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Analyst Angle: And the IoT market leader will be …

There is no debate on the premise that the “Internet of Things” sector is poised for massive growth and, with that, represents endless opportunities across all industries and subsectors. With billions of connected “things” driving several trillions of dollars in revenue, understanding where market participation opportunities lie across different sectors remains top of mind in our client group.

Newly released IoT research suggests that five major categories will make up the IoT ecosystem – hardware, software, services, connectivity and security. This ecosystem includes intelligent systems, network equipment, connectivity services and data integration as well as other types of software, applications, services and security. Industry analysts have predicted IoT ecosystem growth from $1.3 trillion dollars in 2013 to slightly over $3 trillion dollars in 2020, representing a roughly 13% compound annual growth rate. Another way to think about it: By 2020, there will be approximately four connected devices for every person on the planet.

Opportunities presented by the IoT ecosystem are driving curiosity, attention and strategic planning across both traditional and nontraditional telecom and technology players looking to gain first-mover advantage, meeting customers’ needs and adding additional new, fast-growing revenue streams to their core business.

Additional evidence of the IoT sector’s promise can be found in the billions of dollars of capital raised/earmarked for investment in IoT technology and ecosystem development over the next decade by venture capital and private-equity funds. Recent private-equity deals include Houston Ventures investment in Geoforce, a GPS tag for the oil and gas industry, and Cortec Group’s investment in Barcodes, whose products serve a growing demand for scannable data for multiple industries such as health care, retail, etc.

Who will be the market leader in 2020?

From the Atlantic-ACM vantage point, this is one of those few market scenarios where no one leader can emerge. The carriers cannot dominate the space without the hardware manufacturers who need the sensor/RFID players along with the software and app developers to “smarten up” their products.

Having said that, this scenario should not be a surprise if you look at recent market trends. Take for example the recent emergence of mobile payments. The market isn’t dominated by retailers or “e-tailers,” any one specific device manufacturer, one bank/payment system nor any one carrier. The market has come together as a result of lucrative partnerships leveraging their core businesses to help build and develop solutions well outside their cores.

In the short- to midterm, partnership will be the winning strategy, not to mention the only route to market, and for good reason. It allows industry participants to test the waters without too much capital resource allocation while simultaneously bringing their best work to market and staying focused on their core. It also gives companies the flexibility to choose more than one sector entry point and bet on a number of technologies/end-to-end solutions.

AT&T is one of the first out of the gate, partnering with a host of companies as they test the breadth and depth of new market opportunities. Some of AT&T’s partners include IBM (smart cities), Cisco, Intel and GE (industrial data).

As companies look to enter the market and ramp up over the next few years, it will be increasingly important to not only be strategic about partner selection, technologies and sector selection, but also to conduct a soul-searching internal diagnostic, so as a company you bring the best you have to offer to the partnership while remaining realistic and accountable for the venture’s goals and expectations.

Among the numerous opportunities available to private equity and venture capital firms within this space, two principal areas stand out: touch technologies (i.e., sensors, RFIDs); and back-end analytics of the newly acquired IoT data across multiple industry niches. The general prerequisite to investment in any IoT area should be with companies who can very quickly and easily plug in to multiple partnerships and whose technology/service can be scaled on demand.

The commercialization of IoT will be an exciting time for carriers, service providers and technology companies, with hopefully all players finding niche areas to win in the marketplace. At the end of the day, this would lead to an increased shareholder value and an enhanced customer experience.

Atlantic-ACM

Rajive Keshup is a partner at Atlantic-ACM and specializes in corporate and investment strategy. Keshup brings global strategy and merger and acquisition experience to the Atlantic-ACM team having participated in transactions and strategy case studies for family offices, private-equity firms and corporations across North America, the Middle East and Asia. Keshup has participated, advised and executed 15 transactions with over $10 billion in deal value along with numerous strategy cases on topics such as market entry, new product strategy, channel and pricing strategy, capital structure optimization, commercial diligence, business case planning and portfolio benchmarking and optimization. Prior to Atlantic-ACM, Keshup was a part of TMT teams at management consulting firms such as The Parthenon Group, Ernst & Young and The Boston Consulting Group in Boston and New York City, as well as business development and corporate development teams at AT&T in Dallas and Dubai. Keshup has an MBA from Cornell University and Bachelor’s of Science in finance and management from Bentley University.

Editor’s Note: Welcome to Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.

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Altantic-ACMhttp://www.atlantic-acm.com
Analyst Angle Contributor to RCR Wireless Newswww.atlantic-acm.com For more than two decades, ATLANTIC-ACM has delivered strategic consulting and research services to leading business owners, operators and investors around the world. ATLANTIC-ACM delivers quantitative and qualitative research that provides executives with clear, accurate and actionable strategies for tapping new revenue streams, shoring up existing customer bases, penetrating new markets and navigating changes in market dynamics. Our work incorporates supply-side development strategies, operational evaluation and refinement to increase margins and downstream channel management including brand management, niche and mass market penetration to increase revenues. From market sizing, forecasting and segmentation to customer satisfaction measurement and competitive benchmarking, ATLANTIC-ACM’s information solutions provide key insight into the entire value chain.

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