3 ways companies are investing hundreds of billions in IoT

Research by IDC suggests that “US organizations will invest more than $232 billion in Internet of Things hardware, software, services, and connectivity this year, [and] US IoT revenues will experience a compound annual growth rate of 16.1 percent over the 2015-2019 forecast period, reaching more than $357 billion in 2019. Furthermore, Business Insider predicts that “there will be 34 billion devices connected to the internet by 2020, up from 10 billion in 2015. IoT devices will account for 24 billion, while traditional computing devices (e.g. smartphones, tablets, smartwatches, etc.) will comprise 10 billion.”Given the stakes, corporate giants are racing to dominate the IoT landscape, thereby changing it at the same time. Here’s what all of this means for the IoT industry.

More IoT acquisitions and more data centers

Cisco recently announced that it would be paying $3.7 billion for software maker AppDynamics and integrating it into their IoT and Applications Unit.“We acquired AppDynamics because they are a market leader in a category that will be a cornerstone for how enterprises drive their business forward,” says Rowan Trollope, Senior Vice President, and General Manager, Internet of Things (IoT) and Applications, Cisco. “Together, AppDynamics and Cisco will be the only company that can deliver complete visibility spanning from the infrastructure to application to end user.” This acquisition comes after Cisco purchased Jasper Technologies, a startup that helps companies launch, scale, and monetize IoT services, for a whopping $1.4 billion in 2016. As explained in the press release, “Acquisitions and investments remain a key part of Cisco’s build, buy, partner, and integrate strategy. IoT is a critical component of Cisco’s priorities and imperative to the company’s overall strategy to be the number one IT company.”But Cisco isn’t the only corporate player in the IoT space. Seven other corporations with market capitalizations over $150 billion are hoping to prove themselves trusted partners for IoT solutions: Google, Microsoft, Amazon, General Electric, AT&T, Verizon, and IBM.As the amount of data generated by IoT continues to skyrocket, corporate powerhouses are launching more data centers: Oracle spent $1 billion on setting up data centers in fiscal 2Q17, IBM recently announced plans to build four new cloud data centers in the UK, and Google alone invested $10 billion in its cloud operations in 2015.

Beyond the proof-of-concept phase

One of the biggest hurdles when building connected hardware is getting from proof-of-concept to large-scale production. Microsoft is looking to bridge this gap through labs that invite companies to partner with IoT experts and work on complex internet-connected hardware together.“Imagine if you had someone who cared about you were doing, and really was invested in your acceleration,” says Cyra Richardson, Senior Director of IoT Business Development at Microsoft. “And imagine if they were right there in front of you.”Here’s how it works: Companies are accepted into one of three Microsoft Internet of Things and Artificial Intelligence (IoT/AI) Insider Labs with their current hardware, get paired with mentors who are experts in their field, and gain access to Microsoft’s machinery (like full-color 3D printers) to test out numerous hardware designs. The time commitment for both parties? Only an intense two or three weeks of work.“[It’s saved us] tens of thousands of dollars – which for a startup is a lot of money,” says Andrew Lowe, co-founder of PiCo, a startup in the program. “I’d suggest the two weeks we were in the lab was the equivalent of about six months of product development time for us.”The third lab, which Microsoft is opening in Munich, Germany joins the others in Shenzhen, China, and Redmond, Washington.

Emphasis on cybersecurity

Security is arguably the number one priority for the IoT industry. As explained by Wired, IoT cybersecurity is still stuck in 20th-century practices, making the growing market a tempting target for motivated hackers. 2017 has been a year in which IoT has taken center stage. Major breaches across sectors illuminate the need for security to move from peripheral to core business objectives. According to Cybersecurity Ventures’ 4Q16 report, global spending on cybersecurity services will exceed $1 trillion over the next five years, with the overall space growing at a CAGR of 9.8 percent from $106.3 billion in 2015 to $170.2 billion by 2020.

The bottom line

For the Internet of Things, the future will be driven by innovation, corporate resources to help IoT startups go beyond the proof-of-concept phase, and a continued emphasis on cybersecurity. As corporate giants like Cisco, Microsoft, and IBM continue to fight over land in the IoT landscape, historians have begun to call the Internet of Things the next Industrial Revolution. At Hologram, we call it something simpler: the future — and if you're looking to join this phase of innovation, we're here to help. Start with a free IoT SIM and get connected today.