Disparate levels of adoption in vertical markets
The IoT market is developing through vertical industries, albeit in a very uneven fashion as adoption levels vary depending on use case. Today’s key vertical sectors are utilities and automotive, spurred by regulation and public policies around the globe. Future opportunities are also opening up in the logistics and health sectors.
A growing but still very disparate market
The number of connected objects in use worldwide is expected to reach 6.5 billion units by 2025.
Utilities will remain the biggest market with 2.1 billion units in 2025, followed by the automobile industry. Logistics also has solid growth prospects, notably thanks to LPWAN technologies, with asset tracking as its killer app.
Short-range wireless (Wi-Fi, Bluetooth) are still the most widely used technologies, chiefly due to the consumer market for connected household and wellness products.
With heavyweight China as a main driving force, Asia-Pacific will account for the bulk of the market (54% of all connected objects), followed by Europe. The fastest growing region is Africa/Middle East, posting average annual increases of 64% over the next five years.
Asia-Pacific driving IoT growth (Regional distribution of connected objects worldwide)
IoT, a pillar of the industrial transformation
Today, an IoT solution is installed in the original equipment and integrated into the final product, and the service provided by that product’s manufacturer. This enables the manufacturer to accelerate its strategy of transitioning into selling services (in addition to selling the goods, or instead of). Solutions providers tend to specialise when it comes to replacement items, typically marketing an end-to-end solution.
In the connectivity segment, telecom operators market dedicated solutions for the different vertical industries, with very modular plans, which can entail including the service as part of a complete solution, as a way to stem the decline in connectivity ARPU.
A host of players have positioned themselves in the key IT services platform segment, but IaaS solutions providers, such as Microsoft and AWS, are proving the most successful.
Industry players' growing focus on selling services
GM's changing strategy
Public policies as market enablers
The main driving force behind IoT market growth is still very much vertical regulations in the energy (smart meters) and automotive sectors, which are having a positive impact on volume.
The appeal of the solid return on investment for IoT solutions is another major key to their success, since the purposes of most IoT applications is to optimise processes and/or reduce costs, particularly in manufacturing.
Another positive factor is the growing deployment of LPWAN technologies (Sigfox, LoRaWAN NB-IOT/LTE-M) that will help these applications to catch on, as it is vital for sensors to be used in logistics or smart farming applications to be self-powered.
The chief impediment remains industrial projects’ lack of economic maturity, as they have not always tapped into IoT solutions’ full potential and remain at the PoC stage without scaling up, or the lack of a business model, as is the case with health solutions.