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Blog Post

Mid-year hits and misses: Do we qualify as Soothsayers?

by Alex Brisbourne
08/11/2015

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Earlier this year, we issued a series of “15 for '15” predictions for the IoT market, in which we considered the key trends that would likely impact the connected device industry this year. It’s hard to believe we’ve already passed the half-way mark for 2015, but as we round the corner, it’s a good time to take breather, reality-check our arguments, and perhaps refine where stakeholders should turn their attention most directly in the second half of the year. 

On the network side, we saw indications early on that 2015 would be the year where M2M begins the steady march away from 2G, and more importantly starts to make the leap directly to LTE in many instances. This is bearing out, largely as noted.

At the top of the market, LTE coverage has maintained its steep rollout curve. Major and secondary carriers alike are pushing to cover a full one-third of the globe by the end of the year. 

As far as LTE’s relevance to the non-phone device market, we expect LTE devices to very soon reach the price where 3G GSM devices were as recently Q4 2014 – around the mid-$30s per device. If you fast forward a bit, you will see certain new categories of LTE devices start to appear and they will be in the $10-$12 range, which is where 2G GSM products are right now. 

Moreover, the per megabyte cost of LTE network resources is pushing downward at a noticeable rate, and should soon be even less than that of 2G. Even though high-bandwidth applications are still the strongest candidates for LTE (think, streaming content from high definition cameras in video security, or industrial backup, or leased T1 line replacement), you simply don’t need a gigabyte data consuming application to justify a LTE network anymore.

Result: HIT

On the topic of monetizing the IoT via so-called “connected life” applications, 2015 has tracked favorably to our early impressions, with some slight modifications. For starters, we continue to be bullish on the market for m-health devices, but it seems the lion’s share of growth has occurred in the realm of “personal wellness tracking” as opposed to professional, “doctor connected” devices.

This is not to say that the year has not been a boon for higher-leverage devices like health monitors, blood pressure cuffs, blood glucose monitors, IoT-enabled scales, pulse meters, and appliances like pace makers. Quite the contrary, as those have all seen steady growth. But, when you hear that Fitbit beat Wall Street’s earnings projections by 260 percent (21 cents per share actual vs. 8 cents projected), you have to hand it to the wellness market for going above and beyond in 2015.

Likewise, even though we called out specifically the expansion of connected in-vehicle applications, we probably did not give quite enough credit to growth for the insurance industry’s use of telematics to offer more personalized coverage premiums. The pay-as-you-drive auto insurance model has really taken off. 

As for an uptick in 2015 towards Internet-connected vehicles, automakers this year are heavily advertising 4G LTE in their cars, the next-generation of which will include Wi-Fi routers running over LTE. 

Finally, we were all but spot on about the near-term growth for Smart Home products and applications. To be fair, the market was already quite hot in January, but the quick emergence of Smart Watches to become virtual “remote controls” for the home systems certainly gave the market sharp boost in the first half of this year. 

Result: HIT

Turning attention towards security trends, we noted in January that differences between the M2M ecosystem and “standard” Internet communication show that M2M provides a more closed environment by nature and, as a result, has a number of built-in defense mechanisms. However, to see the revelation last month that a modern connected car, in this case a Jeep, could be hacked as it drove down the road, is to understand that we perhaps underestimated the risk. Sure, autos are not entirely analogous to typical, narrowcast M2M devices but the event underscores just how seriously security needs to be taken as non-phone connected devices proliferate. They could easily become gateways to a veritable buffet of goodies for nefarious parties to feast upon, if proper measure are not met.

The primary concern for the remainder of 2015 (and beyond) needs to be one of finding a balance between the value of IoT data and the risks brought on by its collection. With increasingly sophisticated threats, security is not an afterthought in the IoT; rather, it is a mega-driver.

Result: NEAR MISS

As a parting thought, we stated in January our belief that the workplace would progress in its understanding of how to use connected devices, and specifically that wearable devices would gain ground as a means toward workforce automation. On this score, there have been a number of forward steps taken, but we must ultimately conclude that the jury is still out. 

To be sure, we’ve just borne witness to a holistic sea change in the competitive world of enterprise IT, where IBM has allied with Apple bring Macs to the enterprise workplace. The move instantly places ancillary devices like the iPad, iPhone and Apple Watch on the shopping list for enterprise IT executives, but it is hard to say how long the transition with take. 

What we know is the enterprise represents a huge market opportunity for Apple, and especially for the Apple Watch. When Watch-wearing employees are turned loose to gather and create data from every instant of their workday lives, we will start to see workflows get smarter, latency will shrink, and IoT data will move from a primarily descriptive role to fuel more predictive insight.

Result: TOO EARLY TO TELL