The Shifting Sources of Value Creation
and Profitability in the
Internet of Things Arena
Are platforms the real strategic
control point in the IoT?
The evolving competitive landscape and vendor ecosystems that are emerging to enable Smart Systems and the Internet of Things continue to be extremely diverse, fragmented and include a wide variety of established as well as emergent players.
Many of the traditional supply-side technology segments such as chipmakers, enterprise software players, professional services players have, in our opinion, failed to re-evaluate their relationship to advancing technology and to their constituents and are increasingly finding themselves grasping for a position in the new order. Companies like Oracle, Intel, IBM, HP and a slew more are now attempting to prepare themselves for this new reality.
To state the obvious, they will need to change the way they do business. And they won’t be alone. All the players in this new landscape—from small, privately held technology innovators to large IT “arms merchants”, diversified OEMs and system integrators will need to develop an understanding of the new ubiquitous-computing value chain, and make some crucial decisions about where they want to live on it, and with whom.
Many players we speak to are asking fundamental questions about where value and profitability will be in this rapidly evolving competitive market structure. In our modeling of the Internet of Things opportunity for clients we have found that with few exceptions, traditional silicon, connectivity, gateways, device provisioning and management to name just a few technologies are becoming declining profit activities—even though their literal growth will likely be enormous. The higher margins these product segments generated in the past will diminish predictably and steadily. The products will continue to exist, of course, but only as “portals” into new valuable services offerings, not as ends in themselves.
Value and profitability are playing a new game of hide-and-seek. They’re still there, but not where they used to be. If you keep looking in the same old places…well, you know what’s going to happen.
Many observers say it’s the data, analytics, and managed services these new enablers inform. Often we hear, it’s the data and services delivery “platform” where the value and profit is moving and where the ever elusive “strategic control point” is lurking. But is this true and what does that really mean?
If you line up ten intelligent people and ask them what is a platform ….. well you can just imagine the number and diversity of likely answers.
Given the scale of the apparent opportunity one cannot help but wonder if a more unified and horizontal device integration, data management and application and services delivery platform will evolve to enable the “Internet of Things and People”… could a platform that integrates devices and people, and also provides communications, collaboration and applications capabilities – be an orchestrator of the pervasive Internet of Interactions?
Well if in the infinitely indistinguishable array of so-called platforms announced just in the last two years for the IoT amounts to “where the action is” and everything above this in the stack either looks aging and decrepit or like generic infrastructure and everything below the platform opportunity in the stack is becoming a commodity then let’s not debate it too long and look at the market dynamics of this emerging and evolving technology segment.
What are the critical defining forces and trends for platforms?
First, the platform must be device and communications agnostic as well as open and interoperable; basic functions that are critical to rapid adoption of new smart systems.
From a partnership perspective, platforms can leverage open source technologies and drive collaboration towards leveraging a community of technologies. Take the connected vehicle space, for example, where the open source Automotive Grade Linux initiative (spearheaded by Linux Foundation) is aiming to accelerate the development and adoption of a fully open software stack for the connected car. Recently, Oracle, Qualcomm and Texas Instruments joined the Automotive Grade Linux project in an effort to drive interoperability from semiconductors and in-vehicle software to IoT and connected cloud services. By doing so, these companies will not only provide guidance but will also be able to leverage the vast community of Linux developers who already exist in the market today.
From a technology perspective, leveraging unique graph databases and easily developed applications enables developers to quickly build tools that allow for interoperability. Fathym, a disruptive startup in the IoT space, provides the building blocks for customers to develop custom solutions in a rapid prototyping fashion while also providing a scalable platform that is agnostic to data types due to the relationship of its application development tools and the graph database structures the company has created. Fathym has developed an ecosystem that allows for the rapid, affordable creation of end-to-end IoT solutions, from hardware to application. The company’s platform lets existing hardware, applications, data management, analytics tools, or infrastructure/cloud to easily plug-in to its existing platform, resulting in true interoperability.
Along the lines of unique database structures like Fathym, another company, Maana, advocates for “knowledge graphs which allow for users to leverage machine intelligence and analytics to connect the dots between different sources of data.” The company recently raised a $26 million Series B funding round with investors including Saudi Aramco, Shell Technology Ventures, GE Ventures, Chevron Technology Ventures, Intel Capital, and Frost Data.
Second, a unified end-to-end “managed” services offering is required to support the shift from predominately OEM adopted solutions to true end customer managed “owner/operator” solutions that go beyond just a narrow function platform story.
Acuity Brands, an indoor and outdoor lighting and energy management solutions provider recently acquired DG Logik. The goal of Acuity’s acquisition is to leverage DG Logik’s unique application development tools to expand and enhance Acuity’s portfolio of holistic IoT solutions for the growing market of intelligent networked systems that collect and exchange data. Acuity brands is working to provide customers with tools that interact with various sets of data from various devices to increase efficiency and enable smart services in lighting, smart buildings and smart cities applications.
Exosite’s Murano platform was developed and released last month with an eye towards end-to-end services. From device connectivity functions like provisioning and commissioning, to third-party integration with cloud infrastructure providers like Amazon and Microsoft, the platform leverages open APIs, to provide an end-to-end platform. Additionally, Murano provides pre-integration with OEMs through its partner program, while allowing customers the ability to retain complete control and ownership of their users, data, IP and code.
ENGIE, a French multinational electric utility company, recently selected C3 IoT as their platform which not only demonstrates but validates the vast scale and range of capabilities inherent to C3 IoT’s enterprise application development platform offering. C3 IoT provides a full-stack application development platform that leverages big data and connected devices and systems to drive greater insights into business processes and productivity, operational efficiency, and customer and product behavior. C3 IoT also announced a partnership with Amazon Web Services last month to enable faster deployments and go-to-market initiatives designed to facilitate customer success with large-scale IoT implementations.
Resin.io has developed a platform that uses Linux containers and other open technologies to simplify the way developers build, deploy and manage software for security patches, new feature deployments and device configuration changes to IoT devices. The company recently raised 9M from GE and Ericsson to grow their product footprint, expand their developer community and drive new partnerships with an eye towards adoption.
For the past few years Bosch Software innovations, a division of Bosch, has been developing an IoT software suite to drive visibility into the performance of equipment. Today, the software suite has more than five million connected devices that leverage analytics, data management, provisioning and commissioning, etc. Now, Bosch is taking on the Amazons, Microsofts and IBMs of the world, by launching an IoT cloud infrastructure platform. Many see this as the final piece of an end-to-end platform, which will run 50 in-house applications on the cloud this year, before opening up to other the cloud to other companies and developers by 2017.
Hitachi recently followed suit behind players like Bosch and GE by announcing a new IoT division along with its own platform offering—Lumada. The platform’s architecture was designed to encourage co-creation with customers by leveraging Hitachi’s OT and IT technologies. Lumada provides modular tools to help drive edge device and connectivity integration, application integration, data integration and orchestration, data repositories, stream and batch data processing, advanced analytics, artificial intelligence, simulation tools, repeatable solution blueprints, and enterprise services.
Fourth, platforms will need a new information architecture driven by a true peer-to-peer, distributed organizing schema for information and data objects, driven by information relationships instead of by hardware address or origin
n.io, a disruptive company on this front, has developed core innovations that are focused on providing B2B and B2C developers, partners and customers with tools to facilitate data and events from anywhere, at anytime, and in any format. n.io’s platform addresses transactions, application development and collaboration for smart connected systems as a unified challenge that can be addressed by a single, scalable solution. Recently the company received a gold level award by Dell in the “Connect What Matters” contest for its work in precision agriculture.
The technology and the various features we are seeing in new platform introductions are showing that it is possible to completely re-think the whole relationship of people and devices to business systems and processes even if, in most instances, no single player has included most or all of what’s required.
We are continuing to see the market for these technologies maturing and that developers and innovators are increasingly seeing that Smart Systems need to be designed and built for true, across-the-board digital automation, accomplished by enabling everyday electronic devices and the data communicating inter-operably with each other, supplemented by a whole new generation of information tools for managing rich, vast streams of meaningful data.