GSMA Intelligence’s principal IoT analyst Sylwia Kechiche explores enterprises’ digital transformation journey.
For better or worse, the IoT has captured public attention. Yet, while news headlines focus mostly on consumer devices being connected (speakers, cars, fridges, drones), this is just one part of the story. Purely connecting devices is not the IoT end-game. Rather, it is about the data these devices generate, the insights derived and actions taken as a result to create value and benefit consumers, enterprises, and wider society. We are now at the point that IoT is real: it has moved beyond novelty factor and proof of concepts. MWC19 witnessed that, but it also left unanswered questions that are still being grappled with.
Industry 4.0 is driving a new wave of connectivity
Although consumer segments are currently larger in unit volumes, enterprise verticals will be the principal driver of future IoT deployments. By 2025, GSMA Intelligence predicts that 13.3 billion IoT connections (54 per cent of the total) will come from the enterprise sector as enterprises of all sizes deploy IoT solutions. Smart manufacturing is the fastest-growing segment, driven by Industry 4.0 initiatives, and manufacturers deploying sensors and robotics to automate production lines and increase productivity.
The digital transformation journeys
According to our survey, 60 percent of all enterprises have deployed an IoT solution as part of a broader digital transformation agenda. This varies only slightly between smaller and larger enterprises (more than 500 employees), some of which are deploying across operations in multiple countries. The majority of enterprises view IoT as transformational for their company and the wider industry, utilities; manufacturing; and automotive, are the strongest believers. While there are industry-specific requirements, many enterprise journeys follow a similar path: IoT solutions connect assets, collect data from those assets and analyze those data, often in real-time, to improve business processes. The primary goal is to increase productivity, achieve cost savings, and better tailor products and services. Data is the new currency and will power the digital transformation of many sectors in the economy.
Deployments are scaling up
The majority of enterprises’ IoT deployments remain small, although our research shows that the average IoT deployment size is increasing (see chart, below, click to enlarge).
One of the reasons for the smaller scale is simply that smaller enterprises tend to deploy fewer devices. We see this scaling up as the overall market matures and new capabilities emerge. For example, a small retail company currently would be likely to connect their Point-of-Sale machines while adding security cameras, fleet management for the vans, along internal devices such as smoke detectors. Looking into the future, these devices would be supplemented by automated check-outs, beacons, inventory management products, and even robots.
However, looking only at the size of IoT deployments is to ignore the wider benefits that stem from connecting devices. As data is generated, collected, and analyzed, the application of AI and machine learning can, in turn, lead to new use cases and further benefits. That is the ultimate goal of Industry X: to reinvent and re-engineer the product manufacturing process and create new business models that can be iterated on over much shorter time increments than today. To be clear, we are not there yet, it will take years to achieve this vision.
Challenges remain around integration, security, and cost
These long-standing issues are felt by all enterprises that have already deployed IoT, no matter the size. A lack of internal skills can then often exacerbate challenges around integration, maintenance and security, while the enterprise also suffers from a custom-build price premium. At MWC19, these challenges were recognized and the theme of “making deployments simpler” came to the fore, with announcements of partnerships between different industry players (Arm and Vodafone, Microsoft and HPE) aimed at addressing enterprise pain points around integration and security. Had this year’s event go ahead, we would have likely seen more of the same, but also more focus on big data and ML/AI.
The human factor matters as much as technology
There is no clear preference in terms of IoT solution providers among enterprises, which reflects the high level of complexity and fragmentation of the IoT ecosystem. However, IoT vendors that have strong credentials and offerings in cloud computing platforms and infrastructure such as Microsoft and Google are more likely to be the first-choice provider by enterprises. Less than 10 percent of enterprises consider operators as their “go-to IoT vendor”, although this differs by country and enterprise size. Operators have been active in building up their credentials and partner ecosystem to address IoT opportunities. None of the IoT ecosystem players can address the entire IoT value chain on their own: collaboration and partnerships are key. This mantra will echo throughout 2020.
However, perhaps the essence of the shift to enterprise will most are felt in the role and way of working among IoT vendors. No longer will this be purely a transactional seller of connectivity or services, but rather a partner and co-creator that helps enterprise clients through their internal digital transformation.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its members or Associate Members.