What to Expect from the Internet of Things (IoT) in 2016

Jan 29, 2016

At the start of each year, analyst firms make predictions about different technologies and overarching themes that will dominate an industry. Most analysts that track the Internet of Things (IoT) agree that 2016 will be the year of IoT. While we must take each of these predictions with a grain of salt, IoT will continue to dominate trade shows and the marketing message from most companies in most industries. Here are some of our predictions about the themes that will dominate the IoT conversation in 2016.

Consumer IoT will generate buzz in the media, however, IoT for businesses will generate revenues for vendors and service providers

There are many applications that are considered part of consumer IoT. This includes smart appliances, wearable devices, smart home, alarm monitoring, connected car, and others. While these applications have generated the most of the hype in past years, service providers have been unable to develop compelling business models. Alarm monitoring solutions have been in the market for decades and even today, fewer than 20 percent of all households in the US have monitored alarm systems. IoT will help generate buzz for consumer applications, but business applications such as portable asset tracking, remote monitoring for industrial machines, and logistics solutions will generate the most significant revenues for carriers. These applications may not have the “sexy” factor of consumer applications, but these are the applications that will drive revenues.

IoT Security will come to the forefront in 2016

Over the past few years, cybersecurity has been in the news for a wide range of attacks that used backdoors to enable unauthorized remote access to different types of devices. Smart home devices, vehicles, and other devices have compromised networks. While these hacks have been relatively small, the ramifications of a bigger hack remain an imminent threat. Network operators, device manufacturers, platform developers, and others are making strides with protecting IoT devices. However, there is a fine line between increasing security and minimizing convenience for users. This opens up the possibility of a major hack that could force consumers to distrust any IoT device. While there is no guarantee of such a hack in 2016, the possibility looms and service providers continue to operate in the IoT space with fear and uncertainty.

Carriers continue to attempt a move up the stack

The core market for mobile network operators (MNOs) is network connectivity. For smartphones, MNO ARPU is typically between $60 and $80. IoT devices, on the other hand, typically provide an ARPU of between 80 cents and $10. For most large MNOs, the investment in their IoT organization does not justify this small ARPU for a few million devices. To maximize the value of their investment, MNOs must move up the stack to platforms, applications, and end-to-end solutions. Over the past 2 years, AT&T, Verizon, Vodafone, Telefonica, Deutsche Telekom and many other large carriers have been making strides to move up the stack. In 2016, we will see some of these investments pay off with MNOs gaining recognition for their solutions and not just their network reach.

Carriers will stop talking about connections… maybe

The reality is that the number of IoT connections on a carrier’s network is overrated. AT&T, Sprint, and T-Mobile US all report the number of IoT connections on their network. While analyst firms like to monitor connections, the revenues that carriers generate from IoT solutions is the more critical metric. An IoT solution is not about just the connection. Revenues include cloud, big data & analytics, security, platforms, network enablement, hardware, value-added services, and connectivity revenue. The number of connections is really not the most important factor and maybe (wishful thinking!) all carriers will start focusing (and reporting) on revenues from IoT solutions as opposed to simply connections.

 

To learn more about our coverage of the Internet of Things, contact our Principal Analysts in different regions:

Dilip Sarangan (dilip.sarangan@frost.com) | Americas

Sheridan Nye (Sheridan.nye@frost.com) | EMEA

Mark Koh (mark.koh@frost.com) | APAC 


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Dilip Sarangan

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