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COVID-19 changes everything: What’s next for devices and IoT?

In pandemic recovery, IoT will contribute to organizations’ resilience, while PC sales will suffer from saturation

The COVID-19 outbreak has had two effects on pre-existing trends: In many cases, such as the migration to remote working, it has accelerated them, and in others, like the deployment of voice solutions in workplace environments, it has interrupted them. Where trends are accelerated, we can expect a slowdown or temporary rebound as the economy recovers from the impacts of the pandemic, followed by a resumption of the trend. Where trends are interrupted, resumption will often be delayed until later in the recovery, when there is less uncertainty.

Under these circumstances, it is worthwhile to look back at last year’s predictions:

  • There will be less talk of IoT, as it will be increasingly viewed as one technique among many for delivering digital transformation.

This trend was accelerated by the pandemic, as organizations focused on operating in the crisis and preparing for greater uncertainty during and following the recovery. In a sense, once IoT was better understood by customer organizations, including IT, operational technology (OT) and business management, it no longer required special attention. The focus shifted from the enabling technology, IoT, to the problems to be solved using all techniques including IoT.

  • AI in IoT will increasingly be encapsulated in specific functions like recognition and detection.

This trend was also accelerated by the pandemic, as organizations focused on point solutions that included IoT and strategic solutions that incorporated data from all sources, including from IoT. At the edge, AI is aimed at improving operations by increasing efficiency and reducing errors as well as recognizing things like anomalies and patterns that imply a need for service. IoT-generated data contributes to AI-enabled business analysis, but that is as part of a larger body of data, including data from other sources, and is typically done either in the cloud or in on-premises data centers.

  • Conversational user interfaces, based on voice or typed communication, will play an increasing role in business solutions.

Many natural language processing (NLP) projects have been deferred or slowed due to pandemic constraints as well as organizations diverting attention and dollars to more pressing needs or to husbanding resources for a more uncertain future. A minority of NLP projects, especially ones already in use, have been accelerated because they reduce dependency on human operators. While conversational solutions remain in the digital transformation tool kit, TBR believes NLP will remain a lower priority for the first stages of recovery, as organizations look to solutions that increase resilience and transparency.

This focus on digital transformation for resilience and transparency, giving organizations the flexibility to adapt to changing conditions in the pandemic recovery and economic unpredictability, is, TBR believes, the next phase in the evolution of commercial IoT. At the same time, the PC industry faces a saturation-driven reduction in demand following a pandemic-driven surge in 2020.

2021 Devices & Commercial IoT Predictions

  • The emergence of the chief data officer role will increase organizational clarity, accelerating IoT adoption
  • Packaged solutions and components will become more important
  • Despite enjoying an increase in TAM, PC vendors suffer from market saturation, a weak global economy and demand for resale units

Technology Business Research 2021 Predictions is a special series examining market trends and business changes in key markets. Covered segments include cloud & software, telecom, devices & commercial IoT, data center, and services & digital.

COVID-19 changes everything: What’s next for devices and IoT?

The COVID-19 crisis has accelerated some trends and slowed others. In IoT, the emphasis has shifted to a more strategic approach to achieve greater resilience and transparency, while projects largely aimed at increasing operational efficiency have be put on the backburner. At the same time, the crisis has accelerated a maturation in customer organizations that makes it easier to build IoT into digital transformation strategies. In devices, especially in PCs, the 2020 surge in consumer demand will be followed, TBR believes, by market saturation, reducing revenue and driving down margins.

Don’t miss:

  • The new division of labor in IoT customer organizations     
  • Specialized packages and bundles simplify vendors’ go-to-market strategies
  • How the increased PC total addressable market will affect the near-term PC market

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IoT is helping improve supply chains, smart city infrastructure and healthcare, with growth in energy, public and manufacturing

3Q20 vertical takeaways

Global organizations are battling supply chain issues due to COVID-19. IoT will continue to play a role in enhancing supply chains to help increase long-term resilience in the event of future pandemics or other disruptions. Automation in manufacturing and other verticals continues to be a major trend. Although some companies may have previously been reluctant to use robots due to concerns over the threat to people’s jobs, the pandemic has required businesses to find ways to maintain supply chains and productivity with less human interaction.

The healthcare vertical will continue to rapidly adopt IoT devices and solutions during the pandemic to help medical systems cope with the high volume of patients. Telehealth solutions remain in high demand, as do IoT solutions that are capable of monitoring changes in patient medical data as part of preventive medical treatments and otherwise delivering more efficient patient care.

Smart cities continue to look to IoT to increase public safety and assist with various public operations, including first responders and traffic equipment. However, smart cities increasingly need an overarching main IoT platform to better manage all the IoT sensor and camera deployments, which will help improve the real-time data analysis.

The Commercial IoT Market Landscape delivers overall market and top vertical insights, including identifying key use cases as well as trends in technology and buyer behavior. The landscape also captures the top public deals within those verticals and the lead vendors associated with them.

Commercial IoT market continues to grow during pandemic as demand for automation and security increases

Commercial IoT market continues to grow during pandemic as demand for automation and security increases

3Q20 vertical takeaways

Global organizations are battling supply chain issues due to COVID-19. IoT will continue to play a role in enhancing supply chains to help increase long-term resilience in the event of future pandemics or other disruptions. Automation in manufacturing and other verticals continues to be a major trend. Although some companies may have previously been reluctant to use robots due to concerns over the threat to people’s jobs, the pandemic has required businesses to find ways to maintain supply chains and productivity with less human interaction.

The healthcare vertical will continue to rapidly adopt IoT devices and solutions during the pandemic to help medical systems cope with the high volume of patients. Telehealth solutions remain in high demand, as do IoT solutions that are capable of monitoring changes in patient medical data as part of preventive medical treatments and otherwise delivering more efficient patient care.

Smart cities continue to look to IoT to increase public safety and assist with various public operations, including first responders and traffic equipment. However, smart cities increasingly need an overarching main IoT platform to better manage all the IoT sensor and camera deployments, which will help improve the real-time data analysis.

The Commercial IoT Market Landscape delivers overall market and top vertical insights, including identifying key use cases as well as trends in technology and buyer behavior. The landscape also captures the top public deals within those verticals and the lead vendors associated with them.

Intelligent supply chain and ports: Atos on the present and future of digital transformation in port operations

Applying emerging technologies to supply chains  

In a wide-ranging discussion, Atos Technology and Innovation Lead Erwin Dijkstra and his colleague Bas Stroeken, Scrum Master & Pre-sales Consultant – Intelligent Supply Chain, shared a few key insights into their company’s strategy on integrating emerging technologies, such as AI, blockchain and IoT, into maritime port ecosystems, highlighting Atos’ current clients and use cases. Noting that Atos’ client base includes airports as well as traditional supply chain solutions buyers (such as manufacturers), Dijkstra and Stroeken described Atos’ differentiation as its ability to integrate across an entire enterprise and ecosystem, optimize around delivery times, and build a platform for intelligent supply chain management, which Atos then manages as a service to the client. A critical factor for Atos’ clients, according to Dijkstra and Stroeken, has been the company’s in-depth examination of actors and roles within an enterprise and how those actors will engage with the platform. Various roles require different information and options in the event of an out-of-plan event, making the ideal platform more than simply a collection of data points and alerts. As Stroeken explained, real-time insights are meaningless if everything is going according to plan (think Homer Simpson working at the nuclear power plant — all good, until it is not). When something deviates from expectations, multiple actors need to be alerted, informed and given options for remediation. With multiple actors involved, real-time information becomes critical as one person’s decision nearly always impacts options or needed actions for others in the ecosystem.

Bringing the discussion back to the broader enterprise level, Stroeken made two observations that resonated with TBR. First, professionals tasked with managing supply chains within many enterprises are not deeply experienced in AI, which necessitates Atos acting as the bridge between the technology and the humans who need to understand it, deploy it and benefit from it. Second, as Stroeken said, “Collaboration begins with the proper sharing of data,” which may be a perfect mantra for digital transformation and emerging technologies.

Atos provided two additional use cases, both tied to port operations, specifically customs, an area in which Atos has expertise. In the first, natural language processing and AI contribute to understanding the text in customs forms, improving and expediting the classification process. In more colorful terms, Dijkstra explained how a drone could be classified as a toy, a military use item, or a camera, all with different tax implications, creating a need for assistance among customs agents to get the classifications correct. In a second use case, Atos helps cargo screeners operate more efficiently and with fewer random checks by scanning containers with X-ray machines and using AI to match the images to the manifests. In both cases, Atos operates as the integrator, bringing together various emerging technologies and providing the platform for clients’ continued operations.

TBR and Atos also discussed blockchain as a tool across the maritime shipping and supply chain ecosystems. While the well-known benefits of increased transparency and a more level playing field appeal to enterprises across the shipping world, including manufacturers, ports and shipping operators, Atos’ role primarily comes through facilitating adoption and overcoming the human barriers, such as lack of trust in the technology and uncertainty around data-sharing (see the collaboration mantra above). In TBR’s view, blockchain solutions apply more readily to supply chain than nearly any other use case outside of bitcoin. Atos’ approach — which assumes the technology has been proved secure and reliable, but the humans need coaching — reflects what TBR believes will be the long-term reality for blockchain.

We continue to be intrigued by ports as test beds for emerging technologies and as starter kits for large-scale smart cities. Following a presentation on IoT by Dijkstra, TBR analysts discussed intelligent supply chain solutions, ports and emerging technologies with Dijkstra and Stroeken, including details about Atos’ use cases and current offerings. The following reflects that discussion as well as TBR’s analysis of the consulting and IT services opportunities around emerging technologies, including insights from TBR’s Digital Transformation portfolio and Management Consulting Benchmark.

Atos is pivoting to industry and leading with technology

Atos emphasizes 7 digital breakthroughs to support its expansion in the mid term  

Atos (Nasdaq: ATOS) is an expert at establishing short- and long-term strategies and not only strictly following and executing its plans but also providing checkpoints and information around milestones and financial achievements related to these strategies. During the Atos 2020 Analyst Day, the company announced seven areas of expansion across its six industry segments in the mid term. The areas are organized around three needs that clients expect to fulfill as they continue with their digitalization:

  • Value — deliver outcome-based services around full-stack cloud, business-critical applications and digital platforms
  • Experience — deliver innovative and flexible services around customer experience (CX) and employee experience
  • Safety — deliver services around security and decarbonization

Atos’ goal is to grow revenue between 5% and 7% year-to-year in constant currency in the mid term and to collectively generate 65% of total revenues from digital, cloud, security and decarbonization solutions, up from 40% in 2019. While digital, cloud and security have been among Atos’ revenue growth levers for the past several years, decarbonization is a new lever that Atos will use to support revenue growth by providing it externally and benefiting from a first-mover approach in the segment, and to improve profitability by expanding its carbon footprint internally. 

Atos 2020 Analyst Day: Atos’ ambition is to be the leader in secure and decarbonized digital. The company will achieve its goal by approaching customers with its technology DNA and a new industry-aligned organization and by targeting seven digital breakthrough segments that address three client needs: value, experience and safety. The global COVID-19 pandemic did not stop Atos from organizing its annual industry analyst day. While the event was held online due to country lockdowns, travel bans and social distancing requirements, the virtual event very much resembled the ones Atos organized in physical locations in past years. Over two days and with a rich agenda of plenary and breakout sessions, a client panel, and virtual one-on-one meetings with Atos’ executives, the company connected with the industry analyst community and shared details on its strategic plans and financial performance expectations in the mid term, or during the next four to five years.

The COVID-19 pandemic is causing a dramatic slowdown in the implementation of IoT

The COVID-19 pandemic is causing a dramatic slowdown in the implementation of IoT

Key takeaways

The COVID-19 pandemic is causing a dramatic slowdown in the implementation of IoT. TBR believes the consequent recession will be deep and long and will inhibit the growth of IT generally and IoT specifically. The current slowdown and ensuing slow recovery come on top of slower-than-expected growth of IoT in 2019, resulting in a dramatically lower estimate of IoT-related revenue.

The current crisis is slowing or stopping IoT implementation because of both tightly constrained budgets and restricted access to physical plants. Access will improve over the next four quarters, but budget constraints will continue for at least two years, as global economic growth will be limited by long-term negative effects on verticals such as travel, hospitality, retail and the public sector. IoT deployment in verticals such as healthcare and logistics will benefit from the crisis as organizations adapt to changed circumstances. Organizations will embrace digital transformation more quickly and thoroughly to become more resilient but will operate with reduced resources.

The slower growth prior to the crisis was caused by the increasing preponderance of smaller-scale IoT projects, often implemented within operational technology organizations, as fewer organizations adopted IoT for strategic change than expected. At the same time, lower prices for hardware and increasing use of automation have facilitated IoT project growth but hindered revenue growth.

TBR’s Commercial IoT Market Forecast includes current-year market sizing and a five-year market forecast for multiple commercial IoT market segments and geographies. This research projects growth by technology and vertical, enabling vendors to identify revenue opportunities that most closely align with their go-to-market strategies. The report also provides a view of growth drivers and the ways in which commercial IoT trends will influence the market.

IBM Think Digital 2020: Making the case for better together

IBM places hybrid cloud at the center of its digital transformation strategy from both a product and a services perspective

At both the IBM and Red Hat sessions, there was no shortage of content that placed hybrid cloud at the center of digital transformation. Through various keynotes and sessions, IBM’s architectural approach, which places Red Hat as the foundational layer for future innovations, came to the forefront. A key example is the IBM Cloud Paks, which are to IBM Services what Red Hat products are to open-source projects. Cloud Paks provide functionality as a service, making it easy for customers to deploy the middleware functionalities that support solutions and applications. The combination of the advantages of cloud computing with IBM’s trusted ability to manage, update and certify solutions for regulatory compliance enable significant improvements in ability and flexibility. It is an emulation of the Red Hat playbook, albeit with far-reaching implications to the Global Technology Services business.

At the event IBM unveiled the IBM Cloud Pak for Data 3.0, which leverages OpenShift 4.3 to deliver new analytics and data management services. Further, IBM’s Partner Packages is a new incentive program for partners that successfully sell the solutions, underscoring IBM’s desire to facilitate customers’ cloud migrations by combining the expertise of services partners with the flexibility of the Cloud Paks.

However, the hybrid cloud model is anything but confined, and Whitehurst noted that edge devices must essentially operate as little clouds and require the same orchestration and interoperability standards. Edge implications address both the telco and enterprise spaces. Network virtualizations seemingly merge IT and cellular technology (CT) through virtualizing those functions to run on the same common platforms supported by OpenShift. Vodafone Business made the case that it leap-frogged competition in India by building a modern architecture that enabled the company to run IT and CT from the same cloud, delivering better consumer service for voice and extending IBM into the adjacent market of hosting enterprise workloads from the same instance.

IBM Think Digital 2020 made the case that IBM and Red Hat are better together — better together in mixed infrastructure, better together in cloud and AI, and better together in IBM’s and Red Hat’s ways of working. Lastly, IBM and Red Hat are better together with Arvind Krishna as IBM’s CEO and Jim Whitehurst as IBM’s president, as the former can assure customers of the IBM offering road map built on Red Hat’s engine while the latter can instill the operational best practices for managing people, processes and financial metrics for a technology world built increasingly on open platforms and recurring revenue subscription models.

Total commercial IoT market revenue is expected to grow from $385B in 2019 to $687B in 2025, a CAGR of 10.1%

Cloud services and IT services are fastest-growing component segments

Cloud services will continue to be the fastest-growing segment of the IoT market despite inroads from edge and hybrid architectures. IT services, primarily design and implementation services, is also a strong segment, playing a role in both custom solutions and in integration and deployment of packaged and bundled solutions. While budgetary constraints stemming from the COVID-19 pandemic will slow overall IoT growth, cloud-based solutions are often easier to implement and more resilient. They also facilitate remote and distributed development. New wireless communications technologies, including 5G and Narrowband IoT, contribute to IoT growth, lowering costs and making new solutions feasible. Wireless technology enables mobile and distributed solutions, which will be helpful as public and private organizations leverage IoT to meet new requirements.

TBR’s Commercial IoT Market Forecast includes current-year market sizing and a five-year market forecast for multiple commercial IoT market segments and geographies. This research projects growth by technology and vertical, enabling vendors to identify revenue opportunities that most closely align with their go-to-market strategies. The report also provides a view of growth drivers and the ways in which commercial IoT trends will influence the market.