Let me first address the headline; no, it is not. But in the last couple of weeks, on more than one occasion, I found myself in several discussions about the future of IoT. IoT’s future potential was questioned due to cutdowns. As you may know, Microsoft and Google are reducing their staff. Ericsson sold its IoT business to Aeris. Also, Bosch Device Management, SAP and IBM Watson have decided to cease IoT operations in 2023. Google closed its IoT platform. Microsoft laid off thousands of people (some working with Azure). Ericsson made a statement selling parts of its business. Three large companies that you trust. When they pull the plug, it is easy to make assumptions. In discussions, the question was raised: does IoT have a future when all these cutdowns are done?
IoT is needed for the transformation of society
Organisations need to develop to meet new business goals, efficiency, better control of resources and less travelling, for example. To develop and adjust to new demands, you need two things (to put it simply): data and mindset (to transform your organisation based on the data you collected). To get data, you need to collect it. You need the guts to transform based on data to change your organisation. To get data, you need IoT. IoT is an enabler of digitalisation. Digitalisation is an enabler of the development of organisations.
I hope this all makes sense. We need IoT to take control of the future so the world can be the best possible place. Then why do these three organisations look away from IoT? The first question is, are they?
Too many players in the cloud
Google will shut down Google Cloud IoT Core in the summertime of 2023. Microsoft has not made an announcement when it comes to IoT. We do not know if Microsoft is laying off IoT-related services; this was just an assumption my counterparts in discussions did make. However, if you look at an IoT ecosystem, you will identify a device, connectivity and an IoT platform if you draw a basic drawing of a regular IoT ecosystem. There seem to exist three platform companies per IoT hardware company. Competition amongst platform companies is fierce. This has allowed other companies, best-of-breed but smaller than these giants, to become even more specialised and to catch up with the offerings. As IoT is on its way up, yes it is, the prominent players will have more focus on other revenue streams focusing on where the money comes from right now. With fewer resources for developing IoT platforms, other players, often small to medium size companies, are growing their offerings and becoming more assertive.
Fragments but no nuggets
Ericssons move, then? Ericsson transferred the IoT Accelerator and Connected Vehicle Cloud businesses with related assets to Aeris Communications, at least that is the formal version. Ericsson states that they were losing close to USD100 million per annum on this business.
Ericsson will hold a minority stake in the new Aeris; rumours are that they paid Aeris to take over their business, but that is just rumours. Ericsson mentioned limited returns on its investment in the IoT market. They point out the market fragmentation, which has resulted in them only capturing bits and pieces and no big chunk. They found a few nuggets but no gold ore on their gold-digging streak.
What does this mean for IoT?
It opens opportunities for smaller companies. It is great that these players are backing out. We will not see the same companies dominate all verticals in the world. They leave room for other companies. The IoT market will continue growing. New technologies evolving will be an enabler, there is a need for digitalisation, and IoT is the enabler.
In many aspects, Ericsson’s decision reflects the challenges faced by the IoT industry. A lot of companies try to get a piece of the pie. But the IoT market is sometimes a long-term investment. These shakeouts are healthy. Fewer players will reach the goals faster if there are a sustainable number of players. Businesses also need to embrace IoT for what it is. An enabler to generate returns on investments. Returns in the form of a better environment, better health or increased profits. These business objectives must be met by a cohesive value chain that can deliver. We may see further consolidations or exits from the IoT market in 2023, but rest assured that IoT will continue to grow and get even stronger.