The ECIA’s Annual Executive Conference did a terrific job of staying true to its theme: Living Connected. The assembly of high-tech business executives walked away with a lot of food for thought and some actionable items regarding the Internet of Things (IoT) and the connected world in general. I’m sure most of the attendees already know the business opportunities the IoT represents, but scanning analysts’ reports and seeing a series of demos back-to-back are different.
To re-use an already over-used one-word summary of future business opportunities, the word is: Sensors. (If you are too young to understand this reference, do me a favor: Stop reading now. Go to your streaming-media source of choice and watch "The Graduate." In turn, I’ll discuss “living connected” as if I think it is a good idea.)
For the electronics industry, it is. The electronics content of anything that already contains components continues to rise. With the IoT, increasingly small and powerful sensors will be used in even the most implausible places. Just a few, according to Dr. Janusz Bryzek, chairman and CEO, TSensors Summit, are: clothing, jewelry, shoes, diapers, toys, basketballs, tennis racquets and toilets. These aren’t just novelty items: they measure something and transmit those measurements to something else that helps make sense of them. The forecast for the mobile sensor market between 2007 and 2014 is growth by $11 billion from $2 billion to $13 billion, Bryzek said.
Although the coolest IoT applications are consumer-driven, the industrial market well benefit as well, according to Dale Ford, vice president, IHS Technology. Major segments include:
- Building Automation
- Commercial Transportation
- EFT-POS & Smartcards
- Industrial Automation
- Power & Energy
- Test & Measurement
- Other Industrial & Commercial
Overall, growth in the industrial sector is predicted to be strong, Ford said:
“This should not be construed as a prediction that manufacturing or commerce is going to grow at a substantial rate. On the contrary, manufacturing and commerce are predicted to be slow and steady globally. However, a trend to seek efficiency in manufacturing and commerce is driving demand for more intelligent strategies which is in turn driving a trend toward connected devices growth.
“Part of the strategy for more efficient manufacturing and commerce includes demands for remote communications, monitoring and control.
“This trend is related to the growth of integrated intelligence, sensor networks, asset tracking, internet connectivity, M2M communications, and energy measurement & management, which in turn is driving growth in IP connectivity for this sector.
The need for compatibility between manufacturing and corporate (office) networks has also contributed to market growth. Companies may wish to unify their entire company network from factory to office level. This reduces the cost to a company of both installation and maintenance.”
There are a few things that could disrupt this rosy forecast including the global economy, business models, the regulatory environment and security. Ford said companies may face an uphill battle in terms of convincing customers that the cost of the connected world – roughly $200-$500 per automobile for OEMs—is worth it. Outside of components and hardware, businesses will be selling services to the connected world, adding costs to the equation. Health-related equipment, several presenters said, will require approval from bodies such as the Food and Drug Administration in the U.S.
A couple of offshoots of the connected world are new business models such as LinkedIn and Kickstarter. LinkedIn makes a compelling case for the value of professional networking. Kickstarter allows inventors to pitch their developments online and receive funding from individuals and organizations. Unlike the venture capital model, Kickstarter does not offer shares or equity in start-up companies; investors benefit in other ways.
Distributors and component manufacturers – the bulk of the attendees at ECIA—will certainly benefit from the proliferation of connected things. Internally, the supply chain has a few challenges, according to Dr. Barry Lawrence of Texas A&M University. For example, research indicates that new customers are less likely to buy from a vendor than an existing customer will. Businesses will grow more if they are able to penetrate existing customers more deeply. Businesses are also expanding service offerings to attract customers, but pricing those services continues to be a challenge. Finally – and this was a surprise -- the supply chain’s salesforce is perceived as not as technically-astute as many believe. “[The industry] is still not investing in people,” Lawrence said.
Perhaps the most worrisome thing about the IoT is the potential for hacking. Any interface--a connection between two devices -- is vulnerable, Joe Grand, president of the Grand Idea Studio, told the audience. Medical devices are as vulnerable as anything else. And many hackers aren’t practicing black magic—they are using off-the-shelf technology, Grand said.
In summary: In many regards, the challenges of the IoT are the same as anything else: reaching customers, convincing them the technology has merit, and making sure the salesforce is well equipped to carry that message. Security can be addressed by hardware, Grand said, but in many cases it will be up to service providers to reassure customers their communications are safe.
On the upside, demand for electronics will continue to grow. There are new business models to take advantage of such as LinkedIn and Kickstarter. A new wave of buyers – the Millennials—will be making many of the purchasing decisions going forward. So maybe it won’t be that hard to convince customers that connected undergarments are a really good idea.