IoT Deployments Have a Scale Problem. Here is What is Needed To Solve That..

If you, like me, have been following IoT device forecasts for the last five or so years, you would have also found incredible variances across various forecasts, and the projections seem to change every year

• In 2016 IHS forecasted an installed base of 75 billion by 2025
• In 2017 Gartner predicted an installed base of 25 billion endpoint units in 2021
• In 2019, a new forecast from International Data Corporation (IDC) estimated that there would be 41.6 billion connected IoT devices, or "things," in 2025
• In 2020 Transforma Insights forecasts an installed base of 24 billion connected things by 2025

Look, forecasting anything is always difficult. And, with IoT, it is rightly so. 

I have worked with many clients across industries on their IoT business strategies and in their execution. Once you go beyond the low hanging fruit use cases of a connected asset that enables remote monitoring and predictive maintenance, there are clear challenges in large scale solution deployment for more advanced IoT solution use cases. 

Advanced use cases go beyond the connected asset. They consider additional context gained from the environment that the connected asset is in, the processes it is part of, the people who interact with the asset, and the assets' ability to communicate with other assets and share data, insights, and the context itself.

Examples of these advanced use cases include:

• Hospitals and retirement facilities - proactive and predictive patient care across the ER, the central nursing unit, patient room, operating room, the doctors' office using data collected from a vast myriad of connected health devices. Additionally, consider the implications and use of this data and insights beyond the hospital for enhanced care across the healthcare continuum.
• Actionable analytics powered by connected assets across the entire supply chain and distribution channels.
• Campuses, residential buildings, and office parks providing enhanced customer experiences gained from analytics mined across a broad spectrum of connected assets
• Not one but multiple production lines across numerous large connected factories working in concert with insights across the entire supply chain
• And many more such examples in agriculture, smart cities, connected cars, energy, and sports and entertainment.

IoT brings real opportunity, and I fully believe that we will see incredible growth in connected devices soon. 

In this blog, I want to share factors that I believe prevent large-scale IoT deployments for such advanced use cases and provide thoughts on what needs to happen to cross the chasm, if you may. Here are, in my opinion, key inhibitors preventing large scale deployments of advanced use cases:

Initial capital investment required prevents commitment for large scale deployments. Capital costs include:

• Upfront device acquisition or device manufacturing costs
• Heavy systems integration costs upfront to integrate cloud services, edge capabilities, data and analytics, APIs as well as app development, to mention a few
• On-premises hardware acquisition in cases where cloud IoT platforms is not an option or where the edge is a more attractive option
• Capital investments in connectivity, connectivity infrastructure, and connectivity management solutions
• Accounting for first years management and maintenance costs

Connectivity options are still evolving

Especially for use cases that demand lots of connected devices indoors, like in hospitals, campuses, cities, homes, and large factories and plants. Connectivity becomes even more important as a move to the edge becomes more attractive over cloud device management and analytics platforms.

Enterprises digital transformation is still largely underway that requires further capital investment.

• Businesses have to transform their operations to support new business models and customer-centric experiences that get enabled through these advanced IoT use cases.
• Processes have to transform while IT departments need to modernize tech debt accumulated over decades and years.
• New business functions may have to be created and staffed.
• All this also takes a significant initial capital investment.

There is a high level of risk with the overall program.

• Too many partners, each with specialized skill or a component of the overall solution are needed to bring a solution together. Delays, potential finger-pointing, or plain inefficiencies present themselves when many companies are involved.
• End to end IoT security requires considerations for everything from the chip, to the overall device, to the cloud IoT platforms, connectivity, and applications.
• Device to device communication standards are still evolving, which prevent more advanced use cases to materialize.
• Overall, skillsets in embedded systems, cloud, data, and AI are not plentiful, making the general proposition riskier and more expensive.

The business case is not attractive

Advanced use cases demand high upfront initial capital investment. At the same time, most organizations cannot confidently measure additional revenue or expense reduction estimates gained from introducing advanced IoT use cases. Together, these factors make it difficult to establish a strong return on investment (ROI).

When you add potential change management impact on the organization and the associated risk, most senior leaders and CFOs will not sign off on the business case unless of course there is a clear strategic imperative (a make or break situation).

So, how do we go about changing things?

I have been pondering over these inhibitors and will summarize a few key things that need to happen to accelerate use case deployment:

Reduce the massive initial investment barrier

First and foremost, the initial investment and initial capital requirements have to come down drastically. This can only happen if the ecosystem partners needed to bring the overall solution to market disrupt their business models. Here, systems integrators, telecom companies, managed services companies, device manufacturers, and software providers need to think differently about monetization and partnerships.

Ideally, pods of ecosystem partners form alliances beyond just the technical level to now also including a joint monetization and business model level proposition for specific industry solutions. The goal should be to price for scale and the alliance as a whole to benefit from the monetization based on successful outcomes and on achieving scale. Adjusting the business model is easier said than done and will require smart investment strategies across each type of company. 

I have yet to see an ecosystem of partners that have come together and marketed a solution for its ease of adoption, low initial capital investment, accelerated time to market, cheaper than cloud to operate, secure by default, faster than WiFi, with ROI guarantees that make it attractive for the CFOs and other senior leaders.

I highly recommend that individual players form tight ecosystems and offer industry and use case-specific IoT solutions as:

• An "off the shelf" solution
• Highly reduced initial capital investment
• 1 SKU
• 1 Monthly Price - per device per month (including Managed Services)
• Minimum Commitment
• As few companies as possible that make up the ecosystem pod to minimize risk and moving parts

As I said, it is difficult to pull off, but I don't think it is just wishful thinking. But, if companies in the IoT ecosystem continue to do the same thing and hope for different results, they might not come.

Private LTE / 5G Networks

While WiFi, Bluetooth, LTE, Zigbee, and many more connectivity options exist today and will continue to add value, the availability of Private 5G networks has the potential to be the game-changer. Private 5G networks will allow hospitals, campuses, utility companies, stadiums, office parks, cities, and more to run dedicated high-speed, secure networks that will power edge.

The recent CBRS auction (read this and visit CBRS Alliance if you are not familiar with CBRS) and the availability of private LTE networks that will soon offer 5G (here is an example of a company that already does) will allow advanced IoT use cases that demand private, secure, regulatory compliant, edge powered, device to device communication, and strong indoor/outdoor coverage.

Connectivity vendors providing Private 5G networks need to participate in the alliance partnerships as discussed in the previous point. The business model of the vendors here that provide the infrastructure will make a difference in large scale adoption and whether some of these advanced use cases start seeing broad deployment.

Making the big bets and sticking with them

It will be crucial for senior leaders in the enterprise and senior leaders of states and cities to focus on a use case, make a big bet, and go all in. Senior leaders will need to fund the underlying enablement and the organizational change required to support the IoT driven innovation. Lower initial investment should provide a renewed attempt at an ROI.

Closing

The future is exceptionally bright. There continues to be incredible momentum across each of these areas happening as I write. I continue to work with a wide array of ecosystem partners that includes connectivity providers, device management software providers, device manufacturers, and many more to build the value proposition for these advanced use cases. And I look forward to sharing updates as we solve these challenges one by one.

If you are interested in exploring an alliance partnership as discussed in this article, or an enterprise interested in exploring how to navigate these barriers please connect with me.

For further reading check out my LinkedIn article "Learn what it takes to launch an IoT services business"