The Internet of Things – Opportunities and considerations for service providers
Living in a hyper-automated world
The Internet of Things (IoT), a natural evolution of machine-to-machine (M2M) technology, is the interconnection of pervasive intelligent devices and management platforms that collectively enable the “smart world” around us. From live health monitoring to smart utility meters, integrated logistics, and self-driving drones, it’s a hyper-automated world.
Per Machina Research,1 the total number of M2M connections will grow from 5 billion in 2014 to 27 billion in 2024, a compound annual growth rate (CAGR) of 18 percent. The speed and sophistication achieved in each market and industry may vary due to specific needs of different segments, the availability of connectivity and other supporting technologies, and economic and regulatory environments in each market. For example, European Union (EU) utilities and insurance industries are early adopters of the technology. It’s considered a basic need due to clear and immediate business benefits and/or regulatory requirements. On the other hand, the healthcare sector is slowly adopting the technology, seeing it as an experimental innovation.
Capitalizing on the opportunities, many innovators are swiftly adopting IoT technology in their respective industries, as this new generation of devices is more useful and affordable, and easy to integrate. Additionally, national regulators in many industries are mandating M2M adoption as a technology enabler in achieving national socio-economic objectives.
Rapidly growing M2M adoption—in different industries—presents significant market opportunities for communications service providers (CSPs). Per market research published by Machina Research,2 the total M2M revenue opportunity will be USD $1.6 trillion in 2024, up from USD $500 billion in 2014, a CAGR of 12 percent. This includes devices, connectivity, and application revenue, while connectivity average revenue per user (ARPU) is expected to witness massive decline during the same period. Fourteen percent of connections in 2024 will use Low Power Wide Area (LPWA) connections such as Sigfox, LoRa, and Huawei’s Cellular IoT. These changing market dynamics will put more pressure on margins.
The exponential growth in M2M connectivity helps reduce the effects of the current decline in revenues, and also opens up new market opportunities for CSPs.