New York – Aug. 8, 2018 – Bain & Company expects the combined markets for the Internet of Things (IoT), including hardware, software, systems integration, and data and telecom services, to grow to $520 billion by 2021 – more than double the $235 billion spent in 2017 – the majority of which will be captured by enterprise and industrial segments. Yet many enterprise customers say they are tempering their expectations about pace of IoT adoption, realizing that complete solutions may take longer to implement and yield the expected return. In response, while they would like to go faster, they are planning less extensive IoT implementations by 2020 than they had planned just two years ago. IoT vendors seeking to tap into this pent-up demand must better address barriers to adoption, provide more consumable solutions, and ease concerns about integration with existing information technology and operational systems.
Bain & Company’s latest report, Unlocking Opportunities in the Internet of Things, includes results from a 2018 survey of more than 600 executives, which found that enterprise customers remain bullish on IoT. They are still running more proofs of concept than they were two years ago. Additionally, more customers are considering exploring new use cases: 60 percent in 2018 compared with fewer than 40 percent in 2016.
Along with analytics and infrastructure software vendors, cloud service providers (CSPs), particularly Amazon Web Services (AWS) and Microsoft Azure, have emerged as more prominent and influential vendors in the space. CSPs are lowering barriers to IoT adoption, allowing for simpler implementations and making it easier to adopt selected use cases and scale up quickly. They also leverage their deep expertise in analytics to expand across IoT battlegrounds, as well as to fortify their position in the analytics and cloud battleground for enterprise and industrial customers.
However, their broad horizontal services provide little optimization for industry-specific applications, leaving a significant opportunity for industry solutions from systems integrators, application developers, industry IoT platform specialists, device makers and telcos. This pent-up demand represents a huge opportunity for technology providers that can meet customer needs.
“Our survey found that vendors are aligned with customers’ concerns about some barriers, such as security, returns on investment, but less so on others – notably integration, interoperability and data portability,” Ann Bosche, a partner in Bain & Company’s global Technology Practice and an IoT expert. “Based on our experience with previous technology cycles, the key to addressing these concerns lies in focusing on fewer industries in order to learn what customers really want and need to ease adoption.”
Barriers to IoT Adoption
Since Bain & Company’s last extensive survey on the Internet of Things and analytics in 2016, customers believe that vendors have made little progress on lowering the three most significant barriers to IoT adoption:
- Security. Recent Bain & Company research finds that enterprise customers would buy more IoT devices and pay more for them (about 22 percent more on average) if their security concerns were addressed.
- Integration with existing technology. Vendors have not made it easy for customers to integrate their IoT solutions into business processes or information technology and operational systems—and they may be underestimating their customers’ concerns. If vendors invest in learning more about typical implementation challenges in their customers’ industries, they will be able to offer more complete end-to-end solutions.
- Uncertain returns on investment rounds out the top three concerns among survey respondents. This is primarily due to the heavy investment required to stand up each solution given the amount of customization currently required.
Three Universal Themes for IoT Vendors
Bain & Company has identified three universal themes necessary for IoT leaders to continue to make gains:
1) Focus on getting a few industries and use cases right. Industry pre-customization and better “out of the box” packaging are emerging as keys for success. More than 80 percent of vendors still target four to six industries—too many to build depth in any particular use case rapidly. Leading vendors are targeting their solutions to fewer industries than before, focusing on two or three domains. This allows vendors to incorporate significant industry expertise, providing a competitive edge against more generic offers.
2) Offer end-to-end solutions to ease adoption. Many IoT deployments require customization, usually based on industry application: More than 60 percent of customers say the solutions they buy are more than 25 percent customized. As vendors gain experience implementing IoT solutions for specific use cases, they develop cost-effective, well integrated, end-to-end packages with their own producers and partners – something for which buyers have been clamoring.
3) Prepare to scale by removing barriers to adoption. Leading IoT vendors address their customers’ concerns – security, integration and returns on investment – by baking them into well integrated and use-case specific solutions, which enables to them deliver cost-effective IoT solutions that can scale.
“The next few years will be critical to the development of IoT markets as leaders continue to make gains and expand their industry-specific offers,” said Michael Schallehn, a partner in Bain & Company’s global Technology Practice and an IoT expert. “Incumbents that fail to move quickly enough to address customers’ needs are likely to get leapfrogged by more nimble competitors. We think device makers, in particular, run the risk of seeing software and analytics competitors capture the value of solutions, leaving them to deliver lower-profitability hardware components.”
Editor's Note: To arrange an interview, contact Dan Pinkney at email@example.com or +1 646 562 8102
# # #
Sobre a Bain & Company
A Bain & Company é uma consultoria global que ajuda as empresas e organizações mais ambiciosas do mundo a definir o futuro.
Com 59 escritórios em 37 países, trabalhamos em conjunto com nossos clientes com uma ambição compartilhada: alcançar resultados extraordinários que superem seus concorrentes e redefinam suas indústrias. Complementamos nosso trabalho personalizado e integrado com a curadoria de um ecossistema de inovadores digitais para fornecer os melhores, mais rápidos e duradouros resultados. Nosso compromisso é investir mais de US$ 1 bilhão nos próximos 10 anos em serviços pro bono, levando nosso talento, experiência e visão para organizações que enfrentam os desafios mais urgentes da atualidade em educação, igualdade racial e justiça social, desenvolvimento econômico e meio ambiente. Desde a nossa fundação em 1973, medimos nosso sucesso pelo de nossos clientes. Em nossa indústria, orgulhosamente mantemos o maior reconhecimento por parte dos clientes, que superaram o mercado de ações em 4:1.