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Maturing offerings, vendors and customers prompt long-term IoT vendor growth

The continued interweaving of the technology component market with Internet of Things (IoT) techniques delivers a well-defined path to long-term sustained growth for many IT and operational technology (OT) vendors, especially those vendors that are best able to differentiate their portfolio and position themselves as critical partners for a wide set of IoT solutions.

The hype surrounding IoT has only served to confuse and overwhelm customers and vendors, but efforts by both parties to cut through the hype is driving the growth of installed IoT solutions. As the hype fades, vendors are better able to rationalize their go-to-market strategies and messaging, particularly around how to assemble IoT solutions, leading customers to better understand how to apply IoT.

However, while it is becoming easier to assemble an IoT solution, it is still challenging to design and implement the IoT technique. We don’t expect a huge explosion of revenue; IoT itself isn’t a “killer app,” but it will enable moderate and slowly accelerating revenue growth for the various components involved in an IoT solution.

In our 3Q18 reports and thought leadership, TBR will focus on three topics that we believe are currently the most impactful on the wider IoT ecosystem: the increasing maturity of the IoT technique, the growing consolidation of generic platforms, and how increasing commoditization around IoT is working in favor of economies of scale and enabling the growth of installed solutions.

IoT is growing up: Increased ecosystem maturity will lead to increased customer adoption

TBR, through discussions with vendors and customers as well as our use case databasing, is noticing growth in installed IoT solutions, whether from net-new deployments or expansions of existing IoT deployments, signaling improved maturity. IoT maturation is not so much about the components of IoT as it is about businesses developing their ability to leverage technologies and techniques that are increasingly applicable to a growing number of business problems.

A major driver of this maturity is greater clarity around IoT techniques, led largely by go-to-market realignment and improved messaging by vendors, organization around IoT by customers, shifts from competition to coopetition by vendors, and general improvements in the construction of the technology that facilitate advanced usage of the IoT technique.

Canonical’s growth play: Make customers’ and partners’ lives easier (and more economical)

TBR perspective

At Canonical’s 2018 Analyst Day, CEO Mark Shuttleworth laid out a very compelling construct for Canonical’s vision of being the link between the operating system (OS) layer and the cloud control planes. Canonical has Ubuntu OS versions to run from the largest high-performance computers with NVIDIA graphics processing units to the smallest device OSes at the heart of offers from niche vendors such as Rigado. Throughout the event, Canonical stressed multicloud interoperability through Kubernetes. The big unknown on the horizon is how to provision infrastructure for edge analytics, which sits at the heart of the strategic relationship Canonical has with Google Cloud as Google donates Borg to ensure Kubernetes does not challenge Borg the way Hadoop forked from MapReduce.

Existing virtualization economics has stalled, with premium pricing models emerging from the major and better-established competitors Red Hat (NYSE: RHT) and VMware (NYSE: VMW). The Canonical play further compresses the economics of the infrastructure abstraction and OS components, where parts will be provided for free and the services and update provisions will become the basis for the monetization model. Akin to how free Android disaggregated the device OS space and gained share against Microsoft, Canonical bets on market projections showing devices used/owned per person growing from two to three devices today to as many as 20 devices within the next five years.

It is from this vantage point that one open-source Linux distro, Canonical’s Ubuntu, was taking direct competitive aim at another (Red Hat), while likewise suggesting VMware’s time as the market maker would quickly start to fade as more and more app modernization efforts move code from virtual machines (VMs) into lightweight Kubernetes containers (clusters).

 

Canonical hosted its 2018 Analyst Day in New York City on Sept. 20, 2018. The event featured presentations from the top leadership at Canonical, including Shuttleworth, Finance Director Seb Butter, SVP of Global Data Centre Sales Jeff Lattomus, and VP of Global Sales, IoT & Devices Tom Canning. Canonical focused on business and go-to-market updates as well as key presentations by partners, such as Paul Nash from Google Cloud, outlining how Canonical has accelerated or added value to their businesses. At this year’s event, there was a noticeable blurring of the lines between cloud and IoT discussions in comparison to years past where there were more definitive tracks. Regarding both Canonical’s own strategy and its conversations with customers, it is exceedingly difficult to have a discussion about one and not the other, which is reflected in the broader IT landscape as of late.