The Global Covid-19 pandemic is of course affecting all aspects of life and work; Andrew Parkin-White spoke to Martin Garner, COO of CCS Insight, about how it will impact the enterprise IoT space, finding that it will have a significant short to medium term impact but will likely make a progressive recovery.

Just a few weeks ago, I was presenting with confidence that the IoT market would see significant growth over the next five years. The GSMA estimates of 25bn global connections by 2025 seemed highly plausible. Suddenly, we then started to see the massive impact of Covid-19 on business confidence and investment and an alternative reality began to emerge quickly. Naturally, we all have our own thinking on the probable scenarios and I was fortunate to have a robust discussion with Martin Garner, COO of market analyst firm CCS Insight, to explore the evolution of business IoT.

We began by exploring how business IoT had been evolving over recent years. Martin sees that business IoT applications have moved from a somewhat frustrating period of proof of concept to the point where it had begun to exhibit strong growth rates of between 8% and 20% per year steadily during the past eight quarters. Enterprises were seeing the value of IoT applications and had a clear focus on adoption. There was tremendous potential in the market.

Martin Garner, COO of market analyst firm CCS Insight

The initial impact of Covid-19 had major effects on business IoT very rapidly. Martin first turned his attention to the macroeconomic environment with governments supporting businesses and workers through supportive cash injections. He points out that many sectors have slammed the brakes on while the virus is brought under control which has affected many promising IoT applications in airlines, retail, manufacturing and supply chain.

Although we could expect that that the primary impact may be short-lived and that some form of normality will resume in the final quarters of 2020, Martin still considers that there is considerable uncertainty in the absence of a vaccine or antibody test. He believes that the short term hit on the business IoT market will be severe with enterprises halting activity and investment. His view is that economies across the globe will be in recession but the depth and severity are not yet quantified. Simply put, the patterns of business investment and consumer expenditure are to be determined. What is clearer is that the focus will be on business continuity, rightsizing and on generating cash.

Clearly, the pandemic having a severe impact on some industries will actually benefit others. Martin points out that supermarkets and pharmaceutical companies could well develop a stronger position as demand increases for their offerings. Similarly, logistics companies delivering online shopping orders have seen short term increase in the level of demand. He thinks this demand may well soften as the pandemic eases but we could see profound effects on consumer behaviour, particularly if the retail sector suffers significantly as a result. The movement of goods around the world to match demand will clearly lead to opportunities in logistics and supply chain management.

There is currently little clarity on the detail of a recovery but anticipate that it will be slow and frustrating. Companies could see a new set of conditions emerging that are ripe for digital transformation and some will use IoT as a disruptor..

So how will business IoT emerge in the medium term? Martin considers that as economies begin to re-energise, he would envisage seeing a range of IoT use cases coming to the fore. He points to predictive maintenance, already a highly significant application, that is set to increase in importance as machinery will continue to fail and production lines stop impacting the supply of consumer durables and spare parts. In this example, maintenance efficiencies are clearly highly important.

He believes that there is currently little clarity on the detail of a recovery but anticipates that it will be slow and frustrating. Companies could see a new set of conditions emerging that are ripe for digital transformation and some will use IoT as a disruptor, while others that have already invested in IoT will understand its value and increase use of it, particularly in mission-critical applications.

The statement above applies to two contrasting sides of IoT adoption and Martin states that many businesses affected by the pandemic will be more cautious in their approach. Capital expenditure will take some time to restart and enterprises will sweat their existing assets rather than in investing in new IoT applications. He points out that government-funded applications like smart cities may struggle to find investment in times of unprecedented state spending on protecting businesses and citizens. Of course, there will be other enterprises who clearly see the benefits of IoT and will be willing to invest.

We then explored how the supply side will be affected by these changes in conditions. Martin expects that a range of factors will come into play. Larger players with stronger balance sheets will have a distinct advantage as will those who can leverage a wider partner ecosystem. Consolidation is very probably given the large number of IoT businesses that have emerged over the past couple of years. He sees that ease of purchase and integration of IoT applications will be key and businesses will succeed by improving their marketing and communications, particularly towards enterprises that find the IoT ecosystem somewhat challenging.

Naturally, it is early days to provide a definitive assessment of business conditions, behaviour and uptake. Martin concludes by pointing out that IoT may well demonstrate to businesses that it enables them to operate in a more efficient and flexible way and this would represent a catalyst to further investment, once there is stability in finances.

Andrew Parkin-White

MEF Advisor  

  

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