Archive for February, 2014

The Internet of Things Gains Traction

The Internet of Things (IoT) appears finally to be gaining real traction with both Gartner and IDC putting out reports on it. The opportunity, however, can best be understood in terms of vertical applications because the value of IoT is based on individual use cases across all verticals. “Successful sales and marketing efforts by vendors will be based on understanding the most lucrative verticals that offer current growth and future potential and then creating solutions for specific use cases that address industry-specific business processes,” said Scott Tiazkun, senior research analyst, IDC’s Global Technology and Industry Research Organization.” Similarly, enterprise IT needs to understand which vertical use cases will benefit first and most.

Tiazkun was referring to IDC’s latest Worldwide Internet of Things Spending by Vertical Market 2014-2017 Forecast.  To tap that market, IDC advises consultants to focus on the individual vertical opportunity that arises from IoT already in play.  Here is where a vertical business savvy IT exec can win. As IDC noted, realizing the existence of the vertical opportunity is the first step to understanding the impact and, therefore, to understanding an IoT market opportunity that exists – for enterprises and IT vendors and consultants.

The idea of IoT has been kicking around for years. BottomelineIT wrote about it early in 2011 here. It refers to the idea of embedding intelligence into things in the form of computer processors and making them IP addressable. Linking them together over a network gives you IoT.  The idea encompasses almost anything from the supply chain to consumer interests. Smart appliances, devices, and things of all sorts can participate in IoT.  RFID, all manner of sensors and monitors, big data, and real time analytics play into IoT.

In terms of dollars, IoT is huge. Specifically, IDC has found:

  • The technology and services revenue from the components, processes, and IT support for IoT to expand from $4.8 trillion in 2012 to $7.3 trillion by 2017 at an 8.8% compound annual growth rate (CAGR), with the greatest opportunity initially in the consumer, discrete manufacturing, and government vertical industries.
  • The IoT/machine-to-machine (M2M) market is growing quickly, but the development of this market will not be consistent across all vertical markets. Industries that already understand IoT will see the most immediate growth, such as industrial production/automotive, transportation, and energy/utilities. However, all verticals eventually will reflect great opportunity.
  • IoT is a derivative market containing many elements, including horizontal IT components as well as vertical and industry-specific IT elements. It is these vertical components where IT consultants and vendors will want to distinguish themselves to address industry-specific IoT needs.
  • IoT also opens IT consultants and vendors to the consumer market by providing business-to-business-to-consumer (B2B2C) services to connect and run homes and automobiles – all places that electronic devices increasingly  will have networking capability.

 Already, leading vendors are positioning themselves for the IoT market. To Oracle IoT brings tremendous promise to integrate every smart thing in this world.  Cisco, too, jumped early on IoT bandwagon dubbing it the Internet of Everything.

IBM gets almost cosmic about IoT, which it describes as the emergence of a kind of global data field. The planet itself—natural systems, human systems, physical objects—have always generated an enormous amount of data, but until recent decades, we weren’t able to hear, see, or capture it. Now we can because all of these things have been instrumented with microchips, UPC codes, and other technologies. And they’re all interconnected, so now we can actually access the data. Of course, this dovetails with IBM’s Smarter Planet marketing theme.

Enterprise IT needs to pay close attention to IoT too. First, it will change the dynamics of your network, affecting everything from network architecture to bandwidth to security. Second, once IT starts connecting the various pieces together, it opens interesting new possibilities for using IT to advance business objectives and even generate revenue. It can help you radically reshape the supply chain, the various sales channels, partner channels, and more. It presents another opportunity for IT to contribute to the business in substantive business terms.

IDC may have laid out the best roadmap to IoT for enterprise IT. According to IDC, the first step will be to understand the components of IoT/M2M IT ecosphere. Because this is a derivative market, there are many opportunities for vendors and consultants to offer pieces, product suites, and services that cover the needed IoT technology set. Just make sure this isn’t just about products. Make sure services, strategies, integration, and business execution are foremost. That’s how you’ll make it all pay off.

The promise of IoT seems open ended. Says Tiazkun: “The IoT solutions space will expand exponentially and will offer every business endless IoT-focused solutions. The initial strategy of enterprise IT should be to avoid choosing IoT-based solutions that will solve only immediate concerns and lack staying power. OK, you’re been alerted.

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Fueled by SMAC Tech M&A Activity to Heat Up

Corporate professional services firm BDO USA  polled approximately 100 executives of U.S. tech outfits for its 2014 Technology Outlook Survey and found them firm in the belief that mergers and acquisitions in tech would either stay at the same rate (40%) or increase over last year (43%). And this isn’t a recent phenomenon.

M&A has been widely adopted across a range of technology segments as not only the vehicle to drive growth but, more importantly, to remain at the leading edge in a rapidly changing business and technology environment that is being spurred by cloud and mobile computing. And fueling this M&A wave is SMAC (Social, Mobile, Analytics, Cloud).

SMAC appears to be triggering a scramble among large, established blue chip companies like IBM, EMC, HP, Oracle, and more to acquire almost any promising upstart out there. Their fear: becoming irrelevant, especially among the young, most highly sought demographics.  SMAC has become the code word (code acronym, anyway) for the future.

EMC, for example, has evolved from a leading storage infrastructure player to a broad-based technology giant driven by 70 acquisitions over the past 10 years. Since this past August IBM has been involved in a variety of acquisitions amounting to billions of dollars. These acquisitions touch on everything from mobile networks for big data analytics and mobile device management to cloud services integration.

Google, however, probably should be considered the poster child for technology M&A. According to published reports, Google has been acquiring, on average, more than one company per week since 2010. The giant search engine and services company’s biggest acquisition to date has been the purchase of Motorola Mobility, a mobile device (hardware) manufacturing company, for $12.5 billion. The company also purchased an Israeli startup Waze  in June 2013 for almost $1 billion.  Waze is a GPS-based application for mobile phones and has brought Google a strong position in the mobile phone navigation business, even besting Apple’s iPhone for navigation.

Top management has embraced SMAC-driven M&A as the fastest, easiest, and cheapest way to achieve strategic advantage through new capabilities and the talent that developed those capabilities. Sure, the companies could recruit and build those capabilities on their own but it could take years to bring a given feature to market that way and by then, in today’s fast moving competitive markets, the company would be doomed to forever playing catch up.

Even with the billion-dollar and multi-billion dollar price tags some of these upstarts are commanding strategic acquisitions like Waze, IBM’s SoftLayer, or EMC’s XtremeIO have the potential to be game changers. That’s the hope, of course. But it can be risky, although risk can be managed.

And the best way to manage SMAC merger risk is to have a flexible IT platform that can quickly absorb those acquisitions and integrate and share the information and, of course, a coherent strategy for leveraging the new acquisitions. What you need to avoid is ending up with a bunch of SMAC piece parts that don’t fit together.

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