trade journals for the enterprise and channel partner community. He holds a degree in economics from the University of Chicago and a Master’s degree in marketing from Northwestern University’s Kellogg School of Management.
With acknowledgement and thanks to Bosch Software Innovations GmbH
This blog first appeared at: http://blog.bosch-si.com/category/m2m/
M2M Now Jargon Buster:
IoT = Internet of Things
M2M = Machine-to-Machine
RoI = Return on Investment