Critical IoT connectivity: a USD37 billion market in 2033

Amongst the thousands of different use cases that are supported by the Internet of Things, there are many that can be considered ‘critical’, either in terms of saving lives or supporting crucial organisational operational processes. In this article Matt Hatton, Founding Partner at Transforma Insights, explores the plethora of IoT applications that might be considered critical and the implications of application criticality for how IoT connectivity is delivered, as well as looking at sizing the market for critical connectivity.

What is critical IoT?

The first question is definitional. There is not doubt that many IoT applications are hugely important, but it’s worth considering the different ways in which they might be critical, or close-to-critical. We identify five main categories as listed below:

Life critical

The use of IoT remote monitoring which is focused on life-saving applications and where availability of the service might have a direct and significant impact on reducing loss of life, and by implication there will be an immediate risk of loss of life if the service is not available. Includes tracking and monitoring devices for emergency services, comprehensive living solutions for patients, and lone worker safety. Another prominent example is ‘Health & Safety Notification’, which includes monitoring of life-saving equipment.

Wellbeing critical

As well as immediately life-critical applications, there are also many where the application is used to monitor something which might have implications for health and safety but typically not immediately and/or it is only infrequently triggered. For instance, an application such as Emergency Call (eCall) or tyre pressure monitoring which probably isn’t immediately critical but may be important in the long term. Also included here would be long-term healthcare monitoring applications related to diseases such as Diabetes or Coronary Heart Disease. We also include Security Cameras and Alarms in this category.

Critical national infrastructure and national security

These are applications that are considered to be important to ongoing national security, for instance for the provision of basic services such as utilities. Smart Metering and Smart Grid are the most obvious categories here. Also included is Electric Vehicle Charging infrastructure, power generation and ATMs. With these types of applications a brief outage may not matter, but overall their proper functioning is considered critical to the working of civil society. Sometimes there are degrees of importance, for instance a single connected waste bin is not critical, but a complex vacuum tube waste collection system covering a whole city would be. We include here also applications such as border control and offender tagging.

Commercially critical

The categories thus far have focused largely on risks to people and society. There are also numerous applications which are mission critical for enterprises, where reliability of connectivity has a direct impact on effectiveness as a service, and there is an immediate commercial risk from not having constant reliable connection. The best example here is probably payment terminals, where lack of service will prevent businesses from taking payments. Other examples relate to manufacturing and supply chain operations such as Real Time Location Systems, some Track & Trace, Warehouse Management Systems and Fleet Management.

Commercially important/required for normal activity

This category involves a degree less criticality than the previous but includes use cases where lack of availability might have a noticeable knock-on impact on commercial operations or everyday life. For instance, Machinery Remote Diagnostics & Maintenance applications can certainly cope with short periods where they are unavailable but in the long term they provide significant commercial value to an organisation. This category also includes things like building access, where it would be tremendously inconvenient if it weren’t available.

And non-critical

The remainder of IoT applications can be categorised as non-critical. They are use cases where a service outage would be very unlikely to have a significant implication for life, wellbeing or business continuity. That includes consumer electronics, white goods, lawn mowers, and various other things that will work with most functionality without connectivity anyway. It also includes things like trigger devices which initiate the refilling of soap dispensers or record indications of satisfaction with cleanliness or similar.

Why is criticality such an important consideration?

The degree of criticality of an application will have significant implications for how a solution is architected and the vendors chosen to support it. A simple ‘best efforts’ approach is increasingly unlikely to be acceptable to companies deploying such applications. They will demand a higher guarantee of reliability for the connectivity, for instance by making available fall-back connectivity in the event of network outage. For instance, Transforma Insights has recently commented in its 2024 Transition Topics about the opportunities related to hybrid cellular/non-terrestrial network connectivity for reasons of providing an additional level of redundancy.

Vendor selection is also an important consideration. In a survey of IoT connectivity buyers in late 2022, Transforma Insights found that the number one factor influencing selection of a vendor was ‘reputation/brand in IoT’. IoT buyers are very conscious of who they are selecting to take their connectivity from, doubly so for more critical applications. Any vendor selling connectivity to critical adopters need to ensure that they have a reputation for reliability and robustness.

Considerations of criticality have come increasingly to the fore in recent years due to the rising concerns over cybersecurity related to Critical National Infrastructure. High profile hacking cases, such as the Colonial Pipeline incident, the ongoing tensions between Russia and the west, ramped up requirements for national autonomy and resilience in Europe, and the increasing prospects of regulatory clampdowns in the US on Chinese vendors, all point to a greater consideration on exactly how these critical use cases are delivered.

How big is critical IoT?

Transforma Insights has the most granular IoT forecasts available, spanning hundreds of IoT applications. One of the benefits of this granularity is that it allows us to segment the market in a number of different ways. For the purposes of this analysis of critical IoT connectivity, we allocated each of the applications into the categories identified above (and in some cases divided between several).

Presented below is a chart showing the total number of cellular IoT connections globally split between the five categories of criticality (and the residual non-critical category). Of the 1.9 billion connections active at the end of 2023, 1.6 billion (83%) were ‘critical’ in some way. By 2033 that figure will grow to 4.8 billion, albeit as a proportion it will decline to 69% due to large volumes of consumer electronics devices.

It is noticeable that truly ‘critical’ applications are only around one-third of connections. Life critical and commercially critical account for 4% each. More dominant in terms of volumes of connections are the applications that fit into the ‘Critical National Infrastructure’ category, accounting for 27% of all connections. The dominant use cases here are smart metering and smart grid. Smart metering – electricity, gas and water – collectively account for two-thirds of CNI connections in 2033.

Perhaps unsurprisingly it is applications that have an impact on health but are not directly immediately critical which account for the next most significant volume of devices. Wellbeing critical represents 22% of connections in 2033, with use cases such as eCall and factory-fit vehicle head unit being significant use cases, as well as security alarms and cameras.

A further 11% of connections in 2033 are accounted for by applications where the maintenance of connectivity is important but perhaps not quite as critical, or where a break in connectivity is something that can be coped with relatively easily.

If we consider the connectivity revenue, or what Transforma Insights defines as ‘Value Added Connectivity’, the total value of the critical connectivity is USD37 billion out of a total market of USD63 billion. This equates to 58% of global IoT connectivity revenue being used to connect critical applications. The fact that this is lower than the proportion of connections is unsurprising given that, for instance, consumer electronics use cases will generate much higher average revenue per connection than smart meters.

We should note, of course, that neither of these metrics is really a measure of the importance of the applications being used. However, by doing this market segmentation we can see that a comfortable majority by volume and value of cellular-based IoT is used to connect applications which are in some way critical.

Join us on the 5th February for a webinar on critical IoT

On the 5th February, I will be joined by Monia Challaoui of Vodafone, Klaus Doblich-Frühstück of Deutsche Telekom IoT and Richard Cunliffe and David Copeland of CSL on a webinar 'Resilient IoT connectivity: how to reduce outages, ensure connectivity availability and boost customer satisfaction ' to discuss the topic of critical IoT and resilient IoT connectivity.