I heard a story from an IoT software platform vendor recently about this year’s IFA consumer electronics show in Berlin.
At the show, an IBM guy walks up to him and says, hey Bob, did you know there are 163 IoT platforms now. Wow, that’s a lot.
Later in the day, an IHS analyst says to him, hey Bob, there are over 200 IoT platforms. Man, the number grew by dinner.
Bob gets home and thinks, wow, it’s getting really competitive out there. 200 platforms. Later that week, he’s chatting with an investment banker and the topic arises. What does the banker say? Hey Bob, you know there are 300 IoT platform providers now.
Clearly the number of IoT software platforms appears to be growing by the hour. Just ask Bob.
So while the number probably isn’t growing by the day, it is growing. But why is this happening? Well, the simple answer is that a lot of entrepreneurs and investors believe there’s a lot of money to be made by networking the physical world. Everyone from IBM to two developers with a website are looking for business.
They believe that all of these connected devices, 50 billion if you ask Cisco, will need software and that the device makers are unequipped to write that software, manage back end cloud services, design hardware modules, build APIs, or handle mobile integration. After all, whether you’re Whirlpool or Staples, building out robust software platforms for connectivity isn’t your corporate DNA.
And the folks starting all these IoT platforms are largely right. The market opportunity is real and the pace of connectivity may encounter bumps as a lot of connectivity with little consumer ROI is introduced, but the long term trend is there. The question now is with so many platform providers wanting access to the market, how can they differentiate themselves. Or asked another way: So, Bob, when’s the consolidation gonna start happening? (My best guess is in around 18-36 months when all the venture capital has been spent and VCs are only interested in providing latter stage funding to the platforms showing the most traction.)
To answer the question about differentiation, the major factors for platform customers are price, time to market and security. Pricing wise, there’s obvious downward pressure and I’ve even heard that some platform providers might be trying to provide connectivity software free and attempting to monetize in other ways like through third party deals in industries like the utility sector.
Though I also think what’s happening is that the market is segmenting as certain premium brands gravitate towards the most robust and skilled platforms, which can still demand reasonable prices, while a lower market segment emerges that will provide basic connectivity for less expensive products that may not care about data, analytics, or to be honest, security.
Time to market also will remain critical as the whole reason OEMs go to platform providers is to get them to market as soon as possible. If they wanted it to take a long time, they could do it themselves. In market segments like smart locks, security will remain absolutely crucial and customers will pay for the best. That’ll be less true for products like wearables where the perceived security threat is lower. For platforms attempting to crack the security conscious markets, basic strategies like repeated third party audits will be standard operating procedure.
In reality, it remains very early days for the IoT platform market. We’re waiting to see how impactful a lot of outcomes from IoT will be. For example, how critical will connected product user data be for product designers in terms of iterating and making better products faster, or even through firmware updates? My belief is that in some scenarios, this will make a real difference. And if so, it will further drive connectivity due to accelerating the competitiveness that results from IoT.
The trick for the current class of platform providers is to make it through the next 2-4 years so when the consolidation begins and the dust settles, they’re there to provide platforms for that accelerating market.