2016 Trends in the Internet of Things

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1 PREVIEW 2016 Trends in the Internet of Things DEC 2015 Christian Renaud, Research Director Brian Partridge, Vice President The Internet of Things is evolving from hyperbole to reality with lighthouse real-world production deployments proving demonstrable return on investment. These will pave the way for a larger number of fast-follower production deployments in 2016/2017 as well as the first winnowing of startups with products or services that failed to reach commercial viability before running out of operating capital Research, LLC

2 ABOUT 451 RESEARCH 451 Research is a preeminent information technology research and advisory company. With a core focus on technology innovation and market disruption, we provide essential insight for leaders of the digital economy. More than 100 analysts and consultants deliver that insight via syndicated research, advisory services and live events to more than 1,000 client organizations in North America, Europe and around the world. Founded in 2000 and headquartered in New York, 451 Research is a division of The 451 Group Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss legal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such. 451 Research shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. NEW YORK SAN FRANCISCO LONDON BOSTON 20 West 37th Street 3rd Floor New York, NY P F Geary Street 9th Floor San Francisco, CA P F Gower Street London, UK WC1E 6HH P +44 (0) F +44 (0) Liberty Square, 5th Floor Boston, MA P F ABOUT THE AUTHOR CHRISTIAN RENAUD RESEARCH DIRECTOR As Research Director of 451 Research s Internet of Things practice, Christian covers the ongoing virtualization and digitization of the physical world around us. For 25 years prior to joining 451 Research, Christian built nationwide networks at large and small enterprises, worked with Fortune 50 companies in the systems integrator channel, built products at Cisco Systems and ran the company s New Markets and Technologies team. II

3 Key Findings Despite a raft of legitimate technology-related obstacles, the key barrier to wider Internet of Things (IoT) adoption continues to be the perceived risks associated with making wholesale business processes changes, and the associated organizational and cultural impact of IoT-enabled digital transformation. Communication protocols are proliferating around IoT, most visibly at the network edge, where competing protocols such as MQTT and AMQP introduce uncertainty and risk for early adopters that are reticent to pick the wrong horse early in the race. Telecom operators will play a central role in delivering connectivity services to the IoT ecosystem, but the emergence of low-power wide area network (LPWAN) unlicensed spectrum alternatives such as LoRA or SIGFOX is forcing investment decisions that can summarized as beat them or join them. In an effort to move up the stack, tier one operators such as Verizon, AT&T, Orange, Vodafone and Telefónica will continue aggressive investment in IoT platforms, end-to-end applications, integration services and business models to stake out more lucrative, long-term value chain positioning in IoT segments where they can win. IoT will place unprecedented demands on data storage, processing and analytics. Streaming IoT data has the potential to overwhelm networks and datacenters, giving rise to edge analytics. This could see some data processed and filtered closer to where it is created. Large vendors from across the technology sector view IoT as the next battleground and have begun speciating in pricing strategy for which IoT components will be commoditized and which will maintain value and margin. IoT platform providers, enterprise IT vendors, networking and edge hardware companies are already adopting different strategies, and enlisting traditional and some non-traditional allies in the form of industry consortia, business partners and standards development organizations to the cause. IoT security and data privacy continues to be the elephant in the room in all IoT conversations as the necessary underlying foundation of IoT. Several competing approaches are seeking to address what device- and network-level security will look like, along with the role of operating systems and middleware, applications and the cloud. In today s IoT, security approaches are fragmented ranging from device security to behavioral analysis of data in motion and a single silver bullet is unlikely to emerge given the scale and diversity of IoT. III

4 Executive Summary INTRODUCTION The Internet of Things (IoT) has reached an all-time high of hype and hyperbole. At the same time, it also has a growing number of production deployments, ranging from industrial automation and enterprise to fleet and automotive applications to the wild world of the consumer market, with increasing percentages of organizations planning to evaluate and deploy IoT technologies in the future (see table below). With the explosion of interest in all things IoT has also come an explosion of large and small vendors with hardware, software and services reflecting exciting new approaches to virtualizing the physical world around us. This Cambrian explosion has come with the usual artifacts of pioneering tech markets, such as multiple competing standards, industry consortia, protocols and open source efforts. If anything, the early IoT market has been flooded with too many standards in some areas and not enough in others, having the perverse effect of introducing risk and uncertainty for early adopters that are concerned about picking the wrong specification or a vendor that doesn t survive the coming industry consolidations. Internet of Things Deployment and Adoption Source: 451 Research s ChangeWave Research 4Q 2015 Corporate IT Spending Study While the multitude of approaches and companies gives early adopters pause, the key variable to adoption continues to be the business process changes required to benefit from IoT, and the associated organizational restructuring and retraining those changes entail. IoT protocols and standards continue to proliferate, and (as expected) a growing number of startup offerings have emerged as protocol translators or routers between them in an attempt to mitigate risk and single-vendor lock-in. IV

5 2016 TRENDS IN THE INTERNET OF THINGS Carriers continue to play a key role in IoT as both the connection between sensors and devices and the systems that transform the data they output into actionable insight. These network operators are still in the process of determining the best place for their strengths and capabilities in the IoT, ranging from operators building physical (or virtual) IoT overlay networks to providing full-service analytics and cloud services. Carriers will have their hands full with the low-power wide area networks (LPWAN)/LTE-M debates in the near term, and outside players continue to propose other WAN connectivity options that keep the door open to market-changing disruption in the space. The impact of the volume of data ingested from sensors and things is just now becoming evident. Different technologies are being employed to triage the data coming from metrics and measures, transaction and diagnostic data. 451 Research divides these technologies into 10 different categories: in-memory databases and databases with an in-memory option; inmemory grid or cache; streaming and log management; edge analytics (often referred to as fog computing in the context of IoT); analytics as a service and database as a service (DBaaS); NoSQL and the new breed of relational databases that 451 refers to as NewSQL databases; Hadoop and Hadoop-related technologies such as Storm and Spark Streaming; search, data and text mining; data integration; and visualization. Each has a specific impact on ingesting the data streaming from things and transforming it into actionable insights. With the growing number of IoT deployments, we are seeing growth in unit shipments across the spectrum from components from Intel, Samsung, Qualcomm and ARM, to short- and long-range radios, to infrastructure components such as the cost of cloud storage, networks and computing. With the increasing volume (and competition) come lower costs, bringing IoT components within reach of a larger audience of potential adopters. This is definitely a leading indicator, and customer uptake and benefit should trail two to three quarters before the adoption impact becomes evident. Another large barrier to adoption continues to be the real or perceived security exposure that IoT represents to IT/operational technology (OT), with some early IoT security issues in automotive and consumer markets coloring the discussion. The lack of a de facto standard for IoT has resulted in a number of approaches to security, ranging from chip security (Intel, ARM), to gateways (Dell), to more behavioral analysis approaches to monitoring traffic from sensors and embedded systems too lightweight to be able to run their own antivirus software. This is an area we will be monitoring closely over the coming year as the industry unites in its efforts to neutralize the negative press surrounding IoT as a potential weak link in enterprise security by providing infection vector or insertion point. This report presents the trends we see shaping IoT in the coming year. V

6 2016 TRENDS IN THE INTERNET OF THINGS 451 Research s 2016 Internet of Things Trends Source: 451 Research, 2015 Business Process Changes Will Continue To Be the Largest Barrier to IoT Adoption in Organizations Communication Protocols at the Edge Will Remain Fragmented Winners Enterprises with c-suite buy-in for IoT projects; vendors that specialize in key industries and verticals Vendors with standard and interoperable protocols that serve real-world deployments Losers Isolated enterprise IoT efforts; startups focusing on the technology without considering how it will integrate into existing corporate environments Proprietary, walled-garden protocols and vendors LTE-M Timing Gap and New LPWAN Upstarts Will Force the Hand of Operators Data Management of Your Things Will Create Opportunities and Challenges Pricing Drops for IoT Components Will Bring Deployments into Reach for a Larger Audience Security of IoT Will Remain an Imperfect Science for the Foreseeable Future Telecom operators that get in front of the LPWAN discussion with near-term solutions that prevent customer migrations Incumbent vendors with targeted IoT offerings for existing data management platforms; startups and vendors that develop vertical-specific solutions Analysis systems and edge computing vendors Existing security vendors with flexible architectures and pricing; silicon vendors with integrated security capabilities Vendors and telecom operators that insist that only licensed-spectrum LPWAN alternatives are viable Startups that don t focus and spread their resources too thinly Vendors that focus on the lossleader sectors of IoT Security bolt-ons and customers that deploy IoT before planning for its security METHODOLOGY Reports such as this one represent a holistic perspective on key emerging markets in the enterprise IT space. These markets evolve quickly, though, so 451 Research offers additional services that provide critical marketplace updates. These updated reports and perspectives are presented on a daily basis via the company s core intelligence service, Market Insight. Forwardlooking M&A analysis and perspectives on strategic acquisitions and the liquidity environment for technology companies are also updated regularly via Market Insight, which is backed by the industry-leading 451 Research M&A KnowledgeBase. Emerging technologies and markets are also covered in additional 451 Research channels, including Business Applications; Cloud and IT Services Markets; Data Platforms and Analytics; Datacenter Technologies; Development, DevOps and IT Ops; Enterprise Mobility; European Services; Information Security; Mobile Telecom; Multi-Tenant Datacenters; Networking; Service Providers; Storage; and Systems and Software Infrastructure. Beyond that, 451 Research has a robust set of quantitative insights covered in products such as ChangeWave, Voice of the Enterprise, Market Monitor, the M&A KnowledgeBase and the Datacenter KnowledgeBase. All of these 451 Research services, which are accessible via the Web, provide critical and timely analysis specifically focused on the business of enterprise IT innovation. For more information about 451 Research, please go to: VI

7 Table of Contents TRENDS 1 Trend 1: Business Process Changes Will Continue To Be the Largest Barrier to IoT Adoption in Organizations 1 Figure 1: IoT Data Storage and Analysis Locations: Current and Planned RECOMMENDATIONS WINNERS LOSERS Trend 2: Communication Protocols at the Edge Will Remain Fragmented 4 Figure 2: IoT Communication Protocols RECOMMENDATIONS WINNERS LOSERS Trend 3: LTE-M Timing Gap and New LPWAN Upstarts Will Force the Hand of Operators 7 RECOMMENDATIONS WINNERS LOSERS Trend 4: Data Management of Your Things Will Create Opportunities and Challenges 8 RECOMMENDATIONS WINNERS LOSERS Trend 5: Pricing Drops for IoT Components Will Bring Deployments into Reach for a Larger Audience 10 RECOMMENDATIONS WINNERS LOSERS VII

8 2016 TRENDS IN THE INTERNET OF THINGS Trend 6: Security of IoT Will Remain an Imperfect Science for the Foreseeable Future 11 RECOMMENDATIONS WINNERS LOSERS THE LONG VIEW 13 FURTHER READING 14 INDEX OF COMPANIES 14 VIII