'State of the Market: IoT 2017' prepared by Verizon

Screen Shot 2017-12-01 at 11.44.10 AM.png

Executive summary

IoT is at the core of digital transformation

From farm to fork, food producers are collecting and leveraging data from tens of thousands of internet-connected sensors to better manage the quality, safety and distribution of their products worldwide.

Sprawling healthcare complexes are leveraging IoT-enabled track and trace capabilities so medical personnel can quickly locate critical emergency equipment needed for urgent patient care.

Cities and communities are looking at ways to improve citizen engagement, quality of life and safety while bridging the digital divide through IoT and infrastructure upgrades.

Across the energy and construction industries, companies are deploying IoT-connected unmanned aerial vehicles—“drones”— instead of dispatching workers to perform inspections, maintenance and other high-cost tasks.

Even the insurance industry has taken to the skies in a big way, with 70% of Fortune 500 property & casualty companies tapping network-connected drones to perform inspections and other claims-related work1. It’s no longer a question of if or when, but rather of just how deeply IoT will transform the industry going forward.

No turning back

In our view, 2016 was the year IoT gained significant momentum in the enterprise. In 2017, it is clear there is no turning back. Businesses are laser-focused on IoT as an enabler of sustainability, safety and economic growth—with 73% of executives either researching or currently deploying IoT, according to a survey of industry executives commissioned by Verizon2. By digitizing their most important assets and processes through IoT—everything from fleet and pharmaceutical tracking to data analytics that support public safety and sustainability efforts, enterprises are banking on:

  • Dramatically growing their businesses.
  • Increasing operational efficiency.
  • Delivering an unparalleled experience to partners and customers.

Yet this is happening at a slower than expected pace. Here’s why.

Most enterprise IoT projects are in the proof of concept or pilot phase, not in production.

In the industrial sector, in particular, “companies are often constrained by long capital cycles, organizational inertia and a shortage of talented staff that can develop and deploy IoT solutions,” McKinsey & Company notes3.

For now, businesses seem most focused on simpler use cases to track data and send status alerts. These are easier to deploy but lack data analytics capabilities. Yet, because these simpler projects generate value more quickly, customers will remain focused on them, at least for the immediate future, according to the McKinsey & Company report. And this means they will not obtain full value from IoT.

An absence of industry-wide IoT standards, coupled with security, interoperability and cost considerations make up over 50% of executive concerns around IoT, according to Verizon’s survey2.

What’s new and what remains the same.

Pace aside, great strides have been made in the last year, especially on the cost, security and technology fronts.

Gartner, Inc. forecasts that 8.4 billion connected things will be in use worldwide in 2017, up 31% from 2016, and will reach 20.4 billion by 2020. Total spending on endpoints and services will reach almost $2 trillion in 20174.

Last year, we reported on advancements in technology, data, and integration—all of which were brought together through platforms and services that often seemed disparate and complex.

This year, simplified end-to-end solutions, low-cost IoT technologies and connectivity solutions, and new regulatory requirements around food safety, pharmaceuticals, energy and the operation of commercial drones, are driving IoT deployments. For example, to comply with the US Drug Supply Chain Security Act (DSCSA), pharmaceuticals manufacturers, distributors, and the various logistics and transportation providers in between, are leveraging IoT solutions to track and trace medicines from production to patient.  Innovation in IoT and network technologies is advancing rapidly, while costs are declining. Pricing of new Category M (Cat-M) connection modules used in IoT sensors has dropped to a fraction of the cost they once were. And with the low cost of connectivity, the addressable market expands. As a result, companies are deploying more sensors, collecting more data and tracking more goods and assets. In March, Verizon launched the first nationwide 4G LTE Cat-M1 network. Designed specifically for IoT use, the Cat-M1 network offers flexible data plans at competitive rates.

Competitive pricing will rapidly drive new use cases. And new connectivity options, including NarrowBand-IoT (NB-IoT), combined with more secure platforms are opening the doors of innovation in enterprises. Lower latency and higher throughput options are also coming to market. This is the year we will see more developments around the first 5G networks. 5G is expected to be up to 100 times faster than existing networks, it also promises to be more efficient and have lower latency rates. As such, experts expect 5G to massively expand IoT applications and drive innovation across all industries.


Getting up to speed:
The evolution of IoT connectivity

  • 2G—A network protocol that allowed the most basic smartphone functionality: simple text messaging and very small amounts of data.

  • 3G—A network protocol supporting services that provide an information transfer rate of at least 2 Mbps, allowing larger data formats, including music and video.

  • 4G LTE—The fourth generation of mobile communications technology (established in March 2008). LTE is a mobile communications protocol established by the International Telecommunications Union. The acronym stands for “Long Term Evolution,” and was more or less established as the “path” along which wireless broadband capabilities would continue to expand as demand increases. 4G LTE currently delivers the fastest wireless connection for a mobile internet experience—up to 10 times faster than 3G.

  • Low-Power Wide-Area Network (LPWAN) or Low-Power Network (LPN)—A type of wireless telecommunication wide area network designed to allow long-range communications at a low bit rate among things (connected objects), such as sensors operated on a battery. Examples of LPWAN networks include LoRa and SigFox.

  • Cat-M—A new class of LTE chipset specifically designed for sensors. Earlier this year, the first 4G LTE Cat-M1 network launched, affording low-cost connections for commercial IoT endpoints.

  • NB-IoT—An LPWAN radio technology standard that has been developed to enable a wide range of new IoT devices and services to be connected using cellular telecommunications bands.

  • 5G—A new protocol which is expected to be up to 100 times faster than existing networks and will have an additional advantage of low latency. In February 2017, Verizon announced 5G trials in 11 markets throughout the US. Verizon is collaborating to accelerate global commercialization of 5G through the Verizon 5G Technology Forum.


5G’s low latency, throughput, and efficiencies are critically important in the development of technologies like autonomous mobility, supporting innovation in drones, fleets, consumer vehicles and more.

What has not changed is perception of the number one barrier to large-scale IoT deployments in the enterprise—security concerns. The concerns are justified. Verizon’s 2017 Data Breach Investigations Report analyzed 1,935 confirmed data breaches and 42,068 incidents. It found that no locale, industry or organization is bulletproof when it comes to the compromise of data. Perpetrators’ main motives: financial gain and/or espionage5.

Screen Shot 2017-12-01 at 11.38.12 AM.png

But is the risk too great to go forward? Not according to Gil Press, a consultant focused on IoT and other technology topics.

“The lack of standards and security risks will continue to slow down the adoption of IoT for years to come,” Press says. “But the sudden emergence of a ‘killer app,’ possibly in the enterprise rather than in the consumer market, could accelerate IoT adoption regardless of any security and interoperability concerns6.”

The big three: Simplicity, scalability, and security

Security is the biggest concern, but not the only demand enterprises have. Businesses also want scalability and simplicity from IoT, and industry-wide, technology providers are partnering to provide end-to-end services to meet their demands.
The evolution of IoT platforms that o er industry-specific applications and extensive data analytics are streamlining the enterprise IoT experience. Municipalities, in particular, are leveraging these IoT developments to create and extend smart city services, such as smart parking, smart lighting, citizen engagement and public safety services.

Overall, IDC predicts that the worldwide installed base of IoT endpoints will grow from 14.9 billion at the end of 2016 to more than 82 billion in 2025 [7].

Yet companies are just at the very beginning of uncovering new data-driven revenue sources and delivering enriched customer experiences.

This growth will propel major efficiency and productivity gains as enterprises discover innovative new use cases for the devices and simple, low-cost connectivity options continue to become available.

The bottom line: IoT is open for business.

 

References

1  CB Insights, The Insurance Industry Is Poised to Lead the Way in Drone Adoption, June 28, 2016

2  Based on 2017 survey commissioned by Verizon

3  What’s New with the Internet of Things, McKinsey & Company, May 2017

4  Gartner Press Release, Gartner Says 8.4 Billion Connected “Things” Will Be in Use in 2017, Up 31% From 2016, Feb 7, 2017,

5  Verizon 2017 Data Breach Investigations Report

6  Biggest Obstacles Facing the Internet of Things, Data2Go Wireless, 2016

7  IDC Worldwide Internet of Things Installed Base by Connectivity Forecast, 2017–2021, p.2