Barriers to IoT adoption: Removing inhibitors may create new opportunities
A version of this article first appear in Internet of Business on 17 January 2017.
The Internet of Things is not living up to expectations. Sold on the idea of a massive new growth market, executives are starting to get frustrated at the slow pace of adoption. The press has also picked up on this, with articles exploring why IoT is failing to take off . One recent piece said: “Consumers, developers and even venture firms are becoming disillusioned in building connected hardware.”
How justified is this negativity? And, if IoT growth is slow, what can those involved in IoT do?
Other than IoT specialists, like Sierra Wireless or Telit, few companies report IoT revenues. In itself, this is telling; for most firms involved in IoT, associated revenues are too small to warrant a separate reporting line. Where they are reported, the numbers are typically low — 4% of revenues for Intel, 1.3% for Vodafone. Revenue ramp up is rapid but not explosive, with annual growth rates averaging around 15%.
The drivers to IoT are well documented
The drivers for IoT growth are well understood and widely discussed. The increased performance and reduced price (and size) of technology mean that connectivity can lower costs and make new revenue opportunities possible. Governments have also been instrumental in pushing for connected solutions, from smart utility meters to e-Call in vehicles. Finally, we have a strong push from suppliers looking for new markets.
Barriers to adoption merit more attention
The barriers to IoT are less well explored. Solving these problems will help open up the market and may create opportunities in themselves.
The first barrier is uncertain demand for IoT solutions. Especially for consumer IoT services such as smart home solutions, demand remains unclear and is only slowly emerging. The apparent success of standalone devices, like Amazon’s Echo, that require no integration (unlike, say, a Nest thermostat) may point the way here. Initial products may need to be extremely simple, even if that limits some of their functionality.
A second issue is that of fragmented standards. Multiple standards and platforms exist in each part of the IoT value chain. Organisations may be withholding investment until an agreed set of standards emerges. Some organisations are also developing new standards, as existing standards are viewed as sub-optimal. We believe this is a mistake — as Andy Stanford-Clark of IBM, and one of the developers of the MQTT protocol, says “Don’t, under any circumstance, develop your own protocol [for IoT]!”, as plenty already exist. Even if existing solutions are imperfect, developers may be better off working within their constraints rather than trying to gain support for yet another option.
More can be done to illustrate the business case
The third inhibitor is the business case. The case for many current applications centre on cost savings. For example, for Hitachi Construction Machinery, GE and ThyssenKrupp — three organisations that have made early moves in connecting devices — marketing focuses on how adding connectivity reduces the cost of operating expensive machines, like trains and lifts. There are fewer examples of IoT reducing costs for less expensive devices, or of generating new revenues. Vendors can do more here. Plenty of proof points on the investment case exist but more could be done to provide case studies and even example models to illustrate it.
Privacy and security concerns are the fourth major barrier: Enterprises and end users are unclear about the privacy and security implications of billions of connected devices, with some justification. A recent paper “Don’t Panic: Making progress on the ‘Going Dark’ debate” listed examples of how IoT devices could be used for government surveillance, stating that “the future will be even more laden with sensors that can be commandeered for law enforcement surveillance”. The implications of this are concerning — if devices can be hacked by governments, who else could gain access? Work is being done by vendors to show how security is incorporated into solution design, something that is increasingly being demanded by customers. The IoT director of a telecoms operator recently told us “Two years ago security in an IoT RFP was a ‘nice to have’, today it’s a ‘must-have’.”
A fifth barrier is data discoverability. Major IoT solutions, for example, for smart cities or intelligent transport, need resolution of issues such as data discovery, data formats, payment for data and so on. One study estimated that less than 15% of organisations with IoT solutions integrate them with third-party products and services. For IoT to realise its potential, solutions may need to take actions based on data from many sources: one estimate is that 40% of the value of IoT will be from solutions using multiple sources. At present there are many barriers that make using data from multiple sources difficult or impossible.
Some companies and organisations are working on resolving the knotty problems of making data discoverable, available in usable formats and easily purchased. Work is ongoing to develop standards, with projects such as FIWARE and HyperCat, to create marketplaces to discover data (Onetransport, datastreamx, Thingful) and to create ways of paying for IoT data (Tilepay). Solving these barriers could develop into a lucrative business. Paul Egan of 8Power (formerly with IoTUK and Neul) has predicted that “the first company to come up with a data exchange for IoT will probably be the next Google.”
Finally, while governments can be catalysts for investment, they can create unnecessary uncertainty. In one example, a telecoms operator was planning a wide scale LPWA network, but halted the project after the government suggested that it could build a similar network that any public sector initiative would use. 18 months after the telecoms operators’ initial plan, there is still no sign of the government network. Governments and regulators need to be clear in any statements relating to IoT and understand the potential unintended consequences.
The inhibitors to IoT can seem daunting — the points covered above are a long (and incomplete) list, none of which has a simple solution. By their very nature, all IoT projects will be complicated. Solutions will involve multiple elements — sensors, connectivity, data storage and processing, software and so on. Even simple services are hard and sometimes painful to develop. Added to this point is the lifetime and replacement cycle for many devices. ‘Things’, from thermostats to industrial machines, will last many years and it will take time for investment to filter through. IoT firms need to be realistic in their short-term expectations for IoT but should also try to identify how they can reduce barriers to adoption.