TBR believes packaged, “off‐the‐shelf” — or “shrink‐wrapped” — Internet of Things (IoT) solutions will drive accelerating growth of IoT‐driven vendor revenue for the foreseeable future, fueled by increased availability of IoT solutions targeted at specific use cases that address specific business processes in industry subverticals. These solutions are most marketable when they require the minimum amount of configuration, customization and integration for end‐customer businesses, and most of the business world is waiting for shrink‐wrapped IoT applications. The challenge for both vendors and customers of IoT applications and technologies is that IoT use cases, and therefore IoT solutions, are far more diverse than traditional, horizontally applicable categories of solutions, such as CRM or ERP. Because IoT solutions are inextricably bound to the physical parts of businesses, they are different for each type of business and for each business process. These differences extend far beyond broad vertical classifications. For instance, manufacturing solutions differ based on the type of product being manufactured and the type of manufacturing equipment being used. Custom‐built solutions work for large businesses The challenge for both vendors and customers of IoT applications and technologies is that IoT use cases, and therefore IoT solutions, are far more diverse than traditional, horizontally applicable categories of solutions, such as CRM or ERP. Because IoT solutions are inextricably bound to the physical parts of businesses, they are different for each type of business and for each business process. These differences extend far beyond broad vertical classifications. For instance, manufacturing solutions differ based on the type of product being manufactured and the type of manufacturing equipment being used. Because use cases are so diverse, in most instances, businesses have built custom solutions out of general‐purpose modules. Custom building is an expensive, time‐consuming process, so most current investors in IoT are large businesses that leverage their scale. In our interviews and surveys of large businesses that have built IoT solutions, customers are satisfied with the building process and are getting the results they need, but would prefer to also benefit from data and development advances made via outside projects. Vendors are increasingly offering industry‐specific and process‐specific modules to reduce the cost of custom solutions. Further, vendors are using their experience to advance the building process so that solutions can be assembled from kits rather than being constructed from scratch. By lowering costs, vendors can broaden the available market for IoT solutions. Some vendors, such as GE Digital and Amazon Web Services, are encouraging both users and third‐party vendors to add their own modules to their marketplaces. For most businesses, packaged solutions are best The evolution of IoT‐related technologies to include more specialized and more business‐relevant components will lower costs and time to implementation and will provide more comprehensive solutions. This, along with increasing experience among vendors and customers, will help drive gradually accelerating growth in IoT. For large businesses, assembling custom solutions, especially as platforms and technologies mature, continues to be a good choice. Not only can large enterprises benefit, because of their scale, from the subtle optimizations available through custom work, but these optimizations can also give these companies a vital competitive edge. Small and midsize businesses often compete only against similar local businesses with similar lack of scale. This is even truer of governmental organizations and many nongovernmental organizations, several of which could benefit greatly from IoT solutions. However, because of the cost, time to implementation and resource requirements associated with building custom solutions, these types of entities prefer packaged offerings. Packaged IoT solutions will expand the market to include small and midsized businesses. Some smaller, packaged solutions are already on the market, and others are under development. Some have been incorporated into equipment and systems being purchased by SMBs as well as governmental and nongovernmental organizations. To address this market, both Dell Technologies and Hewlett Packard Enterprise have focused much of their IoT efforts on their existing embedded or OEM systems practices, through which equipment vendors in verticals such as power, oil and gas, logistics, and healthcare are building IoT into their products. The companies that are “building in” IoT have both the products and the deep understanding of their narrow markets needed to fully exploit the potential of IoT. They also have relationships with their customers or with the channel to their customers. As a result, they are often best suited to deliver aftermarket IoT solutions, adding IoT capabilities and services to in‐place equipment. The fragmented IoT market leads to slowly accelerating growth Each IoT solution comes to market at a different time, meaning that as more packaged solutions become available and as some experience rapid growth, the total growth accelerates. The IoT market has been described as a “popcorn” market, in which each submarket “pops” at its own pace — some smaller markets grow explosively, but the total market (the “pot of popcorn”) expands more uniformly. As a result, and as providers of the horizontal components that go into specific solutions have witnessed, the IoT market has not seen the sudden growth many expected. While this is frustrating to companies that planned for a rapid wave of adoption, the upside of this trend is that growth will gradually accelerate for at least five years. TBR is not yet predicting the point at which growth will start to slow. Vendors of horizontal IoT components are challenged to reach their market — companies building packaged IoT solutions — because the buyers are not IT departments but rather product development organizations. Despite the fact that the components are broadly applicable, the buying market for packaged IoT solutions is much more diverse than that for conventional IT solutions. At the same time, potential buyers face a challenge finding vendors for their solutions. The market in which component vendors are selling to solutions providers is currently evolving, and its growth is contributing to IoT growth. (C)...
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