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Futures: Who’s Developing All The Applications For 50 Billion Devices?

The Internet of Things (IoT) and cloud computing are combining to create new modes of asset intelligence, collaboration, and decision-making.  People, information, and technology are becoming more connected, distributed, and pervasive; enabling the convergence of the physical and virtual worlds.  While the IoT is a huge opportunity with many new market entrants who are predicting that enormous volumes of connected devices are “just around the corner”, we believe the biggest challenge will be finding enough new technology and industry fluent players to develop all the applications required to inform this expanding opportunity.

Having nearly reached the saturation point with traditional enterprise application development and deployment, professional IT services firms are now turning their attention to non-IT devices capable of being connected to a network and integrated into cloud services.  Services players are taking a number of market- and technology-oriented steps to advance smart connected devices and cloud market development, including beginning to work more directly with partners for smart system applications and capabilities.

These steps will enable services firms to provide more robust business and technology support to their customers. However, while the opportunity may be very large, many professional service providers are coming to realize the prevailing model for offering generic cloud services is not robust enough for market differentiation. What will be required of the technology and services players coming together to serve the IoT opportunity?  What are the critical challenges that need to be addressed:

Enhanced Service Delivery Platforms: With more players focusing on the smart devices and systems opportunity the competition for customers is heating up.  Network operators realize that in order to be profitable it will be necessary to connect large volumes of devices, as many IoT applications require minimal bandwidth, therefore limiting the data/usage rates that carriers can charge.   In turn, operators are seeking ways to differentiate their services, since already low data rates limit the opportunity to compete on price.  One emerging area for differentiation centers on Service Delivery Platforms (SDPs).

Connecting and managing networkable devices, has traditionally been a problematic area for customers.  In the past, it took several months to get a device network certified.  Once the device was connected, there was often little visibility into how it was performing on the network, as well as, limited back end control.   SDPs have emerged as a critical tool that can help address these areas.  SDPs provide configuration services, provisioning, SIM management and reporting, billing, upgrades, and basic asset-related application services.  Realizing that these services are crucial to end customers, professional services firms are beginning to search for SDP partnerships with third parties in an attempt to customize their services and meet the needs of their constituents.

Application Development & Delivery: Today, for most users, IoT applications are cumbersome and complex to develop. Whether the application is developed by the company deploying it or a third party, they are very custom in nature and often configured for the environment in which they operate—factory, office, hospital, and elsewhere. Application development for connected devices today entails a very high level of engineering complexity, due to disparate data formats, diverse networks, incompatible IP addressing schemes, different operating systems, and so on. The applications must be compatible with different device types, configurations, and operating systems, and must be supported by different wireless networks for the customer to gain real value.  Smart system application development, to date, has focused primarily on developing better infrastructure technology for provisioning, management and billing for connected devices – not for application development and application services delivery.

Vertical Expertise:  Applications will require analysis tools and skills, and the ability to design systems to create awareness of asset status, structure the analysis of this data, define rules and work flow, and identify the right tools to initiate the appropriate actions.  Further, for those vendors that pursue a vertical industry strategy, choosing which verticals to go after will be a key success factor. Because application requirements tend to be unique to an industry, crafting the right combination of expertise, system elements and partners to address these challenges requires deep understanding of different industry segments and their unique challenges.

Professional services firms worldwide have seen a steady march to maturity for their core business. This has lead to critical introspection of their traditional business model.  As a result, many service providers are racing to develop new opportunities enabled by “cloud” services.  The emergence of new IT and network service offerings – so-called “cloud” or “X as a Service” or “Anything as a Service “ or “Everything as a Service offerings are rapidly becoming pervasive. Many services firms think offering on-demand IT services combined with their network resources will differentiate them.  But will it?

Services players moving to expand IT services are also facing competition on multiple fronts.  Web application and services players such as Amazon and Google are leveraging their scale and experience to offer low-cost services with the network acting as a “dumb pipe” and, IT infrastructure and services players like IBM and HP are using their systems-integration capabilities and professional services relationships with IT organizations to develop their new offerings.

For forward thinking professional services players, developing a combined cloud computing and IoT offering is a prime example of an opportunity to gain share and really differentiate if they are willing to act.  The convergence of wireless networks, IT and smart devices drives huge opportunities.  However, innovation in the design of new businesses for traditional IT services players will need to extend beyond just simple ideas about new cloud service extensions. To successfully develop this market, IT services players will need to think and act differently.  A renewed focus on developing ecosystems and the critical relationships that will drive value are key to success.

Ultimately, the dynamics surrounding the combined cloud computing and IoT opportunity are incredibly complex.  Basic enablement, network connectivity, middleware services, value-added services, and other device management functions are all needs that generally must be addressed when customers seek to connect smart devices.  Given all of the aspects that must be addressed from the customer standpoint, we believe alliances between unique emergent platform players and a new breed of smart device-fluent solution and services partners represent the best available means to address these market development challenges.

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