A recent report from ABI Research, a market-foresight advisory firm providing strategic guidance on the most compelling transformative technologies, comprehensively defines the growth dynamics in IoT service revenues. Internet of Things (IoT) connections are supported by services and software platforms that reside in distinct segments of the IoT solution value chain: data and analytics management, device and applications management, network management (including connectivity and subscription management), and security platforms. Revenue generated from the sale of services and platform licensing is augmented by professional services and IoT data plans, to constitute total IoT service revenues. This is money that is paid by enterprises and municipalities to the software vendors and service providers that enable IoT connectivity. It is the supply-side of the IoT service opportunity.
Jamie Moss, Research Director for M2M, IoT, and IoE at ABI Research, describes the lay of the land, “The earliest software services developed specifically for M2M were connectivity management platforms, which we consider as part of network services. It is a market segment well-known to have been led by Cisco Jasper and Ericsson. But its value was always eclipsed by the professional services (custom solutions development and systems integration) aspect of IoT service rollout. Yet, as new software services and end-to-end solutions have grown in importance, professional services’ market share has been falling. The first such up-and-comer services segment challenging professional services was application development and management platforms, a popular commercially-available example being PTC Thingworx.”
At the end of 2018, IoT service revenues will total over US$110 billion worldwide. This figure will increase fourfold by 2026, to an annual total of more than US$460 billion. Connectivity revenues, i.e., IoT ‘tariff plans’, will constitute a modest portion of overall service revenues in 2018 with a 13% market share, this being a long-established trend. Meanwhile, the most valuable elements of the current service revenue mix will be device and application platform services, as well as professional service fees, constituting 65% of total services revenues. However, the future of IoT service revenues belongs to an even newer entrant, in the form of data and analytics.
Critical in the evolution of M2M into the IoT, the rise of data and analytics services and the revenue they generate represents a crucial transition from the initial and principal concern of enterprises and municipalities having been the tactical real-time status and control of connected devices, to their new goal being the strategic intent of creating informed business decisions based on the accumulation of data lakes and mid-to-long-term trend analysis. Consequently, by 2026, data and analytics services will account for 28% of all IoT service revenues and will be second only in value to the perpetually-important device and application development services segment.
Moss looks to the future by concluding, “IoT service revenues are a portion of the IoT opportunity. It does not include the cost of device hardware, nor does it represent the enterprise IoT return on investment. The latter is, of course, the ultimate focus for the market and represents the economic value of the transformation of the underlying fabric of society through intelligent connectivity. Enabling technologies, hardware, and software alike, need to be affordable to be applicable to as many uses as possible. This means that it is the scale of deployment that vendors must rely upon, and perhaps in the future, the proven value those technologies generate for customers will define their income.”
These findings are from ABI Research’s IoT Market Tracker – Worldwide market data report. This report is part of the company’s M2M, IoT and IoE research service, which includes research, data, and Executive Foresights. Market Data spreadsheets are composed of deep data, market share analysis, and highly segmented, service-specific forecasts to provide detailed insight where opportunities lie.