Vdc Io T Service

IoT executives implementing service-based business models

Dec. 15, 2017

Natick, MA. The market for IoT services will grow at a rapid compound annual growth rate (CAGR) of 28.8% through 2021 as businesses continue to shift products towards the network-based, as-a-service business model. These findings are outlined in a VDC Research study entitled The Global Market for IoT Services, which includes quantitative and qualitative analyses, discussions of major market dynamics, insights into vendor strategy, and end-user trends.

The IoT services market is unique in that it is not only one of the fastest growing markets under study within the IoT & Embedded Technologies group at VDC, but also one of the largest due to revenue generation from the rapidly accumulating installed base of IoT devices, rather than just yearly unit shipments. Every connected system adds to the potential pool of devices that can use or consume IoT services over the useful life of the system.

“The IoT Services market is unique—rapidly growing due to revenue generation from the accumulating installed base of IoT devices, rather than just yearly unit shipments,” said Roy Murdock, IoT and embedded-technology analyst at VDC Research

Licensing schemes and control of the licensed software functionality separate IoT services from IoT software and hardware. Commercial hardware and software are sold outright, on a royalty/per-device basis, or licensed for use over set increments of time. Traditional products generally do not depend on a network for their resources or functionality to be consumed, and are often controlled and managed by the customer directly once purchased from the vendor. IoT services, on the other hand, are typically metered and billed in granular increments and controlled by the service provider.

IoT services are central to many organizations’ decisions to invest in IoT capabilities. As illustrated in the accompanying figure, “Finding new strategic opportunities or service-oriented business models” was top of mind among engineering managers surveyed by VDC. The usual factors—price, competition, and time-to-market—have taken a back seat in recent years, as managers look to transform products and businesses at a higher level through service-oriented business models.

“Unsurprisingly, the vertical markets with the highest installed bases of heavy machinery, such as the automotive, hospital medical device, and industrial automation markets, will also see robust IoT services growth through 2021,” said Murdock. “The ROI on services for these heavy assets is attracting much-warranted attention from IoT services customers—the OEMs and equipment providers of the world.”

Click here for more information on this research.

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