IoT continues to expand vendor revenue, but it is unlikely to ever contribute to explosive growth
Total commercial IoT benchmarked revenue increased 14.7% year-to-year (YTY) to $11.7 billion in 4Q18. IoT is a market that is “too big to miss” and is contributing new revenue for a large set of vendors. However, it will not offer explosive growth, and large transactions represent a shrinking percentage of the available market, leading vendors to evolve to a more agile way of doing business or face missed opportunity.
Cloud services revenue grew 46.7% year-to-year in 4Q18 and increased as a percentage of benchmarked IoT revenue from 13.2% to 16.8% year-to-year, favoring all cloud platform vendors. Cloud services continues to be a growth leader as vendors gain customers and upsell with advanced tools as price wars wane. Efforts to extend PaaS to the on-premises edge or private cloud will further bolster cloud services revenue.
Most IoT deployments today consist of multiple-vendor solutions, and in delivering multiple-vendor solutions, component vendors are challenged to be recognized and compensated for their contributions and must target their go-to-market efforts precisely to generate margins. This is leading to an increase in “ingredient marketing,” where component vendors communicate to customers and partners the value their components contribute to solutions. Systems integrators, usually the vendors with the greatest exposure to customers, are stuck between their claims of owning differentiated IoT intellectual property and the increasing visibility of third-party components. Increasingly, solutions are delivered as bundles and sold by value-added resellers, ISVs and independent hardware vendors, posing the same challenge to component vendors.
TBR’s Commercial IoT Benchmark highlights the current commercial IoT revenue and gross profit of 28 vendors. TBR leverages financial models and projections across a diverse set of IT and operational technology (OT) components. Additionally, the benchmark outlines the major vendor drivers and trends shaping the market. Reach out to [email protected] for a deeper conversation about the findings in TBR’s 4Q18 Commercial IoT Benchmark.