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Berg and Machina reports see growth in IoT connections and platforms

Steve Rogerson
August 11, 2016
The total number of IoT connections will grow from six billion in 2015 to 27 billion by 2025, a CAGR of 16%, according to Machina Research. A separate report from Berg Insight says the global third party IoT platform market increased 36 per cent to €610m in 2015. Growing at a CAGR of 30.8 per cent, revenues are forecasted to reach €3.05bn in 2021.
Today 71% of all IoT connections use a short-range technology such as wifi, Zigbee or in-building PLC. By 2025, that will have grown slightly to 72%, says Machina. The big short-range applications, which cause it to be the dominant technology category, are consumer electronics, building security and building automation.
Cellular connections will grow from 334 million at the end of 2015 to 2.2 billion by 2025, of which the majority will be LTE. And 45% of those cellular connections will be in the connected car sector, including both factory-fit embedded connections and aftermarket devices.
Just over one in ten connections in 2025 will use low power wide area (LPWA) connections such as Sigfox, LoRa and LTE-NB1.
China and the USA will be neck-and-neck for dominance of the global market by 2025. China will account for 21% of global IoT connections, ahead of the USA on 20%, with similar proportions for cellular connections. However, the USA wins in terms of IoT revenue (22% versus 19%). Third largest market is Japan with 7% of all connections, 7% of cellular and 6% of global revenue.
The total IoT revenue opportunity will be US$3tn in 2025, up from $750bn in 2015. Of this figure, $1.3tn will be accounted for by revenue directly derived from end users in the form of devices, connectivity and application revenue. The remainder comes from upstream and downstream IoT-related sources such as application development, systems integration, hosting and data monetisation.
By 2025, the IoT will generate over two zettabytes of data, mostly from consumer electronics devices. However it will account for less than 1% of cellular data traffic. Cellular traffic is particularly generated by digital billboards, in-vehicle connectivity and CCTV.
“We are constantly monitoring hundreds of different constituent applications across every country and adjusting our outlook for each,” said Machina Research CEO Matt Hatton. “Every year we take a snapshot of the IoT market, pulling our latest forecasts to examine how the overall market had developed in the year. This year, the top line figures of 27 billion connections and $3tn of revenue are eye-catching and the opportunity is substantial. However it's not just a case of rising tides lifting all boats. To take advantage of the opportunities in IoT, suppliers need to understand the key market dynamics and their competitive environment, and develop best practice.”
The Berg report looks at the wide range of software platforms available, intended to reduce cost and development time for the IoT by offering standardised components that can be shared across many industry verticals to integrate devices, networks and applications. Most IoT platforms available on the market today can be categorised as being a connectivity management platform, a device management platform or an application enablement platform, although there are many products that offer overlapping functionality or other unique features.
Many enterprises and organisations have already been involved in various M2M deployments that have typically been characterised by customised services deployed within single industry verticals, or by one company, to improve existing business operations. The IoT puts more emphasis on integration of sensors, devices and information systems across industry verticals and organisations to transform operations and enable new business models.
“IoT furthermore aims to facilitate a better understanding of complex systems through analytics based on data from diverse sources to assist decision making, improve products and enable entirely new services,” said André Malm, senior analyst at Berg Insight.
Whereas connectivity and device management platforms have already reached comparatively high adoption, the market for application enablement platforms (AEPs) is in an earlier phase. AEPs typically provide functionality such as data collection, data storage and analytics. Fully featured platforms also provide tools, frameworks and APIs for creating business applications featuring data management, event processing, automated tasks and data visualisation.
Many platforms also provide tools and ready-made libraries and UI frameworks that facilitate modelling and creation of interactive applications, workspaces and dashboards with little or no need for coding.
“The AEP segment is seeing considerable activity in terms of acquisitions and new market entrants,” said Malm.
After PTC acquired ThingWorx and Axeda, other major software and IT companies have followed. Examples include Amazon that acquired 2lemetry, Autodesk that acquired SeeControl and Microsoft that acquired Solair. Other leading IT companies that are extending their service offerings to include IoT platforms – often focusing on analytics and machine learning – include IBM, SAP and Oracle.
“As a group, AEP vendors primarily face competition from system integrators and companies that develop similar functionality in-house,” said Malm.