We’re at yet another cross roads of how we access and use the Internet, first migrating from PCs to handheld devices and now to everyday objects and devices.
This revolution is being touted as the Internet of Things (IoT) and promises to connect our homes, workplaces and cities, making them smarter. The connected device market will soon be larger than the PC, smartphone and tablet markets combined, with an estimated 25 billion IoT devices in use by 2019.
This growth will hold massive revenue generating opportunities for companies, with the IoT market estimated to be worth $600 billion by 2019. Majority of this will be powered by software and services rather than hardware, with the overall IoT market expected to grow at 44% CAGR over the next five years.
The growth of IoT will also aid companies present in the Big Data and Cloud computing spaces. The amount of data generated by IoT devices will be massive, with the total amount of data generated estimated to hit 40,000 exabytes by 2020, as opposed to the current 10,000 exabytes.
What will drive IoT adoption?
- Over half of the world’s population will have access to the Internet by 2019
- Over 1 billion homes will have Wi-Fi connectivity
- More people will own smartphones and other connected devices
- The price of sensors in IoT devices will continue to fall
While there’s a lot of buzz surrounding the IoT in the consumer market, enterprise and industry customers will contribute to a larger chunk of the market at first. Businesses will invest close to a quarter trillion dollars in IoT by the end of the decade, with most of that going towards software and services rather than hardware.
It is expected that IoT adoption will grow across all industry sectors, but manufacturing and logistics businesses are the earliest of adopters. Partly, this is due to the increasing adoption of industrial robots, like the ones in Amazon’s warehouses that are estimated to save the company $900 million annually.
Civilian use of drones is another area which is growing massively, despite the safety, privacy and regulatory concerns. Companies like are already developing technologies to use drones to make deliveries, but for now the world’s defence forces are still the biggest buyers of UAVs.
Legacy technology companies are indeed well equipped to cater to the demands for connected devices and services, however increased investments in IoT startups are starting to pile up. In 2014 alone, Investors invested $341 million in IoT startups, up from just $193 million in 2012.
Further, IoT M&As in the January 2012 to November 2014 period amounted to $7.7 billion, with the biggest chunks of money being spent on monitoring ($3.9 bn) and connected car services ($2.8 bn).
IoT for consumers
The connected home is at the top of the list of consumers must haves, with home automation and energy applications leading the sector. The smart home market is estimated to be worth more than $1.6 billion by 2019, up from the current $200 million. The Nest smart thermostat is an early success in the sector, with an estimated quarter million units being operational by the Q1 of 2014.
While manufacturers are marketing smart home devices under the guise of energy savings, not all consumers are convinced. A survey shows 41% percent of consumers feel the IoT devices they’ve seen are gimmicky, while 58% of consumers said they won’t upgrade to IoT devices unless they’re more than just a novelty.
Early successes in the IoT for consumers market are smart TVs and connected cars. It is estimated that one-third of all homes in the US already own a smart TV, while estimates put the connected car market at 100 million units by 2020. However, there are still issues of low consumer awareness that’s hindering the growth of connected devices.
Based on insights from a BI Intelligence report