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The IoT market has begun sorting itself out in 2019 — a vast improvement from its disorganized past

It has been a wild and chaotic ride for Internet of Things (IoT) vendors, with many placing big bets on IoT in the past and entering 2018 largely disappointed by the results. While IoT will likely never meet the expectations placed on it in 2015 and 2016 — the peak of hype — IoT’s contribution to IT vendor revenue will increase, with IoT ultimately becoming a core revenue driver. IoT, as a technique to solve business challenges through the assembly of technology to drive results, such as predictive maintenance, resource efficiency, value-added services or generally, increase insight, is not going anywhere.

The good news for vendors is IoT is getting a lot easier as the ecosystem sorts itself out. The increase in portfolio focus and partnering is making the market easier to navigate for vendors and customers. Offerings are becoming easier to implement and integrate as vendors begin to converge on architectures and standards, as well as orient go-to-market strategies toward coopetition rather than “winner takes all.” Customers are coming to market with a greater understanding of what they are looking for thanks to efforts by vendors and early adopters educating the market and cutting through the hype pays off. TBR believes 2019 marks the emergence of “go-to-market 2.0” as an evolved strategy for both IT and OT vendors seeking to better profit from IoT.

 

The 1Q19 Commercial IoT Market Landscape looks at technologies and trends of the commercial IoT market. Additionally, TBR catalogs and analyzes by vertical more than 450 customer deals, uncovering use trends, identifying opportunities, examining maturity, and discussing drivers and inhibitors.

Predix is looking for a new owner

Reports surfaced on July 30 that General Electric (GE) has contracted an investment bank to auction off the company’s GE Digital unit.

When former CEO Jeff Immelt aimed to diversify GE into the software space to take advantage of the synergies between Internet of Things (IoT) and the company’s industrial machinery footprint, GE Digital was created. The unit got some things right. It was one of the first IoT vendors to message the importance of operational technology (OT) inside the IoT technique, emphasizing that IT vendors couldn’t do it alone. It was also one of the first companies to highlight the digital twin, allowing engineers to run simulations or see the effects of an asset via its digital doppelganger, a technique now utilized by most IoT solution companies. It also promoted the idea that almost everywhere across a customer’s organization, from light fixtures to robots on the manufacturing floor, the addition of IoT could deliver insight. The unit carved the path forward for its OT peers, most of which were fast followers that gained an advantage by first witnessing GE’s successes and challenges.

TBR believes there were a few missteps. GE Digital made one of the more fatal mistakes among early IoT companies caught in the hype wave: It advertised that it was able to provide solutions for everything from manufacturing to healthcare and from utilities to transportation. It is understandable that GE Digital wanted to mirror GE’s wide industrial reach, but it led to a jack-of-all-trades, master-of-none messaging. In actuality, GE Digital likely focused on its Oil and Gas, Manufacturing, and Energy and Utilities segments, however, TBR believes the pivot to specialization in specific industries was too late.

This phenomenon of overextending can also be seen in the mechanics of Predix, which was marketed as a broad, do-all, edge-to-cloud platform with analytics. In reality, Predix was a do-all generic platform that needed a lot of expensive customization and developer time to build tailored solutions for customers. Because of this complexity and platform breadth, GE Digital had problems messaging what it was best at and how it could help customers. We believe the company overemphasized the platform’s  wide set of capabilities and underemphasized packaged IoT applications that solved real business problems. Ultimately, messaging of the platform got mired in discussions of technical features and functions, rather than the outcomes and differentiation of the company’s analytics and platform versus those of competitors such as IBM.

However, what tripped GE Digital up the most was that it wasn’t a great partner in a market that thrives on partnerships. Large IoT deployments will often have a multitude of vendors involved, all with expertise in a specific component of the holistic solution. Instead of focusing on enhancing areas where IT companies are weak, such as OT knowledge, GE Digital tried to do IT and OT. Because GE Digital wanted to do it all, it didn’t play as well as it could have with IT companies boasting deeply established roots in customer companies.

GE’s initial go-it-alone stance also had the company building from scratch, with its tools, such as analytics or cloud platforms, and feature sets always playing catch-up with IT companies that have been building these technologies for decades. For example, GE Digital initially tried building out its own cloud services mirroring Amazon Web Services (AWS) and IBM Bluemix. It ultimately ended up partnering, but we think the company’s initial focus on creating a PaaS cloud kept the company bogged down in services that didn’t add a lot of value. Ultimately, GE Digital proved to be an unattractive partner to bring into an IoT solution, and its platform failed to differentiate it enough to remedy partner apprehension. The platform was also much more expensive to build from scratch than just partnering with peers, making running-at-a-loss GE Digital look like a huge drag to GE leadership, which ultimately sealed its fate.

Where are GE’s Predix assets going? It’s hard to say for sure. As my colleague Ezra Gottheil noted, GE Digital announced it was standardizing on Microsoft less than two weeks ago. Microsoft has been looking for ways for Azure to outpace AWS in IoT and other emerging technology, and being a long-standing IT company, improving its OT expertise would make it more attractive in the industrial space. Perhaps Microsoft, or a Microsoft partner, such as Rockwell Automation or ABB, may be a purchaser.

TBR is seeing other large OT companies, such as Siemens, thrive as they focus on their strengths as OT-whisperers and enhance, not compete with, IT brethren. We are also seeing vertically specialized small ISVs pop up, in the OT and IT domains, that are focusing their expertise on a narrow set of business problems and are being brought in as essential partners. GE Digital blazed the trail for these peers, but also became a cautionary tale for those following in its wake: Enhance partners, don’t compete; be interoperable, not closed; message and provide expertise in your strengths, don’t provide a broad generic solution.

The exaggerated expectations created by IoT hype play a big role in how vendors approach IoT in 2018, for better or worse

HAMPTON, N.H. — Internet of Things (IoT) vendors are succeeding by focusing on business problems, not transformation, according to Technology Business Research, Inc.’s (TBR) 3Q18 Commercial IoT Market Landscape. Shane O’Callaghan of TSM Control Systems, a PTC customer, explained it at LiveWorx2018 in the most straightforward manner: “IoT is not a technology project; it’s a business project.” TBR believes leading vendors are gaining market traction because they are molding their IoT go-to-market strategies around solving tactical business problems with solutions proved by case studies.

Vendors that focus on technical aspects are unlikely to gain breakthrough success and will be relegated to being component suppliers to vendors more engaged with customers at a business-problem-solving level. At LiveWorx 2018, PTC CEO Jim Heppelmann told analysts PTC may have been looking too far forward, focusing on cutting-edge technology, and had trouble explaining IoT to customers and how its platform, ThingWorx, would improve outcomes.

Like PTC, some vendors appear to be caught between trying to evolve from a component-positioned, technical-messaging vendor and a vendor trying to solve business problems. And many vendors are struggling to rise above the messaging of more successful peers or put a unique twist on their solutions to differentiate them amid an increasingly saturated and hypercompetitive market.

In its 3Q18 Commercial IoT Market Landscape, TBR deeply examined paths vendors are taking to evolve.

  • Emphasizing partnering is one approach most vendors use. Partners are critical because most IoT projects include components from several vendors, and very few of those vendors have a relationship with the customer.
  • Increasingly, IoT is embedded in both hardware and software products from independent hardware vendors (IHVs) and independent software vendors (ISVs), respectively. IT vendors are leveraging large- and small-scale ISVs and IHVs to bring their technologies to a broader market beyond providing custom solutions.
  • Some vendors are narrowing their focus and messaging to verticals in which their expertise matches the challenges experienced in the vertical.
  • Some vendors are beginning to sell off underperforming business units or looking for attractive acquisitions in their areas of focus. TBR expects 2018 to be a year of consolidation and acquisition activity.

The 3Q18 Commercial IoT Market Landscape looks at technologies and trends of the commercial IoT market. Additionally, TBR catalogs and analyzes by vertical more than 350 customer deals, uncovering use trends, identifying opportunities, examining maturity, and discussing drivers and inhibitors.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

 

ABOUT TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client-specific issues further or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com.