Towards better IoT market forecasting

Every new technology that receives a lot of attention ends up being subjected to exaggerated claims of its growth potential. Such is the case for Internet of Things, or IoT. Beecham Research’s press release last week on this has been well-received among some of the more established market players. It is felt that a correction in market expectations for IoT is needed – a return to reality.

It is easy enough to create an over-optimistic forecast – much more difficult to create one that stands the test of time for accuracy. Yet that is what companies planning their future in this market need – the best assessment they can get of expected market outcomes several years ahead. So what is best?

Put bluntly, forecasters do need to be held to account for the accuracy of their predictions. Beecham Research has been forecasting this market for 15 years and sometimes, but by no means always, we do call it right. As part of a regular exercise, we recently looked at our forecasts produced in 2011 for 2014 – three years out. Now we are in 2015, we can look at 2014 and see what actually happened. It turns out our overall market forecast for hardware shipments in 2011 for 2014 was particularly accurate – within 3% of the actual outcome in 2014. If it had been less so, we would have investigated why.

In a fast-moving market like IoT it is not always possible to be that accurate. Technology alternatives are developing quickly and – to be useful – the assessment needs to provide clarity on which alternatives are most likely to succeed, and by how much. That is what the market needs to know, but the sentiment towards different alternatives can shift quite radically in a small space of time – with some possibly gaining momentum at the expense of others. Such may be the case in the current LPWAN (Low Power, Wide Area Network) market right now.

There is also a marked difference in market dynamics between so-called B2B (business to business) and B2C (business to consumer) products and services. In general terms, B2B market growth for IoT (Enterprise IoT) can only be as fast as enterprises are able to assimilate the solutions into their operations. Such projects tend to be lengthy and proceed in several stages, from early pilots through to limited implementation, then more widespread use throughout the enterprise. That process means that per annum growth in the 50% plus range is generally completely unrealistic. On the other hand, B2C growth may be more dramatic – so long as the products on offer quickly capture the imagination of the consumer.

Adding to these differences, individual IoT applications may be categorised as After Market, Regulatory or OEM/Line Fit. Each of these categories has dramatically different market dynamics and growth rates. After-Market and especially Regulatory grow quickly in their early phases before tailing off, while OEM/Line Fit is the opposite. A further treatment is required for the development of sensor populations, for example related to Smart City solutions.

The IoT market is amazingly diverse, which is a key reason why it is so fascinating. There are literally hundreds of different applications – we recognise nearly 500 – and the growth prospects for each is different. It is a hugely promising market in revenue terms, where we should think in terms of millions of dollars, and in some cases billions, but not trillions of dollars please.

Article by Robin Duke-Woolley, the chief executive of Beecham Research