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Industry Developments and Models

IDC's Worldwide Internet of Things (IoT) Taxonomy, 2013


Carrie MacGillivray
Denise Lund
Scott Tiazkun

Vernon Turner
Monika Kumar

IDC OPINION
Autonomous communications between devices, or what has long been referred to as machine-tomachine (M2M) communications, and the value generated for ecosystem players, end-user
businesses, and consumers alike has evolved. It is now unduly narrow to think of M2M as reflective of
the burgeoning, full opportunity. Billions of things are increasingly managed by intelligent systems,
transmitting exabytes, zettabytes, and yottabytes of data. The role of wireless connectivity, platforms,
analytics, and applications are increasing, making way for a broader, emerging Internet of Things
(IoT). IDC is examining all of the piece parts that come together and are connected to make the
Internet of Things a realistic and viable vision of connectivity-driven value over time. In this study, IDC
presents a comprehensive and standardized view of the worldwide Internet of Things market. In more
detail:

IDC defines the Internet of Things (IoT) concept as a network connecting (either wired or
wireless) devices, or "things," that is characterized by autonomous provisioning, management,
and monitoring. The IoT is innately analytical and integrated.

Machine to machine is described as a network facilitating communications between either


wired or wireless devices that served as a precursor to, and now a subset of, the Internet of
Things.

Devices, or things, in the IoT are managed by intelligent systems, which are defined as
securely managed electronic systems that run a high-level operator system (HLOS) and
autonomously connect to the Internet, execute native or cloud-based applications, and
analyze data collected. Intelligent systems possess greater programmability and performance
than an individual thing, integral connectivity, and the potential to capture, analyze, and
forward data to/from other systems.

This taxonomy includes the five submarket segments that all work together and as such
comprise the IoT: devices (i.e., sensors, RFID-enabled things) managed by intelligent
systems, connectivity, platforms (device, network, and application enabled), analytics and
social business, and applications. Connectivity, within the IoT will drive revenue growth across
the ecosystem and benefit mobile operators, device vendors, technology suppliers, platform
vendors, application vendors, and systems integrators.

IoT opens up opportunities for traditional IT vendors to the consumer market. Providing B2B2C
services to connect and run homes and automobiles, for example, will leverage even more
opportunities to make use of networking capabilities.

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IN THIS STUDY
This study outlines IDC's current taxonomy for the Internet of Things market. It provides definitions for
all the components in this network devices (sensors/RFIDs/smartcards within and outside of
intelligent systems), connectivity, platforms (device, network, and application enabled), analytics, and
applications (including vertical use cases). It also describes the role that security and professional
services play in this market and highlights the relevance of vertical industries to the IoT. This study
also provides insights on the market drivers and use cases for IoT solutions.

SITUATION OVERVIEW
While many data points exist in the market in terms of how many devices can possibly be connected,
one thing is for certain we've only just recently passed the starting line of this emerging market
opportunity. Add to this the increasingly recognized and valuable role that wireless connectivity,
platforms, analytics, and applications together have in this system, and we've only just begun to
identify the value of the entirety of the Internet of Things.
Adoption of highly branded and increasingly available Internet of Things use cases in the consumer
market are clearly taking off. As the leading use cases, such as that of the original Amazon Kindle,
continue to drive interest, the IoT value to consumers and businesses will amplify. Each has played a
pivotal role in familiarizing the market with the opportunity for "connected" consumer electronics. New
applications of IoT in the consumer space are being seen in personal fitness (i.e., Fitbit a wireless
activity tracker device) and in connected cars.
B2B IoT adoption is clearly taking off as well. The nature of an enterprise's adoption of IoT is naturally
more methodical than consumers' adoption. As such, many industry verticals are on the cutting edge
of innovations with IoT a tremendous opportunity for ecosystem partnerships and innovations.
However, most businesses are still early in understanding the benefits and the business innovations
and efficiencies that IoT presents. Applications in the IoT realm are seemingly endless. "Track and
trace" applications were an initial hotspot in the transportation vertical however, that has morphed
into tracking not only location, but the tracking of high-value cargo/assets to ensure integrity of goods
in transit, such as food and biologics, and monitor tampering/security, for example. This application is
leading a transformation of this industry as new value-added services can be added to what was
traditionally a predominantly "track and trace" segment.
Other industry verticals at the forefront of the growth of the IoT market include retail, utilities,
transportation, healthcare, insurance, and manufacturing. These verticals are at varying stages of
sophistication when it comes to moving beyond the current capabilities of their IoT solution to collect
information via connected devices. Collectively, these verticals desire more and are on the cusp of
innovating and implementing IoT solutions that richly leverage analytics and social business tools to
create monetizable intelligent, automated solutions.

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Regardless of enterprise or consumer IoT solution, the double-edged sword remains for a foreseeable
future. The breadth and value of information that can be collected creates monetization opportunities
whereas privacy concerns will continue to play an important role in what is actually collected and the
level of detail retained. This will need to be addressed before infinite data collection and IoT's ultimate
value creation can occur.
What is clear is that driving IoT proliferation and its value expansion is the increasing ability to
systematically and synergistically leverage the cloud, location based services, connectivity, and social
networks. The opportunity for innovation in both the consumer and enterprise segments is only just
emerging. Connectivity services will enable the extension of information so that every thing has the
opportunity to capture data from other things and its surrounding environment. Things will be
essentially part of or managed by intelligent systems in the vast majority of cases. These intelligent
systems will connect further throughout the five submarkets of the Internet of Things. This is precisely
the multifaceted IoT opportunity that we strive to define in this taxonomy as IDC initiates, sizes, and
forecasts this nascent but growing market.

Supply or Demand Driven?


It is without a doubt that business and consumer demand exists and will continue to expand for the
Internet of Things solutions. IDC expects that current IoT use cases are just the tip of the iceberg.
However, the majority of momentum in the market to date has been generated from the supply side.
The ecosystem of vendors and service providers have been actively looking for ways to expand their
product portfolios and find new ways to generate ancillary revenue and IoT fits the bill. Almost any
enterprise-focused systems integrator, software vendor, professional services firm, or mobile operator
has a story around what IoT and M2M can do to help businesses become more productive, efficient,
customer friendly, and agile, to name a few.
It is up to these vendors and service providers to help enterprises define and understand business
models, and where connected, autonomously communicating devices or things leveraging platforms,
analytics, and applications can benefit their businesses. Systems integrators and professional services
firms (and to varying extents, mobile operators) can play a pivotal role in shaping use cases and
revealing the benefits from investing in an IoT solution. IDC sees deep industry vertical expertise
brought by these ecosystem players as a critical success factor in many IoT cases. These IoT players
will have to forge strong partnerships with other vendors to provide end-to-end solutions that satisfy
their customers' needs.

What About M2M?


Machine to machine is an older, but sometimes still used, industry term that became popular to
describe a network facilitating communications between either wired or wireless devices. Its origins
can be placed somewhere around the time that computer networking automation took place. Early
applications were in telemetry and industrial automation.
IDC in this taxonomy characterizes M2M as a precursor to, and now a subset of, the Internet of Things.
It is now unduly narrow to think of M2M as reflective of the burgeoning, full opportunity. Some reasons
for this perspective are:

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Billions of things are increasingly managed by intelligent systems, transmitting exabytes,


zettabytes, and yottabytes of data. Without intelligent systems' management and connectivity
throughout value-adding platforms (device, network, and application enabled), data analytics
systems, and applications, M2M as an insular solution would present a constrained revenue
opportunity for the ecosystem in the long run.

Innovation is being driven by ecosystem players outside of the device and connectivity
vendors as much as, if not more, in some cases, than within the more narrowly defined M2M
ecosystem.

Feedback continues to be shared that underscores the value of enterprise solutions being
holistic solutions. The full value of an IoT customer, therefore, is most fully and accurately
measured across all of the piece parts that communicate to return the end users' IoT benefits.

Contextualizing IoT in the Real World


As a start to contextualizing and describing the Internet of Things, here are some examples of how the
IoT can be realized:

Connected cars can include emergency call systems with embedded SIMs as well as
diagnostic monitoring, telematics, and in-car entertainment systems

Remote healthcare monitoring can perform continuous and real-time readings of vitals such
as blood pressure, heart rate or sugar levels to notify caregivers and/or medical personnel in
the event of elevated readings

Personal fitness with wearable fitness devices (i.e., Fitbit, Nike+ Fuelband), users can track
steps taken, calories burned, and hours slept for example and monitor results on their
smartphone or personal computer, as well as link to (or create) social networks

Public transit local/municipal governments can use IoT solutions to run, operate, and monitor
public transit systems for fuel optimization, fleet, and fleet content tracking, as well as positive
train control a system for monitoring and controlling train movement as a means to improve
railway safety (i.e., train separation or collision avoidance)

Transportation use ubiquitous connectivity to leverage telematics and RFID devices to


monitor and control shipping equipment and cargo on a worldwide basis (Increasingly,
producers are able to monitor and analyze asset safety and quality across the supply chain.
For example, transporting food from farm to fork is a sensitive process to ensure that foods do
not spoil while in transit.)

Smart utilities use connectivity to monitor energy consumption by automatically measuring


and monitoring home energy usage

Discrete manufacturing use robotics to further automate production of automobiles and other
equipment

Home security/monitoring provides protection against home intrusion but also is capable of
monitoring and controlling home environments (i.e., lighting and temperature)

With these examples and others, the IoT market will provide solutions that bring different levels of
value to the ecosystem players. Connected value is often inversely proportional with volume of
connected device, as depicted in Figure 1. Figure 1 contextualizes a sampling of industry vertical
solutions on two axes value and volumes.

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FIGURE 1
Impactful Vertical Solutions

Source: IDC, 2013

In addition to looking at where industry vertical use cases fall in terms of value to the ecosystem by
volume of connected devices, it's also important to contrast the significance of the frequency of
connectivity and the revenue impact to the ecosystem. To fall within IDC's definition of IoT, an
endpoint, or thing, must connect to the Internet at some point in its life cycle. This can happen seldom,
occasionally, frequently, or constantly. Figure 2 examines this concept of the communications
frequency versus revenue impact.

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FIGURE 2
Holistic View of Communications Frequency Versus Revenue Impact

Source: IDC, 2013

FUTURE OUTLOOK

Internet of Things Taxonomy


As the mobile market continues to evolve and innovate, new constructs begin to emerge. The Internet
of Things, formerly and more narrowly thought of as M2M, as a concept and synergistic set of products
and services is one of these new and evolving constructs. IDC's IoT taxonomy provides the
classifications and definition for the major components that comprise the IoT market and therefore are
covered within IDC's IoT research. All definitions and terminology are current as of September 2013.
IDC describes the Internet of Things as a network connecting either wired or wireless devices, or
things, that is characterized by autonomous provisioning, management, and monitoring. The IoT is
innately analytical and integrated.

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Mobility-enabled, or wireless, IoT is included in what IDC refers to as the 3rd Platform the next
technology platform for growth and innovation, built on mobile devices and applications, cloud
services, mobile broadband networks, Big Data analytics, and social technologies.
This taxonomy provides a deep dive of the following:

Components of IoT:

Devices (i.e., sensors, RFID-enabled things) managed by intelligent systems

Connectivity, including service enablement

Platforms (device, network, and application enabled)

Analytics/social business

Applications and vertical industry use cases

Other considerations in IoT (e.g., quality of service [QoS], reliability, security, and professional
services)

Components of the Internet of Things


IDC has divided the Internet of Things market into five categories in each of which there is a significant
opportunity for vendors and service providers. Each of these components is discussed in Figure 3.

FIGURE 3
Components in the Internet of Things

Source: IDC, 2013

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Intelligent Systems/Devices
Devices in the IoT context are one of sensors, RFID tags, or other such wired or wirelessly enabled
devices. Devices or things in the IoT are managed by intelligent systems. Intelligent systems are
defined as securely managed electronic systems that run a high-level operating system (HLOS) and
autonomously connect to the Internet, execute native or cloud-based applications, and analyst data
collected. Intelligent systems possess greater programmability and performance, integral connectivity,
and the potential to capture, analyze, and forward data to/from other systems.
Among the systems within the IoT, and between disparate devices in the IoT, intelligent systems are
the main drivers of value across the Internet and the dominant electronic systems on the IoT road map.
Naturally, then, intelligent systems operate as clients in the datacenter and in infrastructure systems.

Sensors
Sensors use semiconductor technology such as computing and embedded microprocessors and
microcontrollers and communication chipsets-baseband process, RF, and PAs to enable the
intelligence and autonomous communication between electronic machines and sensors. Hardware
relies on MPUs, MCUs, DSPs, FPGAs, SoCs, and sensors for their native intelligence and
communication.
It is important to note that there are a seemingly endless number of sensors at work today in every
electronic device or thing. However, while all these sensors are all capturing data and sharing it in
various ways and frequencies (from on-demand to batch to real time), not all these sensors have a role
in driving the aggregate size of the IoT market. If the sensor does not communicate with an "intelligent
system," IDC will not include it as part of our core IoT research. For example, an automobile has 200+
sensors to monitor performance; only the number of sensors that are directly connecting with the
intelligent system are counted under IoT. Some sensors are just communicating with each other but
not at a level which would be counted in the IoT. An accelerometer inside a mobile phone would not be
counted, for example, either. Simply, if the device, thing, or sensor has an IP address and is connected
at some point in its life, it will be counted in the IDC IoT.
Devices, sensors, or things that communicate with intelligent systems without human intervention,
automatically sending and receiving data to/from/within the intelligent system, are counted in the IDC
IoT market. This means, for example, that smartphones requiring a user to enter data to be sent to an
intelligent system as context to other events that are automatically passed on between a device and
the intelligent system, are not counted in IDC's IoT.

Connectivity and Service Enablement


Mobile networks and the associated traditional services (i.e., voice messaging, text messaging) have
been the foundation on which operators have built their businesses, applications, games, and video
services, which in turn inspire customers to transition from feature phones to smartphones, driving
revenue mix changes in the operator's business. Voice service is becoming increasingly
commoditized, SMS volumes appear to be plateauing, or even falling, and strong competition is
limiting operators' ability to grow data revenue. Operators are at a crossroads in terms of taking the
next step to drive revenue and subscriber growth over the next several years. IoT represents an
opportunity not only for the operator to find a new source of revenue and play a pivotal role in a new

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service value chain, but also to leverage their legacy networks for low bandwidth connectivity for
which IoT is ideal.
The connections segment of the IoT market can involve any of the following connection types:

Cellular leverages 2G (GSM, GPRS, EDGE, 1xRTT), 3G (HSPA, HSPA+, EVDO, EVDO Rev
A), or 4G (LTE, WiMAX) wide area networks for connectivity.

WiFi leverages a wireless local area network using unlicensed spectrum on WiFi standards
802.11 a, b, g, or n bands.

Bluetooth leverages open wireless technology standards for exchanging data over short
distances.

Zigbee leverages low-power, low-cost connectivity that is primarily beneficial in short-range


monitoring or controlling applications.

Wireline leverages existing wired infrastructure to monitor devices/endpoints.

6LoWPAN (IPv6 over low-power wireless personal area network) leverages a new standard
for IPv6 to be utilized for low-power, low-rate devices such as embedded sensors.

Message Queue Telemetry Transport (MQTT) leverages an extremely lightweight


publish/subscribe messaging transport. It is useful in connections with remote locations where
a small code footprint is required and/or network bandwidth is at a premium.

The role of the mobile operator in IoT can be broken down into three primary roles:

Connectivity-centric solutions

User/application-centric solutions allows CSPs to enhance value with policy and network
capabilities (e.g., location and presence)

Business processcentric solutions branded, end-to-end solutions (e.g., energy management


and security monitoring)

Within and around the connectivity layer of IoT, an operator's business and operational support
systems (BSS/OSS), and service delivery platforms (SDPs) all play a critical role. Operational support
systems (OSS) refers to the service fulfillment and service assurance systems used by
communications service providers (CSPs) to operate, administer, plan, and maintain their
infrastructures. They form the operational systems and process workflows of day-to-day and strategic
CSP operations. Service fulfillment and service assurance systems are classified as OSS. In detail:

Service fulfillment is the function of creating and/or turning up network or other service
offerings that fulfill a customer's order or replace a portion of existing infrastructure. In the IoT
arena, it is the operator's service fulfillment systems that would be involved in provisioning
devices and decommissioning faulty or rogue devices. This component is sometimes referred
to as an IoT device-enablement platform (described in the Platforms section). It can be offered
by the mobile operator or a standalone provider.

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Service assurance is managing existing infrastructure to be operational and perform on a dayto-day basis as well as on a strategic level. Multiple technologies for fault and performance
management are employed at element, network, service, and business levels to ensure
availability, response times, and throughput requirements. In the IoT value chain, service
assurance systems would be responsible for device and module monitoring, maintenance, and
diagnostic management which may include performing firmware-over-the-air (FOTA) updates,
fault detection, prevention and recovery and especially service continuity, performance, and
security. In addition, service assurance systems can provide customer care and support and
perform device/system troubleshooting.

Billing and revenue management systems support billing and revenue management functions
for the communications service provider and its customers as well as the related customerfacing activities involving these functional areas. For M2M, fully automated revenue capture is
essential and many billing and revenue management systems are involved and play a critical
role in ensuring that each transaction and billable event is captured, recorded, and accurately
rated and billed.

Additionally, application integration between the network and devices is vital in ensuring
interoperability and enforcement of policy and charging rules and other applicable policies.
This component is sometimes referred to as an IoT application-enablement platform
(described in the Platforms section). It can be offered by the mobile operator or a standalone
provider.

For

mobile operators, the introduction of IoT implies a significant change in how their networks must
perform to keep pace. In short, while the focus has traditionally been on maintaining "the pipe" to keep
pace with voice, and now data and demand, M2M imposes additional requirements. IoT requires
"transactional" networks that can keep pace with millions, if not billions, more individual transactions.
While these transactions may have minimal impact in terms of data load, the requirement to handle an
exponential increase in back-and-forth traffic requires operators to introduce much more automation
into network and service management processes, and implement solutions to address the dramatic
increase in signaling traffic that will accompany the IoT revolution. Investment in next-gen OSS, billing,
and policy control and charging systems to ensure that all parties in the IoT ecosystem are paid in an
accurate and timely manner is crucial to operators' ability to foster a robust ecosystem.

Platforms
Within the platform layer, IDC identifies three distinct types that offer value to an IoT solution: device
enablement, network enablement, and application enablement. Each type offers functionality to
support an endpoint; however, they are not interchangeable yet they are interdependent. Many
platform providers deliver services across the layers offering comprehensive end-to-end solutions (see
Figure 4). Each of the platform types' layers are outlined in detail in the sections that follow.

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FIGURE 4
Platform Offers Supporting the IoT Market

Source: IDC, 2013

Device-Enablement Platforms
Device enablement is a combination of services offered by vendors and service providers to their
IoT/M2M customers such as device provisioning and enablement. At its most basic level, it is about
device management and providing software that ensures the flow of data to and from the end device.
Key components include:

Activation

Certification

Diagnostics

Enablement

Provisioning

One key issue facing vendors offering device enablement solutions is that standardization of chips and
devices is a significant gating factor. As an example, the Open Mobile Alliance (OMA), which develops
standards for smartphones, is working on bringing handheldlike standards to M2M device
management. However, the issue of standardization is further complicated by other standards bodies
such as oneM2M (announced in July 2012), which brings together 271 partner and member
organizations to provide commentary on technical specifications for IoT/M2M devices.
Another organization the Global M2M Alliance was also formed in July 2012 and is a joint initiative
between several mobile operators including KPN, NTT, DOCOMO, Rogers, SingTel, Telefnica,
Telstra, and VimpelCom. The goal of this organization is to provide technological cooperation to create
a global seamless solution for IoT/M2M solutions to multinational customers requiring device
connectivity. This group will leverage Jasper Wireless' Control Center to provide a consistent Web
interface and centralized management of status and usage of IoT/M2M devices globally.

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Network Enablement
Network enablement allows a service provider to connect with IoT/M2M devices to gather and analyze
connection-related information. Providers offer customers an opportunity to control and manage their
rate plans and billing arrangements through the functionality of this platform type. Cost management
and subscription management are also optimized through IoT/M2M-focused OSS and BSS solutions.
This layer provides customers with SLAs focused on quality and protection assurance of solutions. Key
components of this layer include:

Connectivity, including access network as well as core GGSN functionality (GGSN bridges the
cellular data network with the Internet, including authentication, charging, and record keeping)

OSS/BSS capabilities, including home location register (HLR), a repository of subscriber


information including account status, user preferences, services subscribed to (e.g., data), and
user location or address; and authentication, authorization, and accounting (AAA) related to
data services

Rate plan optimization

International roaming capabilities and management

Subscription management

Security management

This component of IoT platforms is challenged by two specific issues roaming/international support
and network support across multiple network types (e.g., 2G, 3G, and 4G).
In 2012, there has been a lot of activity focused on the need for truly global SIMs. Operators such as
AT&T and Vodafone have been at the forefront of global connectivity and the Global M2M Alliance has
also made it a priority in its work.
The second issue related to network technologies and the decision of which to deploy in a module.
With the move to LTE, previous network generations are deemed out of date yet using an earlier
network technology may suffice in terms of the connectivity required for more basic IoT/M2M functions
(i.e., remote monitoring, smart meters). Moreover, at this juncture, while the price disparity is
improving, 3G modules are still substantially cheaper than 4G LTE modules.

Application Enablement
Application enablement focuses on the horizontal integration of enterprise applications and specific IoT
applications to fit the use case for a connected endpoint. It also focuses on the burgeoning area of
analytics and the capability to build analytical tools for businesses to make real-time decisions about
data collected. Key components of this platform solution include:

API support

Vertically focused applications

Analytics

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Within IoT/M2M application enablement, the most popular use case is fleet management and the many
applications that have existed for years to support the transportation vertical. The business model
supporting IoT/M2M in fleet management is well understood but the challenge for vendors in the IoT
ecosystem is finding other use cases and business models supporting the development of applications
in a host of additional vertical segments. Because many use cases are very vertically focused, it will
require innovative vendors to fine-tune their offerings to fit within specific verticals and develop
applications that address the business process challenges that exist within that use case.
Another challenge is for vendors to build analytics into applications so that business processes can be
improved. Analytics have been an afterthought to date in the IoT industry. But with devices able to
capture critical operational information, it is paramount for analytics to rise to the forefront and become
a standard feature in any M2M application.

Big Data Analytics and the Role of Social Business


The analytics layer is critical to enabling an IoT implementation to drive true business value for a
company taking advantage of this connectivity and data capture. Leveraging the power of "Big Data"
and the capabilities that data vendors offer to enterprises can be extended to IoT applications. These
analytics can take data collected by the connection and endpoint and turn it into actionable insights
that business decision makers can use to affect change in business processes.
With social networks hugely popular, and the myriad of data these networks compile, it is expected
that the rise of IoT will also leverage the role of social. After a data transaction takes place, a social
element can be layered on top of the data collected to paint a richer picture of the customer or process
being monitored.

Applications and Vertical Industry Use Cases


IoT applications are the software and tools that either extrapolate analytics from the IoT or serve as an
input mechanism, that is the way for data from things to marry extraneous vertical industry data
collected and the Internet of Things to conduct a specific function.
IDC benefits from having a strong research team focusing on the evolving role of ICT within several
vertical industries. The IoT value chain is a complex one when looking at the ICT interdependencies.
Add to that, industry-specific needs for IoT/M2M and the need for domain expertise in these individual
industries. These vertical solutions will require many functional components that must interact in
precise ways to make the promise of IoT a winning value proposition for any industry.

Healthcare
IoT in the healthcare vertical already has made inroads with several connected solutions to address
healthcare challenges, such as decreased expenditures while caring for more and more patients. For
example, telemedicine is able to decrease the costs of expensive doctor visits by enabling remote
communication between physicians and patients. Some of the most common IoT/M2M healthcare
solutions are:

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Remote device diagnostics

Clinical trial monitoring

Home healthcare solutions

Telemedicine/telehealth

mHealth (i.e., medication reminders)

Asset management of healthcare providers' inventory

Medical imaging solutions

Retail
IoT is already impacting the retail industry, whether it's through product logistics, in-store customer
kiosks, remote monitoring and control, or business process automation. IoT can also provide
innovative communication channels, such as digital advertising spaces for reaching customers. IoT
solutions can optimize inventory, provide automatic updates on maintenance needs, or even handle
payment services. Some of the most common IoT/M2M retail solutions are:

Real-time inventory data

Customer in-store kiosks designed to make individual special offers

Digital signage

Telemetry for vending machines

Wireless payment solutions

Point-of-sale (POS) terminals

RFID tag-based warehousing

Utilities
IoT is poised to rapidly change the energy and utilities vertical through IoT/M2M solutions for intelligent
power networks, offering utilities efficient load sharing. Also on the consumer side, smart metering and
smart homes also promise new methods of creating efficiency. Some of the most common IoT/M2M
energy/utility solutions are:

Automated electric grids

Supervisory control and data acquisition (SCADA) systems in oil production

Home meters/smart meters

Detecting power network losses or theft

Pipeline monitoring

Home and Consumer


Perhaps the potentially largest IoT market lies with consumer and home applications of the enabling
technology. Consumer IoT solutions are aimed at providing direct benefit to the consumer and rely on
embedded intelligence. Some of the most common IoT/M2M consumer applications are:

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Use the Internet to control smart appliances at home or office

Remote monitoring and control of heating and lighting

Entertainment devices

eReaders

Improving appliance performance through automated error reports

Security systems, fire, and burglar alarm systems

Usage-based insurance/automobile

Transportation
IoT/M2M will help transportations and logistics companies to maximize capacity and improve
efficiencies of their infrastructure as well as to meet the increasing governmental regulation and
compliance demand via telematics and fleet management. With IoT/M2M solutions, transport and
logistics companies are able to monitor their workforce/asset itinerary conditions in real time, transport
the goods and people more safely and efficiently and in turn increase end-customer satisfaction. Some
of the most common IoT/M2M transportation solutions are:

Vehicle tracking

Freight monitoring

Logistic services to control shipment and warehouse traffic

Automated monitoring of air traffic

Connected fleets/asset management

Government/Public Safety
IoT/M2M will support various government processes for public utility payments, monitoring and
surveillance, and toll collection, among others. Many large IT vendors are already looking to enable
and tie together processes for local, city, regional, state, and federal with IT solutions to automate and
monitor important government functions. Some of the most common IoT/M2M government solutions
are:

Automating public transit

Emergency services

Public safety/surveillance

Public infrastructure asset management (bridges, roads, tunnels)

Water management and waste systems

Traffic and parking

School bus tracking

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Industrial Production
IoT/M2M has already been employed by many manufactures for both discrete and process
manufacturing. This trend will only accelerate as there is increased pressure to automate and drive out
inefficiency in the manufacturing process using more process automation coupled with remote sensors
and other devices. Some of the most common IoT/M2M government solutions are:

Robotics in both discrete and process manufacturing

Remote diagnostics

Bidirectional plant floor communications to programmable logic controllers (PLCs)

Process control for continuous manufacturing

Production asset management

Others
There are other applications of IoT/M2M, which are also starting to come online. Homes, offices, and
commercial spaces are undergoing a smart transformation by connecting and linking environmental
sensors, HVAC, and office and safety equipment with external inputs such as the smart grid and
weather. Overall, user-driven and autonomic business processes combining people, systems, and
devices can be implemented to maximize resource efficiency and costs. Some new IoT/M2M solutions
are:

Agriculture such as remote irrigation systems and farm animal living condition monitoring

Environmental such as river-level monitoring or well waterlevel monitoring

Fish farming

Archeological site security protection.

The applications of IoT/M2M will only be limited by the imagination and need of industry and consumer
needs. With that in mind, the future outlook and market opportunity for IoT seems limitless.

Other Consideration in the IoT Ecosystem


An IoT initiative can appear to be as simple as attaching a module or sensor to a widget and
connecting that module and transmitting data and using that data to make business decisions.
However, in many applications, quality of service and reliability become paramount in that both of
these factors can determine the success or failure of an IoT initiative.
Successful vendors and service providers are coming to terms with the proposition that QoS and
reliability are critical pieces in several IoT deployments. Guaranteeing uptime and service reliability
becomes important, especially in applications such as security monitoring, remote asset tracking, and
healthcare monitoring. Vendors that can provide these types of guarantees in their contracts will see
success. Mobile operators will be able to provide more QoS and reliability for mission-critical
applications as 4G networks are deployed and 2G or 3G becoming viable backup options.

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Security and Professional Services


Security and professional services play a critical role in all aspects of M2M.

Security. Security plays an important role starting with the modules, which require physical
security to prevent unauthorized access to the module, particularly the SIM. In addition,
security within the underlying applications, platform, and network is also required to ensure the
efficacy of the overall connection and information exchange.

Professional services. Many service providers and systems integrators are offering
professional services to help enterprises develop their M2M strategies through to the
deployment and implementation. For example, large network equipment vendors are eager to
maintain their close customer relationships as these operators look to deploy M2M in the next
few years. As a result, most NEPs have established M2M platforms, though the degree of
maturity of these platforms varies. Similarly, traditional software players are also building M2M
platforms that focus on their strengths in software and systems integration as well as strong
relationships in key vertical segments.

ESSENTIAL GUIDANCE
The potential for IoT services, hardware, and software is vast and unrealized. Like other mobile
technologies, the IoT revolution will bring transformative change to advanced and emerging
economies as consumers and businesses begin to experience the power of having sensors, widgets,
and machines connected and collecting information via a wireless connection. However, to bring the
potential to fruition, IDC suggests that participants in the IoT ecosystem need to address the following:

Nomenclature. Even within IDC, there has been deep discussion of how to define the Internet
of Things market. As the landscape shakes out, and true leaders arise, terminology will
confuse not only market participants but end customers as well. At the end of the day, IoT is
about using connectivity to transform business process. The discussion with end customers
must be how this technology can positively affect their business be it revenue capture, cost
containment, improved customer response time, or timely decision making, to name a few.

Standards. Existing IoT solutions are highly fragmented and typically dedicated to a single
application. Proprietary solutions and a myriad of standards have resulted in slower
development of the global market. Standardization will play a critical role in faster adoption.

Rationalization of air interface technology. Today, the relationship between mobile operator
and module OEMs is contentious. In more detail:

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For their part, module OEMs indicate that demand for 2G modules is strong and although
they are producing 3G modules, the use case is still weak and the price point is higher
than for 2G devices. Current M2M customers will likely utilize their 2G technology for at
least 510 years. Debate also exists on whether it is prudent to skip 3G altogether and look
for next-gen M2M applications that leverage the 4G network as it is in its infancy but
promises to exist for the long term or for the lifetime of a module.

Mobile operators are in need of new spectrum and would prefer to shut down legacy 2G
networks in favor of reforming that spectrum.

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Revenue models. A major measure of success in the mobility market has been average
revenue per user. As we move to a world where "things" are connected as opposed to people,
or end users, the ARPU model may not be the best measure. Service providers and other
ecosystem players are creating new and unique business models around M2M applications.
As such, the success indicators may have to reside in terms of overall revenue as opposed to
measuring revenue on a per-unit, or per-widget, basis.

For those businesses looking to make an investment in an IoT solution:

Immediate and well-defined business processes that would benefit from IoT/process
automation to start their IoT journey

Soliciting RFIs from vendors that help define the scope of IoT need as well as possible breadth
of IoT solutions (IoT will be an ongoing and expanding IT initiative, and businesses will need
vendors with a large set of options and most likely a large set of partners.)

Corporations will have the opportunity to pull from disparate data sources to extract a more
complete and accurate story of its stakeholders, from customers to supply chain. IoT will help
enable the potential around real-time intelligence and use of analytics that will turn Internetenabled devices into real business opportunity.

All vertical industries and lines of business will want to remember security and compliance
issues that may impact their particular business or processes they are looking to automate.
Data security and industry-specific compliance issues will need to be addressed on a case-bycase basis as IoT plans to move forward.

IT vendors and service providers should focus on:

Partnerships will be key for vendors to have the ability to offer end-to-end IoT solutions (i.e.,
devices, connectivity, software, and support) and therefore penetrate several vertical markets
in the IoT/M2M market.

The convergence of cloud and Big Data/analytics will also be a driver for IoT as the intelligent
integration of data will be required to manage and exploit the device-driven IoT landscape. The
IoT market will want to see these capabilities to realize value.

Systems integrators will have great opportunity through their efforts to "wire" M2M and IoT
communities together with vertical market solutions.

Mobile operators are still in an enviable position to partner with disparate IT vendors to attack
the IoT market from the connectivity and communications perspective. This generates new
markets for communications providers and puts them in an initial lead role to package
IoT/M2M solutions (using IT partners) to current customers.

LEARN MORE

Related Research

Worldwide Internet of Things (IoT) 20132020 Forecast: Billions of Things, Trillions of Dollars
(IDC #243661, October 2013)

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Worldwide Intelligent Systems 20132017 Forecast: The Rise of Intelligent Systems (IDC
#241359, July 2013)

M2M in the Real World: Separating Myth from Reality (IDC #DR2013_LSIS3_CM, March
2013)

Machine-to-Machine Platforms: The Layers for Successful Implementation (IDC #238780,


December 2012)

IDC's Worldwide Machine-to-Machine (M2M) Taxonomy, 2012 (IDC #236136, August 2012)

M2M Market Evolution (IDC #233989, March 2012)

Synopsis
This IDC study outlines the current taxonomy for the Internet of Things (IoT) market.
"The Internet of Things market is a burgeoning market that will lead to all things being connected and
capturing data to transform business processes and consumer behavior," says Carrie MacGillivray,
program vice president of Mobile Services, IoT, and Service Provider Infrastructure at IDC. "As the
ecosystem of vendors, integrators, and service providers continue to develop innovative solutions, and
the demand side of enterprises and consumers look for ways to stay increasingly connected, the
Internet of Things will be realized."

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About IDC
International Data Corporation (IDC) is the premier global provider of market intelligence, advisory
services, and events for the information technology, telecommunications and consumer technology
markets. IDC helps IT professionals, business executives, and the investment community make factbased decisions on technology purchases and business strategy. More than 1000 IDC analysts
provide global, regional, and local expertise on technology and industry opportunities and trends in
over 110 countries worldwide. For more than 48 years, IDC has provided strategic insights to help our
clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading
technology media, research, and events company.

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