2014: Ubiquitous Connectivity and the Internet of Things

2014 is set to be the year when the focus of both IT buyers and IT sellers, shifts to the Internet of Things (IoT). In 2014, more data will be generated by machines (‘things’) than by human beings. This creates enormous opportunities:

·       1. To analyze and use vast amounts of data.

·     2.   To store data and source application functionality in/from the cloud.

·    3.    To create, manage and support apps that enable the operation and management of IoT implementations.

·     4.  To provide high speed connectivity between objects and the people, who work with them and use them.

Indeed, the explosion of IoT activity over the next few years will be driven by the nexus of low cost sensors, cloud computing, advanced data analytics and mobility. 

Big Data

Using powerful analytics tools to take full advantage of the huge amount of data available is becoming common. Big data projects are increasingly being viewed as priorities. As individuals, we see the results of such projects all the time. For example, have you noticed how the ads that are served to you in your Facebook news feed, are increasingly well targeted? 

The IoT is set to create much more data than is created by human beings. This data will be used to enable organizations to increase efficiency and effectiveness, grow revenues, innovate, and transform the way they do business. Demand for tools that can visualize this data will increase as organizations seek to improve evidence based decision making.

Cloud Computing

In mature economies, cloud computing has become mainstream. Organizations in most mature economies, as we predicted, now need to find a justification for not using cloud computing as opposed to on premise alternatives, rather than the converse. 

The new cloud opportunities will be driven by the IoT. Data generated by low cost sensors will be stored and analyzed in the cloud. Applications which drive the functionality of sensors and other mobile devices will also be hosted and developed in the cloud. These cloud computing opportunities will multiply as the IoT becomes more widespread. 

Apps

The app explosion will be further accelerated by the IoT. These apps will be developed in the cloud for deployment on any device or sensor. Platforms that allow this app development will become more widely used. Leading technology vendors, such as Salesforce.com, Microsoft, VMWare, Amazon and Google, will battle for dominance, as the provider of the cloud platform on which apps are developed. A professional services market centered around the development and management of apps will become increasingly significant in 2014.

Mobility and High Speed Networks

The penetration of smartphones has surpassed 50% in many economies. This is driving businesses to find ways of engaging their customers directly on their smartphones. Expect to see apps become the primary form of engagement with organizations. In other words, the first thing that people will do when they want to interact with their bank, airline, favorite retailer or restaurant , is find an app that enables and enhances that interaction. High speed networks will need to be deployed to enable this heavy use of increasingly sophisticated apps. From and IoT perspective, these networks will be necessary to rapidly and reliably transmit growing volumes of data between sensors  and devices.

Some Specific IoT Opportunities

The biggest revenue opportunity today for an IoT ecosystem is transportation and logistics. The deployment of low cost IP enabled sensors within ‘things’ that move products around as well as within products themselves, opens huge opportunities beyond supply chain optimization. 

Airbus is an excellent example of the use of sensors to drive performance in the transportation sector. The components that make up an A380 are fitted with sensors that can monitor ‘wear and tear’ in real time. This allows Airbus to create a dynamic maintenance process optimized by data continually being generated from components that are being used. From a technology perspective this requires a huge amount of storage and application functionality, as well as data analysis. Cloud computing, big data technologies and lower cost sensors will enable aircraft manufacturers and airlines to transform and optimize their maintenance processes. 

Other industries are opening up to the opportunities created by the IoT. Smart cities, connected cars, and connected health are examples of transformations that are being driven by IoT.  There is also a lot of interest in how the IoT will impact manufacturing. Soon, managers in the manufacturing sector will monitor and manage machinery from their mobile devices. The activity of specialized machinery such as drills will be monitored using myriad of sensors. This will enable manufacturers to replace expensive machinery based on usage rather than based on the amount of time the machine has been installed. These developments and others have huge implications on the way manufacturing plants are designed, operated and maintained.

Key IoT Challenges

The IoT is dependent on cloud computing, high speed connectivity and powerful data analysis tools. Issues around reliable connectivity and enterprise grade cloud computing services still exist. Reliability and performance issues will need to be addressed to allow the potential of IoT to be realized.

As more machines operate independently of human beings, the potential risks associated with security breaches multiply. Hacking a self driving car or an aircraft navigation system could have devastating consequences. Technology vendors must continually ensure that IoT technology is secure and that there are processes to address security breaches.

Although the ever increasing number of ‘things’ is expected to be IP enabled, it remains important that standards emerge, as ‘things’ may not be able to communicate with each other and the people that engage with them. There remains a risk that we create an ‘Internet of Silos’.

In summary, as cloud, data analytics, mobility and connectivity technologies mature, the IoT will open up enormous new opportunities across industries. Activities that were once the domain of specialized industry vendors will become open to the world’s leading technology firms. Technology vendors will place much greater focus on industry specific activities as they seek to fully benefit from the IoT and connected industries.

Connected Cars: Driving New Opportunities for ICT Suppliers

The nexus of cloud computing, high speed mobile networks, big data and ‘The Internet of Things’ is creating huge opportunities to transform entire industries. From the healthcare industry to the automotive industry, we are on the brink of a surge in innovation, driven by ICT advances.

Organizations no longer view ICT as a way of increasing productivity and improving existing business processes. Instead, ICT is increasingly perceived as a platform for rapid innovation and the key to successful competitive differentiation and growth.

Over the next few years, some industries will become unrecognizable as cloud, mobile, big data and the ‘Internet of Things’ transform them entirely. So what does all this mean and what are the implications for the IT industry? To answer this question, each industry needs to be analyzed separately.

One industry that is currently receiving a lot of attention from technology vendors is the automotive industry. Today’s cars are turning into computers on wheels. Already, autonomous or driverless cars can now be used.  But what is the appeal of such an innovation? The answer is that driverless cars can minimize accidents, reduce congestion and reduce vehicle carbon emissions, while enhancing the overall customer experience for most people.

We can expect to witness a very rapid evolution of the cars that we drive today into autonomous cars. Over the next few years, we will increasingly drive connected cars that have the following IT-enabled features:

• Information and entertainment to the dashboard. Streamed audio and video entertainment, games and access to communications applications will become common in new models. Additionally, information relating to traffic, parking and weather will be fed directly to vehicle dashboards.

• Navigation and driver assistance. Cars will be able to select the best routes in real time, taking into account current conditions as well as assisting drivers as they perform maneuvers For example, cars will increasingly have the ability to park themselves.

• Safety. Connected cars will have the ability restrict speeding, keep a safe distance from other vehicles, predict potential accidents and take avoidance measures, prevent red light jumping and other motoring violations. New cars in Europe will have the capability to instantly notify the emergency services of accidents, and roadside assistance of breakdowns.

• Security. Once a vehicle theft has been recorded, connected cars will be easy to recover through real time GPS tracking.

• Energy efficiency. Intelligent navigation, routing and monitoring of driving style, fuel consumption, emissions and ‘wear and tear’ can be managed effectively.

• Usage based insurance.  Polices can become usage based and linked to the distance driven by individuals and where and how those individuals drive.

Technology firms are currently investing heavily in connected cars. One of the key reasons is a desire to control automotive IT platforms.  Whoever controls driverless car platforms will be in a very strong position. They will be able to establish a communications system for driverless cars. Roads will carry more traffic and be safer and personalized transport will become typical. It will be an enjoyable experience. Cars will deliver you to your home or workplace and park themselves. Onboard, you will be able to work or access entertainment. Accidents will be virtually eliminated and cars will consume substantially less energy. Ultimately, insurance rates will fall dramatically and some mass transit systems may gradually be replaced by personalized transportation run from a common network. It is the IT industry that will enable this transformation and reap huge rewards in the new automotive paradigm.

Translated into IT terminology, this creates massive opportunities for providers of high speed networks, cloud computing vendors and analytics software vendors.

According to LMC Automotive, global automotive sales exceeded 80 million in 2012 and will grow to 83 million in 2013. In the next few years, this will represent 100 million complex computing devices that can connect to the cloud over mobile networks. Vehicles will contain networking hardware, infrastructure software, software applications, and analytics software. This is a multibillion dollar opportunity for existing IT companies. It also offers opportunities for innovation which will drive the emergence of new technology firms.

Microsoft and Google are working closely with major manufacturers to offer connected car platforms. Microsoft is working with Toyota to use Azure as a cloud based mobility platform. Google Is working with Ford to offer a cloud-based platform that offers a variety of features including suggestions of optimized driving routes.

IT suppliers are benefitting from a shift away from proprietary systems to modular cloud based offerings typically provided by IT vendors such as Google, Saleforce.com. Microsoft, IBM and Amazon. These offerings massively reduce development time and costs for automotive manufacturers. Perhaps even more importantly, they can also be integrated to the broader automotive ecosystem. This would be very challenging or impossible if proprietary systems developed by automotive firms are used.

In summary, the automotive industry is rapidly incorporating additional automation into vehicles. As IT firms get more heavily involved, this process will accelerate. In our old age, we may well look back with amazement at the fact that individuals were given so much control of cars. We may ask why we tolerated such high accident rates, such high levels of congestion, and rampant pollution generated by cars.

Microsoft: Will the Empire Strike Back?

To some, the omens look bleak for Microsoft. PC shipments are in decline, and an increasing proportion of IT activity bypasses Microsoft technology entirely. Google and Apple continue to make massive inroads into, what was once, Microsoft territory, forcing Microsoft to react.

Will the trend towards consumerization and ‘Bring Your Own Device’ (BYOD) combined with the move to cloud computing marginalize Microsoft and undermine the fabric of its business model? Indeed, will cloud computing destroy Microsoft’s business model and allow others such as Google and Apple to replace Microsoft within the enterprise?

The answer is no, if Microsoft can develop a coherent marketing strategy that can be understood by its clients. BYOD, cloud computing and the vulnerabilities of Google and Apple’s business models give Microsoft the opportunity to consolidate its dominance in the enterprise. 

Windows 8 is an operating environment that can provide a common experience across multiple devices. It can transform tablets into devices that can be used for enterprise activities in addition to consumer activities. Windows 8 smartphones can also be easily integrated with corporate Windows environments and offer management and security features that enterprises are vigorously demanding.

Apple’s presence in the enterprise is driven organically and is not planned. This may benefit it in the short term, as it rides the consumerization trend. But, the company does not have a coherent enterprise strategy, choosing to remain focused on the consumer experience. 

Google is developing an enterprise strategy with some success. However, it does continue to generate the vast majority of its revenues from advertising, not by addressing the technology needs of enterprises. It does not have a suite of products that can compete with Microsoft in the enterprise.

To the enterprise, Microsoft represents much of what is deemed to be important such as stability, long term product support, flexibility and standards. It offers upgrade paths and a wide variety of support options to name a few benefits that enterprises attribute to it.

So why is Microsoft not seeing more success? Why is Windows 8 adoption so slow? Perhaps this can be explained by Microsoft’s marketing. Microsoft’s marketing activity does not reflect the strength of its position. Its message seems disjointed and uncoordinated. For example, why did Microsoft not present the separate launches of Windows 8 and the Surface as part of the same overall strategy? Its pricing strategy is muddled. It should aim to make Office 365 ubiquitous in the enterprise and then focus on pricing. So far, it has managed to upset a lot of customers with its Office 365 pricing and made alternatives more attractive.

Microsoft will not beat Apple, Google or Samsung on their territories, by launching devices to compete with them. Its advantage over these firms will be enhanced by leveraging its strength in the enterprise market. In other words, it will succeed by practicing the inverse of consumerization. Until the mid 1990s, mobile phones were primarily used as enterprise devices. They moved from the enterprise, into the consumer market. Similarly, PCs were first popularized in the enterprise and thereafter became commonly used by consumers. Consumerization is a blip in the technology adoption timeline. Are Apple’s recent challenges an indication that it is struggling to manage a slowdown in the trend towards consumerization?

Microsoft can galavanise a shift away from consumerization by promoting the benefits of Windows 8 as an operating environment that can be used on any device. The Surface should be primarily targeted at the enterprise not at the consumer. Once established within the enterprise, workers will also use it for consumer activities and its popularity as a consumer device will grow. Microsoft can create a new market for an operating environment that straddles both enterprise and consumer domains. 

If Microsoft cannot wait to strengthen its hand in the consumer market, it could use its vast resources to make some acquisitions of firms that are pioneering new ways of consuming content. For example, acquiring Spotify or Netflix would instantly position Microsoft as a leader in the consumer market.

Microsoft is in a very strong position. It needs to capitalize on this strength in order to re-enforce its position. It must consolidate its enterprise position by focusing on the needs of this huge market. It can then attack the consumer market. It has some great products. It needs to market them more effectively. It needs to be seen by enterprise IT buyers as the IT supplier that can offer one unified, secure, and manageable experience across any device and that these devices can be used for both work and play. To date, it has failed to do this. With a revamped marketing strategy, the Microsoft empire can strike back.

ICT: 10 Years Ago and 10 Years Ahead

In June this year, Frost & Sullivan will hold its 2013 APAC ICT awards banquet. This is the tenth such banquet. Frost & Sullivan’s Asia Pacific ‘Best Practices’ program has been running since 2003.

This anniversary is a great opportunity for us to reflect on some of the developments in the ICT business over the past 10 years, and to predict some changes over the next 10 years.

Frost & Sullivan’s ‘Best Practices’ program uses research to identify firms that demonstrate outstanding performance in particular sectors.  Increasingly, companies that are identified as offering best practices in their sector, are demonstrating innovation and the ability to drive markets through this innovation.

Making predictions around technology developments is, and always has been, a profoundly challenging task. However, we do believe that some powerful trends, that are currently gaining momentum, will strongly influence our technology experience in 2023.

If we go back to 2003, the ‘IPification’ of everything was not yet envisaged. We did not expect telephones to cease to exist. We did not expect voice communications to become just one function that we can use on our preferred devices. We didn’t expect to be carrying powerful IP enabled computing devices in our pockets and handbags. We did not expect to see IP enabled devices being embedded in cars, in consumer good, and in buildings. 

The ‘IPification’ of everything is forcing the convergence of ICT, as we know it today, with a whole host of industry specific processes. For example, we are starting to witness manufacturing automation processes converge with IT as IP enabled technology is built into manufacturing activities. This process is creating huge opportunities for innovation as organizations experiment with and test IP enabled technology.

So, against this background, what is our vision for 2023? We will focus on aspects of technology change that will be noticeable to ordinary people and are transformative. 

# 1 Today’s PC centred model of computing will no longer exist. It was the standard model of computing in 2003 and is currently changing very rapidly. In 2023, we will inhabit a world where businesses and consumers will access IT resources, and conduct the bulk of their interactions from non PC devices. These devices will include home entertainment units (usually described as TVs or games consoles today), in vehicle consoles, wearable devices such as watches, in addition to a range of tablet and smart phone devices.

#2 The focus of the CIO will transform from a focus on the management and optimization of IT assets to a focus on using technology to underpin innovation within the enterprise.  In 2003, the CIO was measured on his/her ability to support enterprise goals within an agreed budget. Today, in 2013, the CIO is increasingly involved in enabling change within the organization. In 2023, the CIO will proactively focus on using technology to drive innovation within the enterprise.  The IT department that we know today will cease to exist.

#3 Leading technology firms will change. New firms will emerge that benefit from this change. One thing is for sure. The companies that dominate today’s technology markets and those which dominated in 2003 are unlikely to remain dominant throughout this technology upheaval. Apple and Facebook will wield a lot less influence in 2023 than they do today. Amazon and Google have better odds.

#4 Self service will spread widely across business and other human activity. In 2003, technology driven self service activities were in their infancy.  By 2023, supermarkets with check outs will look very old fashioned as self service becomes the typical supermarket experience. Similarly, the entire airline experience will be self service. Printing your own boarding passes and luggage tags will soon be normal. By 2023, the customer will expect a self service experience when dealing with organizations. Apps will take over as the primary form of interaction for customers.

#5 IP technology will be embedded across all industries. For example, this change will lead to IP enabled automation across manufacturing activities. In 2003, automation in manufacturing was typically a proprietary activity, and was not integrated with other forms of computing. By 2023, the development of IP enabled automation, together with the development of 3D printing, will allow manufacturing to move closer to the source of demand. As labour becomes a smaller and smaller proportion of manufacturing costs and customization becomes critical, the benefits associated with offshore manufacturing will become negligible. Expect to see an upsurge in manufacturing activity in North America and Western Europe over the next 10 years. 

#6 In 2023, companies will typically have agile, cloud-based IT infrastructures. Combined with the ability to analyse and intelligently use vast amounts of data, this IT infrastructure will make it easier for firms to move into new industries. In 2003, enterprises were usually working with a mix of legacy proprietary technology and distributed systems that restricted their agility. In 2013, we are witnessing a rapid transition towards agile, cloud based IT infrastructures.  In 2023, we can expect to see more companies use their agile IT infrastructures, their brands and huge amounts of data to enter new industries. For example, both Google and Amazon are already doing this, in the financial services industry as well as many others. Expect to see the re-emergence of the conglomerate. In 2023, companies will differentiate themselves by the way they use technology, the way the use data, and the way they use their brands. 

Frost & Sullivan’s research reveals that successful technology firms are factoring these powerful trends into their strategies. We expect that companies which demonstrate best practices in key ICT sectors to continue to perform excellently. Furthermore, we expect them to play a role in shaping and influencing these exciting trends.