Machina Research

IoT Global Forecast &

Analysis 2015-25
Matt Arnott, Pierce Owen, Emma Buckland
& Margaret Ranken

August 2016
 About this report
Market analysis & forecasts
Changes from last year
Forecast methodology
About Machina Research

Machina Research 2
About this report
• IoT Global Forecast & Analysis 2015-25 is based on data extracted from Machina
Research’s IoT Forecast Database in August 2016.
• The database is a comprehensive quantitative analysis of the global IoT market
opportunity from 2015 to 2025. It covers all IoT applications across 200+ countries and
6 regions with detail on connections, technology, revenue and traffic. This report is a
summary snapshot of the more detailed forecasts contained within that IoT Forecast
Database.
• Subscribers to the IoT Forecast Database should access the forecasts via the web tool:
https://machinaresearch.com/forecasts.
• Clients who bought this as a stand-alone report will have received an associated excel
data sheet including high level regional market forecasts. The data sheet includes total
figures for each of the five sectors that comprise our IoT segmentation.
• More granular data, with country-by-country forecasts on each specific application, is
available within Machina Research’s IoT Forecast Database (see the ‘About Machina
Research’ section of this report for more details).
• See the ‘Forecast methodology’ section for more details on our segmentation and the
methodology used for compiling these forecasts.

Machina Research 3
 About this report
Market analysis & forecasts
Changes from last year
Forecast methodology
About Machina Research

Machina Research 4
IoT connections will grow from 6 billion in
2015 to 27 billion in 2025
Global IoT connections 2015-25
Source: Machina Research 2016
• Machina Research defines
IoT as “Connections to
30
remote sensing, monitoring
25
and actuating devices,
Connections (billion)

20 together with associated

15 aggregation devices”
10 • Based on this definition
5
there were 6 billion IoT
connections in 2015 and
0
2015 2017 2019 2021 2023 2025 there will be 27 billion in
Note: in this edition our Global IoT report, as in the previous 2025, a CAGR of 16%
editions, we have included in-building network infrastructure
within our definition of IoT. As such, devices such as residential
modems/ routers are included.

Machina Research 5
In 2015 IoT was dominated by the
Connected Business category
• Connected Business comprises IoT connections by sector, 2015
Source: Machina Research 2016
29% of IoT connections at the end
of 2015
• The next largest sector, Connected Business

Connected Home, accounted for Connected Car

6%
26% of connections, followed by
Connected Cities
Connected Consumer Electronics 29%

with 21% and Connected Energy 26% Connected Consumer

Electronics
with 10% Connected Energy
• The remaining sectors, Connected 3% Connected Health
Industry, Connected Car , 2% 10%
3%
Connected Health and Connected 21% Connected Home

Cities, all represent 6% or less of Connected Industry

total connections

Machina Research 6
Connected Home becomes the largest
sector by 2025
• Connected Business has reduced IoT connections by sector, 2025
Source: Machina Research 2016
to 20% of IoT connections at the
end of 2025, falling to third
largest, behind Connected Connected Business

Consumer Electronics with 22%

Connected Car
• The largest sector, Connected 5%
20% Connected Cities
Home, accounts for 29% of
connections 29% Connected Consumer
5% Electronics
• Connected Energy represents 9%, 6%
Connected Energy
Connected Cities makes up 6%,
Connected Health
Connected Health, Connected Car 4%
9% 22%
and Connected Industry are all Connected Home

5% or less of total connections Connected Industry

Machina Research 7
Short-range technologies will dominate
IoT
Global IoT connections 2015-2025 by • 72% of connections in 2025
technology will be short range (e.g. in-
Source: Machina Research 2016
building PLC, WiFi, Zigbee, Z-
30
Wave), up from 71% at the
25 end of 2015
Connections (billion)

20 • Cellular accounts for 2.2

billion connections in 2025,
15
an increase from 334 million
10 at end of 2015
5 o By 2025 3G takes 7% and
4G/LTE 88%, driven by higher
0 bandwidth requirements and
need for future-proofing
2G 3G 4G
• 11% of connections in 2025
LPWA MAN Satellite will be LPWA, driven by the
Short-range Wide area fixed simplicity of deployment

Machina Research 8
Short-range technologies dominate most
IoT categories in 2015
Short range share of IoT connections by • The dominance of short range
sector 2015-25 technologies will be due to:
Source: Machina Research 2016 o Lower cost
100% o The dominance of consumer
90% electronics and intelligent
80% buildings devices, where wide-
70% area connectivity is rarely needed
60% • The biggest exceptions are:
50% o Connected Car which initially
40% relies almost exclusively on wide-
30% area mobile connectivity
20% o Connected Industry and
10% Connected Energy, within which
0% MANs are often used
2015 2017 2019 2021 2023 2025 • Falls in the share of short range
Connected Business Connected Car are accounted for by rapid growth
Connected Cities Consumer Electronics in LPWA towards the end of the
Connected Energy Connected Health forecast period
Connected Home Connected Industry

Machina Research 9
LPWA technologies grow rapidly in Connected Health
and Connected Industry but are most influential in
Connected Cities
LPWA share of IoT connections by sector • The growth of LPWA technologies
2015-25 will be due to three factors:
Source: Machina Research 2016 o Ease of connection
35% o Wide coverage
30% o Low Price
25%
• LPWA makes it possible to pre-
install connectivity with no need
20% for user participation making it
15% ideal for assisted living devices for
10%
the elderly and infirm. LPWA’s
medical potential is shown by the
5% large increase in its share of
0% Connected Health after 2020.
2015 2017 2019 2021 2023 2025 • It also has an important role in
Connected Business Connected Car connected industry for
Connected Cities Consumer Electronics monitoring equipment at remote
Connected Energy Connected Health locations
Connected Home Connected Industry

Machina Research 10
Wide area IoT connections will be
dominated by LPWA technologies
Wide area IoT connections by technology, • By 2025, almost half of wide
2015-25
Source: Machina Research 2016
area IoT connections will be
60%
supported by LPWA
technologies
50% • LPWA technologies are
attractive due to:
40%
o ease of deployment
30% o homogeneity of solution
o low price and long battery life
20%
• Cellular connections account
10%
for around 30% because as
well as the first two benefits
0% they also deliver high capacity
2015 2017 2019 2021 2023 2025
and mobility
Cellular LPWA MAN Satellite Fixed

Machina Research 11
Connected Car will account for 45% of
cellular connections in 2025
IoT cellular connections by biggest • The top application groups for
applications, 2025 cellular connections will be:
Source: Machina Research 2016
o Connected Car
Connected Business o Connected Energy
• The Connected Car is top
Connected Car
2% because it needs features only
12% Connected Cities
cellular can provide:
8%
o Comprehensive coverage
4%
Connected Consumer
Electronics
o High-speed mobility
45%
Connected Energy
o High bandwidth
21% • Connected Business has only
Connected Health 2% of cellular connections,
6% despite having 20% of total
2% Connected Home
device count
Connected Industry

Machina Research 12
By 2025 the Emerging A-P region and
Europe will have most IoT connections
IoT connections by region, 2015-25 • In 2015 and 2025 Europe accounts
Source: Machina Research 2016
for 25% of all IoT connections and
30.00
Emerging A-P drops from 30% to
29%
25.00
• Asia-Pacific sees a decline in its
IoT Connections (billion)

20.00 share of the global total:

o Developed Asia-Pacific and
15.00 Emerging Asia-Pacific taken
together fall from 45% to 42% of
10.00
the global total
5.00 • Latin America and MEA grow from
5.7% and 3.5% to 6.5% and 4.6%
0.00
2015 2017 2019 2021 2023 2025 respectively
Dev'd A-P Emerging A-P Europe
Latin America MEA North America

Machina Research 13
By 2025, China will lead connections and WWAN
but the US will lead IoT Application Revenue
Top 20 markets (by device count), ranked by device count, 2025
Source: Machina Research 2016

25%
Share of total IoT market

20%

15%

10%

5%

0%

Connections WWAN connections Revenue (IoT Application)

Machina Research 14
Total IoT revenue will approach USD3.0
Billion in 2025
Composition of IoT Revenue 2015-2025 • Previously we forecast only IoT
Source: Machina Research 2016
Application Revenue, now IoT
3.5
Service Revenue (revenue from IoT
related IT services) is included in
3.0
our Total IoT Revenue figures
IoT Revenue (USD trillion)

2.5 • IoT Service initially makes up

2.0 40% of Total IoT Revenue, but
1.5
will become larger than
Application Revenue in 2017
1.0
• By 2025 IoT Service Revenue will
0.5 contribute 55% of all IoT
0.0 Revenue
• Total Revenue over the forecast
Revenue (IoT Application) Revenue (IoT Service) period will have a CAGR of 15%

Machina Research 15
By 2025, IoT Application Revenues will be
a USD1.3 trillion opportunity
Total revenue (IoT Application), 2015-25
Source: Machina Research 2016
• Total IoT Application Revenue
will grow from USD450 billion
1,400 in 2015 to USD1.3 trillion in
2025, a CAGR of 11%
Revenue (IoT Application) (USD billion)

1,200
• This includes:
1,000
o device costs where
800 connectivity is integral to
the device
600
o module costs where devices
400 can optionally have
connectivity enabled
200
o monthly subscription,
0
connectivity and traffic fees
2015 2017 2019 2021 2023 2025

Machina Research 16
In 2025, 82% of IoT Application Revenue will be
generated in the top 20 markets worldwide
Largest markets worldwide, by revenue, 2025
Source: Machina Research 2016

400
Revenue (USD billion)

350
300
250
200
150
100
50
0
North America Emerging A-P Developed A-P Europe Latin America MEA
United States of America China Japan Germany
Russia United Kingdom France India
Brazil Italy Canada Korea (Republic)
Spain Mexico Australia Turkey
Poland Netherlands Indonesia Taiwan
Rest of Developed A-P Rest of Emerging A-P Rest of Europe Rest of Latin America
MEA

Machina Research 17
Device and service revenues will comprise
the vast majority of the IoT market
Composition of Total IoT Revenues, 2025
Source: Machina Research 2016

1.4

1.2
IoT Market Revenue (USD trillion)

0.5
1.0

0.8
0.1
1.3
0.6

0.4
0.7

0.2

0.0
Device Installation Service Total

Machina Research 18
Application service revenue will be
dominated by service wrap
Composition of Total Application Service Composition of Total Application
Revenues, 2025 Connectivity Service Revenues, 2025
Source: Machina Research 2016 Source: Machina Research 2016
600 60

50
500

IoT Market Revenue (USD billion)

IoT Market Revenue (USD billion)

40

400 30 38
49
20
300 482 10
530 5
11 3
0 2
200

Connectivity
Connectivity services

Service Enablement

Mobile Connectivity

Mobile network traffic

Non-mobile network traffic

Support Platform
Platform
100

49
0
Application Service wrap Connectivity
Service services

Machina Research 19
The composition of revenues varies
significantly across segments
Composition of Total IoT Revenues by Sector, 2025
Source: Machina Research 2016

100%
90%
80%
70%
Composition of IoT Revenue

60%
50%
40%
30%
20%
10%
0%

Device Installation Application Service

Machina Research 20
Connected Home dominates connected devices but
remains behind Connected Car in Cellular
Connected devices, cellular connections and revenue by sector, 2025
Source: Machina Research 2016
60%
Percent share of relevant metric

50%

40%

30%

20%

10%

0%
Total connected Cellular connections Application revenue Mobile connectivity Mobile network traffic
devices revenue
Connected Business Connected Car Connected Cities
Connected Consumer Electronics Connected Energy Connected Health
Connected Home Connected Industry

Machina Research 21
 IoT connections per capita

0
5
15
20

10
Switzerland
Japan
United States of…
Korea (Republic)
Canada
Norway
Denmark

Developed A-P
Finland

Machina Research
Netherlands
Germany
Source: Machina Research 2016
Austria
Hong Kong
Belgium
Australia
United Kingdom

Emerging A-P
France
Sweden
Italy
Taiwan
Czech Republic

Europe
Greece
Portugal
Spain
Israel
Russia
Saudi Arabia
Poland
Romania
Chile

Latin America
China
Malaysia
Argentina
Brazil

MEA
Turkey
Mexico
countries by device count, generating 94% of IoT revenue), 2025

Venezuela
Colombia
Thailand
South Africa
Peru
Ukraine
Iran
North America

Philippines
America and Europe dominate IoT

Indonesia
Egypt
IoT connections and spend per capita, ranked by connections per capita (top 50

Vietnam
India
Pakistan
Bangladesh
Nigeria
USD per head
0
300
900

600
1200
On a per capita basis Japan, Korea, North

Application revenue per capita (USD)

22
Project Work and Applications will lead
IoT Service Revenue
Composition of IoT Service Revenue 2015- • 41% of Service Revenue in
2025 2025 will be from
Source: Machina Research 2016
Applications, up from 17% at
1.8
the end of 2015
IoT Service Revenue (USD trillion)

1.6
1.4 • Data Monetisation will
1.2 contribute USD115 billion to
1.0
0.8
Global IoT Service Revenue in
0.6
2025
0.4 o This sector shows the most
0.2 growth throughout the forecast
0.0 period, with a CAGR of 41%
• 37% of service revenue in
Revenue (IoT Service: Project Work)
2025 will be from Project
Revenue (IoT Service: Platforms & Middleware)
Work, a drop from 62% in
Revenue (IoT Service: Data Monetisation)
2015
Revenue (IoT Service: Applications)

Machina Research 23
Connected Car becomes the largest
contributor to IoT Service Revenue
IoT Service revenue by segment, 2015-25
Source: Machina Research 2016

1,800
IoT Service Revenue (USD billion)

1,600
1,400
1,200
1,000
800
600
400
200
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Connected Business Connected Car Connected Cities

Connected Consumer Electronics Connected Energy Connected Health
Connected Home Connected Industry

Machina Research 24
Total IoT traffic (fixed and mobile) will
exceed 2 zettabytes in 2025
IoT traffic mobile share, 2015-25
Source: Machina Research 2016
• >99% of wide area IoT traffic
is accounted for by Connected
2,500 0.25% Living and Working:
o Audio-visual sources (20%)
2,000 0.20% o Audio-visual displays (79%)
• Consumer audio-visual traffic
IoT Traffic (EB)

Percent Traffic
1,500 0.15%
will be overwhelmingly
1,000 0.10%
carried over fixed networks
• Mobile/cellular share of all
500 0.05% IoT traffic remains below
0.15% after 2015
0 0.00%
2015 2017 2019 2021 2023 2025

IoT traffic Mobile share

Machina Research 25
 Excluding consumer AV, mobile networks
will carry 50% of IoT traffic in 2025
IoT traffic by sector (excluding Consumer Audio-visual), 2015-25
Source: Machina Research 2016

6 60%

5 50%

4 40%
IoT Traffic (EB)

3 30%

2 20%

1 10%

0 0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Connected Business Connected Car Connected Cities
Connected Consumer Electronics Connected Energy Connected Health
Connected Home Connected Industry Mobile share

Machina Research 26
Cellular traffic is dominated by Connected
Cities
IoT cellular traffic by segment, 2015-25
Source: Machina Research 2016

3,000

2,500
Cellular IoT Traffic (PB)

2,000

1,500

1,000

500

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Connected Business Connected Car Connected Cities
Connected Consumer Electronics Connected Energy Connected Health
Connected Home Connected Industry
Machina Research 27
81% of cellular traffic will be accounted
for by 3 application groups
IoT cellular traffic by application, 2025
Source: Machina Research 2016
• Top application groups for
mobile traffic will be:
o Public space advertising,
19% consisting of digital
33% billboards
o In-vehicle entertainment
and internet access
24%
o Environment and public
safety category which
24% includes CCTV
Environment & Public Safety
In-Vehicle Entertainment & Internet Access
Public Space Advertising
54 other Application Groups

Machina Research 28
 About this report
Market analysis & forecasts
Changes from last year
Forecast methodology
About Machina Research

Machina Research 29
Our global 2015 estimates have been
revised down
Main metrics, this year versus last year’s
forecast, World, 2015 • We estimate 9% fewer total
Source: Machina Research 2016
700
connections in 2015 at
world level than last year :
connections (million) Revenue (USD billion), Cellular

600
5.9bn compared with 6.4bn
Total Connections (x10,000,000), Celllular

• Estimated revenue is down,

500

400 by 27% (USD451bn

traffic (PB)

300 compared with USD614bn)

200 • Cellular traffic and
100
connections are down this
year, 15% and 6%
0
Total Cellular Revenue Cellular respectively.
Connections connections traffic

last year this year

Machina Research 30
And similar movements have been seen
to our 2024 forecast
Main metrics, this year versus last year’s
forecast, World, 2024 • Our forecasts now extend to
Source: Machina Research 2016
2025, but for comparison
3500
purposes, we offer comparison
connections (million) Revenue (USD billion), Cellular

3000 between 2024 numbers

Total Connections (x10,000,000), Celllular

2500 • Our 2024 estimates for total

2000
connections are down 10% to
24 billion
traffic (PB)

1500
• Cellular connections are down
1000 10% to 2.0 trillion
500 • Revenues are down 23% to
0
USD1.2 trillion
Total Cellular
Connections connections
Revenue Cellular
traffic • Our forecast for cellular traffic
last year this year by 2024 has fallen by 29%
Machina Research 31
Price falls and the multipurpose
smartphone have hit revenues
Sector Main changes

Revenue (IoT Since 2015’s forecasts 2024 device and installation revenue has fallen by around 20%. This change has
Application: predominantly been caused by a reduction in device revenue in the Connected Health and Consumer
Device & Electronics sectors. Connected Health Revenue has been reduced as a result of a change in modelling
Installation) approach: the cost of healthcare devices such as ECG machines is no longer included as Revenue. Device
costs in Consumer Electronics as a whole have also been reduced, as low cost products have emerged to
meet demand in South and East Asia.
Cellular 4G connections now make up a greater fraction of total cellular connections in 2024. The acceleration of
Connections 4G usage and 2G/3G switch-off announcements over the previous year have led to this upward revision
of last year’s forecasts.
Cellular Traffic Cellular traffic in 2024 as a whole has fallen – by roughly 30%. A large component of this reduction has
been as a result of Connected Car Traffic being routed through smartphones, and outside of the scope of
our forecasts. This effect has also been seen in other consumer sectors such as wearables and portable
games consoles. Another factor has been the slower than anticipated deployment of digital signage, a
large component of total Cellular Traffic, in developing nations.

Machina Research 32
Changes in device totals come from a few
key sectors
Sector Main changes

Connected Building Automation is still the biggest single Connected Living and Working application by device count
Living and with 5.7bn connected devices in 2025.
Working
Building
Automation
Connected New information about the current situation has led us to model a less mature market with a slight drop
Living and in device count in 2015 and similar growth. The number of devices in 2024 has fallen from 4.7bn to
Working 4.3bn. CAGRs for devices are roughly 15% over the period and for revenues in the range 5% to 10%
Building depending on the country. Growth rates are highest in Emerging Asia Pacific, Latin America and MEA.
Security
Connected Audio Visual Sources and Displays account for just over 5bn devices in 2025. Unlike last year, the
Living and combined device counts are now lower than those found in Building Automation. Based on new
Working Audio information the number of connected devices has been updated to reflect a less developed market
Visual initially, but with slightly higher growth over the forecast period. Connected TVs now represent a more
significant portion of the sector than previously. Falling costs of large screen televisions have also
resulted in a sizable drop to device revenue in the Audio Visual sector.

Machina Research 33
Other changes to last year’s edition from
a few key sectors
Sector Main changes

Connected Car The most notable change to Connected Cars has been the inclusion of short range connections. The
successes achieved by systems such as Apple’s CarPlay and Android Auto, which partially circumvent the
need for individual vehicle connectivity, and the evolution away from closed systems has encouraged this
development. The greater use of short range connections towards the end of the forecast period has
reduced the necessity for cellular connections in vehicles, which have fallen by 17%.

Revenues in 2024 have fallen by around 20% as implementation becomes cheaper and greater reliance is
being placed upon smartphones for car connectivity. Smartphones are proving to be an increasingly
attractive alternative to after-market devices for some applications, particularly in Navigation, where the
future of stand-alone connected navigation devices looks rather bleak.
Connected Connected Health accounts for about 1.2bn devices in 2025 and this is a segment in which LPWA has a
Health big impact. The slower introduction of LPWA technologies that has been accounted for in this year’s
forecast database is a primary driver behind this reduction, growth is expected to occur at a rapid pace
within this market but the bulk of it will occur after the forecast period.

See the Research Note: The connected health market will grow rapidly to be worth USD36 billion by 2024

Machina Research 34
The inclusion of IoT Service Revenue is the
biggest addition to our coverage since 2015
Service Previously Machina Research’s has forecasted the market opportunity of M2M communications and
revenue applications, including IoT Service Revenue in our forecasting allows us to encompass the entire
impacts opportunity afforded by the IoT market. Specifically this sector includes revenues associated with
IoT-like applications that use data generated by M2M applications and more horizontal revenue types
such as application development and project work.

Where relevant, the revenues identified in these categories also include consideration of work effort that
is undertaken within an end using organisation. Effectively, our forecast revenues represent total
economic activity, rather than just the revenues of third party providers in any relevant industry domain.

Other than in the case of data monetisation, all of the revenue streams in the forecast pre-exist in the IT
sector. Systems integration, strategy projects, platforms and middleware and
applications development and hosting are all concepts that were well established before the advent
of the IoT and will continue to thrive within an IoT context.
Service Due to the centralisation of development common in these sectors the figures provided should be
revenue usage viewed with caution. At a certain level of granularity the Service Revenue forecasts will lose their
relevance: nation-specific service revenue for each individual application is highly unlikely to occur. This
arises because of the bottom up approach to the M2M applications within the forecast database, which
maintain bearing under much closer scrutiny.

For more information see the Research Note: Forecasting the totality of the IoT
revenue opportunity

Machina Research 35
Changes made to last year’s LPWA
coverage
LPWA impacts Since the introduction of LPWA technology, Machina Research has revised some of the growth
trajectories and technology splits in its forecast for IoT devices. One focus of these revisions is on the
expected growth in LPWA connections. We anticipate a slower roll out of LPWA networks in licensed
spectrum and delays in 3GPP standardization for LPWA implementation in MNO networks. These changes
have resulted in corresponding delays in the availability of devices that will use these networks.

While the delays in deploying licensed networks will slow LPWA adoption, we do not anticipate that it
will have a substantial long-term impact. It is more the case that it will simply delay growth by 1-2 years.

Furthermore there will be many deployments, using alternative technologies and in campus
environments that will be unaffected, in fact the roll out of alternative technologies is accelerating to fill
some of the vacuum left by 3GPP delays. The main impact is that we do not expect there to be any
commercial LPWA devices for consumer and other mass market applications that are delivered via multi-
country supply chains until at least 2017. Once 3GPP and multi-country alternative LPWA solutions do
reach the market, there are some applications where there will be very strong growth in the number of
devices because of the lower cost and ease-of-use.
Further See Research Notes: December 2015 IoT device forecast revisions summary for more detailed
reading explanations of changes, or the LPWA market tracker for regular updates on LPWA market developments.

Machina Research 36
By 2025, LPWA will still achieve 100%
global coverage
LPWA global population coverage 2015-25
Source: Machina Research 2016

100%

90%

80%
Population Coverarge

70%

60%

50%

40%

30%

20%

10%

0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Forecast 2016 Forecast 2015

Machina Research 37
Application groups affected by LPWA
revisions
Sector
Connected Cities
Connected Health
Connected Industry
Connected Living and Working
Machina Research
Application Group
 Environment and Public Safety
 Road Traffic Management
 Environmental Monitoring
 Connected Medical Environments
 Remote Clinical Monitoring
 First Responder Connectivity
 Telemedicine
 Clinical Trials
 Boundary Control
 Land Agriculture
 Smart Metering
 Tracking Applications
 White Goods
38
 About this report
Market analysis & forecasts
Changes from last year
Forecast methodology
About Machina Research

Machina Research 39
IoT is hugely diverse and requires a
granular forecast methodology
• Recognising the huge diversity in the IoT market we have developed detailed IoT
forecasts based on our eight focus sectors
• In each sector there are very different dynamics for each application, so we
forecast each of 58 application groups and hundreds of applications separately

Machina Research
Example application group: Road Traffic
Management – 8 applications

Machina Research 41
Differentiating RGUs from connections/
devices to properly size the market
Example application: Comprehensive • Machina Research distinguishes
assisted living solutions between devices and revenue
generating units (RGUs)
• There may be multiple RGUs per
connections (e.g. applications such as
navigation or usage-based insurance
Household
running on a car platform)
• Or there may be multiple devices per
Hub
RGU, as in the example here:
device o 1 RGU
o 4 devices
o 3 short-range connections
o 1 Wide area connection …
• In some cases the hub unit is counted
Blood
in another category, e.g. a fixed
Pulse broadband CPE
pressure Scales
oximeter
monitor • Secondary/ backup connections are
not counted

Machina Research 42
Methodology
• Each Application has a different methodology, but there are some
common factors that we tend to incorporate in every set of
forecasts, which include:
o Current adoption
o Regulation
o Demographics
o Sector-specific statistics
o Service deployment plans
o Value chain positioning
o Technology availability
o Evolving bill of material costs
• Once we have built our bottom-up forecasts, we also tally this
with top-down numbers from operators, regulators, industry
bodies and other sources. Particularly relevant for Wireless Wide
Area network connections.

Machina Research 43
The result: an incredibly detailed database of
global IoT forecasts used by global clients

Ten year forecasts including millions of data points

• For each Application Group we • 201 countries, 6 regions
forecast:
o Revenue Generating Units
o Connections
• Split by tech (2G, 3G, 4G, LPWA,
short range, MAN, FWAN and
satellite)
o Traffic
• Split by tech (WWAN, LPWA, short
range, MAN, FWAN and satellite)
o Revenue
• Split by value chain components
(see below)

Machina Research 44
Revenue forecast metrics
Device
Device &
Installation
Installation

IoT Application
Revenue Service Wrap

Service Connectivity

Revenue
Service Enablement
Data Monetisation
Platform

Applications
IoT Service Revenue
Platforms &
Middleware

Project Work

Machina Research Definitions are provided in the Supporting Material section below 45
 Technology definitions
Technology Definition Notes
2G Second Generation mobile This includes GSM (and extensions GPRS and EDGE), CDMA and PHS/PAS.
connectivity.
3G Third Generation mobile Comprises W-CDMA, CDMA 1x EVDO and a few other similar technologies.
connectivity,.
4G Fourth Generation mobile This comprises LTE (3GPP Long Term Evolution) and WiMAX (802.16e and 802.16m). There
connectivity. is some controversy about the definition of 4G today. Machina Research recognises that
technically LTE and WiMAX technologies may not meet the ETSI definition of 4G, but for our
purposes they are considered to be so.

LPWA Low Power Wide Area Includes a range of new technologies such as LoRaWAN, LTE-NB1, RPMA and Sigfox.

MAN Metropolitan Area Network Comprises a range of medium-range technologies including powerline and community WiFi.

Satellite Two-way connectivity between a Typically used only for niche applications and/or in remote parts of the world.
ground-based device and a satellite.

Short-range Any local area network connection These connections are considered to also have a wide area connection (either fixed or
including WiFi, Zigbee and Ethernet. wireless) associated with them. In Machina Research’s reports there is no traffic registered
under short-range. The traffic is measured only under the associated wide-area network
technology as appropriate.

Wide area fixed Any fixed line connection including The vast majority will be DSL or cable but may include dedicated E1/T1 connections and
PSTN, ISDN, Cable, DSL and fibre. similar.

Machina Research 46
 Metric definitions
Metric Definition
Connected devices IoT connected devices are defined by Machina Research as “connections to remote sensing,
monitoring and actuating devices, together with associated aggregation devices”.
Revenue generating units (RGUs) Distinct from connected devices, this is the number of paying customers associated with the IoT
connections.
Revenue The sum of Revenue (IoT Application) and Revenue (IoT Service)
Revenue (IoT Application) Income from the sale of devices or services. Includes device costs where connectivity is integral,
module costs where devices can optionally have connectivity enabled, monthly subscription,
connectivity and traffic fees.
Revenue (IoT Application: Device & Installation) The upfront component of Revenue (IoT Application) accounted for by capital purchase of device and
installation costs.
Revenue (IoT Application: Device & Installation: The Device component of Revenue (IoT Application: Device & Installation)
Device)
Revenue (IoT Application: Device & Installation: The Installation component of Revenue (IoT Application: Device & Installation)
Installation)
Revenue (IoT Application: Service) The total of ongoing revenue components relating to an IoT application, including usage and
subscription fees.
Revenue (IoT Application: Service: Wrap) The proportion of Revenue (IoT Application: Service) fees that corresponds to the actual application
'wrapped' around a connection.
Revenue (IoT Application: Service: Service (Potentially) connectivity technology agnostic horizontal IoT platform components. See Research Note
Enablement Platform) "The M2M/ IoT platforms space has evolved into a highly sophisticated environment" for further
details regarding the scope of Service Enablement Platforms.
Revenue (IoT Application: Service: Connectivity) Revenue corresponding to mobile connectivity.
Revenue (IoT Application: Service: Connectivity: Mobile network specific horizontal platform components.
Mobile Connectivity Support Platform)
Revenue (IoT Application: Service: Connectivity: The revenue accruing from the carriage of cellular traffic and is therefore guaranteed for MNOs.
Mobile Network Traffic)

Machina Research 47
 Metric definitions (continued)
Metric
Revenue (IoT Service)
Revenue (IoT Service: Applications)
Revenue (IoT Service: Data Monetisation)
Revenue (IoT Service: Platforms & Middleware) Includes all middleware and platform activities other than connectivity support.
Revenue (IoT Service: Project Work)
Traffic
Revenue (Device & Installation: Device: Module)
Revenue (Device & Installation: Device: Non-
Module)
Revenue (Service: Connectivity: Connectivity
Support Platform)
Revenue (Service: Connectivity: Non-Mobile
network traffic)
Machina Research
Definition
The sum of the four items below.
Includes application provision and hosting and application development.
Includes API monetisation, and sales of data and IoT services.
Includes work by systems integrators and consultancies, and also the monetary value of equivalent
projects that are undertaken in house.
The amount of network traffic created per annum by the associated revenue generating units.
The communications module element of device costs. Actual cost where a standalone module is used,
notional where communications elements of a device are integrated
The non-module element of total device cost
Mobile network specific horizontal platform components.
The revenue accruing from the carriage of cellular traffic such as satellite and certain municipal wireless
networks. (to be introduced during 2013)
48
Geographical coverage
Term Definition
Developed Asia-Pacific The most economically developed countries in the Asia-Pacific region, comprising all countries east
of Iran and south of Russia.
Emerging Asia-Pacific The less economically developed countries in the Asia-Pacific region, comprising all countries east of
Iran and south of the former Soviet Union. Includes Central Asian former Soviet states.
Europe All of Europe including Russia, the Caucasus republics and Turkey and all points west, including
Greenland and Iceland.
Latin America Comprises all territory in the Americas outside of Canada and the US. Therefore includes all
Caribbean states.
Middle East & Africa (MEA) Comprises all of Africa as well as the Middle East from Iran in the east and all states south of Turkey.
North America Solely Canada and the US

Machina Research 49
All available on our website

Machina Research 50
 About this report
Market analysis & forecasts
Changes from last year
Forecast methodology
About Machina Research

Machina Research 51
About Machina Research
• Machina Research is the world’s leading provider of market intelligence and
strategic insight on the rapidly emerging Internet of Things, Machine-to-Machine
(M2M) and Big Data opportunities.

• We provide market intelligence and strategic insight to help our clients maximise
opportunities from these rapidly emerging markets. If your company is a mobile
network operator, device vendor, infrastructure vendor, service provider or
potential end user in the M2M, IoT, or Big Data space, we can help.

• We work in two ways:

o Our Advisory Service consists of a set of Research Streams covering all aspects of M2M and
IoT. Subscriptions to these multi-client services comprise Reports, Research Notes,
Forecasts, Strategy Briefings and Analyst Enquiry.
o Our Custom Research and Consulting team is available to meet your specific research
requirements. This might include business case analysis, go-to-market strategies, sales
support or marketing/white papers.

• The company was founded in 2011 by Matt Hatton and Jim Morrish, two
experienced industry analysts and the team has grown substantially since then.

Machina Research 52
 Machina Research’s Thought Leaders

Jim Morrish Godfrey Chua Margaret Ranken Jeremy Green

Founder & Chief Research Officer Principal Analyst Principal Analyst Principal Analyst
Enterprise IoT, M2M application Americas, carrier strategies, industrial, Connected home, connected Smart Cities, M2M and IoT technology
software, M2M & IoT platforms connected home and workplace buildings, smart cities ecosystem, key IoT players

Isabel Chapman Emil Berthelsen Aapo Markkanen Matt Hatton Pierce Owen
Principal Analyst Principal Analyst Principal Analyst Founder & CEO Analyst
Enterprise IoT, software and Enterprise IoT, big data, mobile Low Power Wide Area (LPWA), Operator M2M and IoT IoT forecasts and
middleware platforms enterprise applications edge computing, security strategies, technologies application spotlights

Andy Castonguay Gwenn Larsson Emma Buckland Phil Todd Matt Arnott
Principal Analyst Principal Consultant Principal Analyst Director of Research Analyst
Americas, M2M/IoT devices & Enterprise IoT consulting M2M forecasts, consumer electronics, IoT research content IoT forecasts and
modules, wearables, healthcare connected living, regulation management application spotlights

Machina Research 53
Some of our clients

Machina Research 54
 Advisory Service

Machina Research 55
Advisory Service Research Streams
The Machina Research Advisory Service Comprises 7 Research Streams
• IoT Strategies and M2M Strategies pull together our horizontal expertise, supported by M2M & IoT Regulation
• Forecasts and application analysis for our eight ‘Connected’ verticals (Cars, Cities, Health, Industry, Home, Business, Energy and
Consumer Electronics) consolidated in the IoT Forecast Research Stream
• Smarter Cars, Smart Cities and Industrial & Enterprise IoT Research Streams delve deep into addressing the requirements,
opportunities and challenges of car manufacturers, city managers and enterprises as they deploy IoT

Smarter Cars Smart Cities Industrial & Enterprise IoT

IoT Forecasts

IoT Strategies

M2M Strategies

M2M & IoT Regulation

Machina Research 56
Research Streams
Analysis of the evolution and impact of the emerging concept of the Internet of Things. Topics covered
IoT Strategies include software platforms, application development, data management, machine learning, monetisation,
trusted third parties and key players in this new emerging field.

Covering commercial and technical best practice in all aspects of the provision of connected solutions,
M2M Strategies including devices, networks and service providers. Covers topics such as new technologies, Communications
Service Provider strategies, standards, value chain positioning, pricing and M&A.

Country-by-country analysis of the regulatory issues relevant to M2M and IoT. Each country profile
M2M & IoT
examines issues such as licensing, roaming (including permanent roaming), numbering, spectrum
Regulation availability, and data sovereignty. Also includes analysis of overall trends.

Our comprehensive quantitative guide to the growth of the Internet of Things, featuring forecasts of
IoT Forecasts connections, technology, traffic and revenue for 200 countries across all 58 application groups covered in
our 8 ‘Connected’ verticals: Cars, Cities, Health, Industry, Home, Business, Energy and Consumer Electronics.

Examines how enterprises should prioritise and approach selecting and implementing IoT applications and
Industrial &
solutions in various domains. Explores the potential partnerships and collaborations, enabling (data)
Enterprise IoT technologies and protocols, and how enterprises can secure IoT solutions with SLAs.

Looks at smart city initiatives from the perspective of the would-be user. Provides city managers with
Smart Cities analysis of smart cities overall, recommendations over thresholds and context for deployment of different
smart city applications, best practice for implementation and case studies of deployments.

Focuses on key issues for the evolving connected car, including analysis of operating systems, OEM
Smarter Cars strategies, new business models, alternative vehicle-related applications and new developments such as
autonomous driving.

Machina Research 57
 Research Stream: IoT Strategies

Topics Covered
• Monetisation of data, emerging standards, data management,
privacy, and application topographies.
• IoT software platforms and best practice in the space
• Issues of privacy and security in IoT
• The role of data models within Subnets of Things and abstraction of
data models to support Internet of Things applications.
• The new IoT economy, examining how the growth of IoT will
fundamentally change business models and economic relationships.
• Profiles of the most interesting new and emerging players in the IoT
space.
• The impact on related entities ranging from database and corporate
IT providers through to providers of co-location space.

The Internet of Things is front-of-mind for many corporate

management teams. But, as usual, there’s a lot of hyperbole Deliverables Lead Analyst
associated with this new and emerging concept. For
• Eighteen Research Notes (approx. 4-6
instance, contemporary visions of the Internet of Things as a pages) providing commentary on the
‘connected future’ somewhat underestimate the complexity key themes as identified above.
of that future. The Internet of Things will be comprised of a • Three Strategy Reports (approx. 30-
huge number of Subnets of Things (SoTs), all operating 50 pages)
according to their own standards, protocols and data and • Access to the existing library of
semantic models. Only in certain circumstances will these previous publications.
SoTs be linked together. Machina Research’s IoT Strategies • Direct access to Machina Research’s
team of industry analysts.
Research Stream aims to strip away the hype to expose the
true dynamics at play in this complex yet critical space. Jim Morrish

Machina Research 58
 Research Stream: M2M Strategies
The M2M Strategies Research Stream focuses on technical
and commercial best practice in the delivery of the
connectivity element that cuts across all M2M applications,
providing our views on the key market trends and the
optimum strategies for those providing, or using, M2M
connectivity.
Almost everywhere one looks in M2M, disruption persists.
Device and network technologies are evolving fast, with new
technology arrivals, evolving standards, and technology sun-
setting. The market for M2M service provision is also seeing
a significant shake-up, with different players competing to
secure the same customers. In so-doing they must change
their business models, developing new service features,
building new alliances and finding new ways to interact with
their customers.
Machina Research
Topics Covered
• The role of Service Providers delivering M2M services – This
comprises an analysis of commercial and technical best practice.
• Technology options, issues and roadmaps – e.g.2G/3G switch-off, 5G,
remote provisioning, eUICC and IMSI swapping, and NFV/SDN.
• Low power wide area (LPWA) network technologies
• Modules and devices – With a particular focus on technology
developments (e.g. LTE-MTC), pricing and the impact on adoption.
• M2M security
• The commercial landscape - Including M&A, partnerships and sales
strategies.
• Procuring M2M services – Advising the users of M2M on what they
should be looking for, for instance in terms of SLAs.
• Standardisation – Examining the role that standards have in M2M.
Deliverables Lead Analyst
• Eighteen Research Notes (approx. 4-6
pages) providing commentary on the
key themes as identified above.
• One CSP Benchmarking Report
(approx. 90-100 pages).
• Two Strategy Report (approx. 30-50
pages.
• Access to the existing library of
previous publications.
• Direct access to Machina Research’s
team of industry analysts
Godfrey Chua
59
 Research Stream: M2M & IoT Regulation
There are a number of regulatory issues that have the
potential to hinder the growth of the Internet of Things,
including permanent roaming, national roaming, spectrum
licensing and data sovereignty. Based on Machina Research’s
extensive research in this area, this Research Stream
provides analysis of the current regulatory landscape,
identifies expected future developments and assess the
critical factors that may affect adoption of M2M and IoT.
Machina Research
Topics Covered
• Permanent roaming – Offering services globally is critical one for
supporting M2M. Regulatory prohibition of permanent roaming will
fundamentally influence how connectivity is provided.
• National roaming – Regulation varies in how easy it is to use this
useful tool for M2M
• Spectrum licensing – Issues of availability and use of spectrum.
Includes TV White Space, LPWA and unlicensed spectrum
• Numbering – What are the pros and cons of using this.
• Data sovereignty – What are the rules on how data can be stored and
sent overseas?
• Data privacy – Implications of data privacy rules.
• Other regulatory issues –Including subscriber registration and
taxation.
Deliverables Lead Analyst
• New and updated country profiles of
the regulatory position regarding
M2M and IoT across the key themes
mentioned above, in over eighty of
the top global markets.
• Some overview Reports and Research
Notes (4-6 pages) analysing and
examining the key trends in
regulation of M2M and IoT.
Emma Buckland
60
 Research Stream: IoT Forecasts
The Machina Research IoT Forecasts Research Stream
comprises access to the IoT Forecast Database and 58
Application Spotlight Reports, which between them provide
a comprehensive guide to the global IoT market opportunity.
Our segmentation of the market is based on eight IoT
sectors: Cars, Cities, Health, Industry, Home, Business,
Energy, and Consumer Electronics.
Within each of these sectors there is a diverse set of
devices, applications and services. As a result we base our
analysis on individual applications, of which there are 200
covering all of IoT. We then roll these applications up into
application groups, of which there are 58 (see below).
Machina Research
Topics Covered
• Ten year market forecasts for 58 application groups across 200
countries
• RGUs and Connections – Overall Revenue Generating Units (RGUs),
and connected devices split by technologies (2G, 3G, 4G, LPWA, short
range, MAN, Fixed WAN and satellite).
• Traffic – Wide area traffic per technology type.
• Revenue – Split by application (between device & installation and
service wrap, connectivity and service enablement) and service
revenue (between data monetisation, applications, platforms &
middleware and project work).
• Application Spotlight reports for each of the Application Groups
Deliverables Lead Analyst
• The full regularly updated Forecast
Database is accessible online via our
Forecast Database console. This can
be found via the Forecasts tab on the
website.
• For all 58 application groups for 200
countries, data is available for
connections, technology splits, traffic
and diverse categories of revenue.
• 58 regularly updated 10-20 page
Application Spotlight reports on each
of the Application Groups Margaret Ranken
61
 Research Stream: Industrial & Enterprise IoT

Topics Covered
• Assisting enterprises uncover and address the complexity in
implementing IoT solutions across multiple solution domains.
• Identifying changes in IoT data and applications, and impact this has
on supporting database and data processing technologies such as
NoSQl, NewSQL and SQL.
• Supporting enterprise assessments of buy and build approaches for
end-to-end M2M/IoT app support, data analytics’ solutions and app
development.
• Identifying value models for data, and value add enhancements
through data aggregation.
• Assessing the impact of standards on protocols and data models for
application development.
• Requirements and implications of data privacy and data sovereignty.

Enterprises are becoming increasingly aware of the need to

Deliverables Lead Analyst
implement connected devices to remain competitive and
deliver improved operational performance, innovative • Eighteen Research Notes (approx. 4-6
products and services, new customer experiences and pages) providing commentary on the
key themes as identified above.
financial improvements. Implementing enabling IoT
• Three Strategy Reports (approx. 30-50
technologies across different relevant domains will require a
pages each ) on key topics in Industrial
significant shift in mindset from traditional operational and & Enterprise IoT.
information tools and approaches as well as a closer • Access to the existing library of
understanding of the changes in market characteristics in IoT previous publications.
for enterprises. These relate to attributes such as scalability, • Direct access to Machina Research’s
agility, flexibility and speed. team of industry analysts.
Emil Berthelsen

Machina Research 62
 Research Stream: Smart Cities
The aim of this Research Stream is to provide city managers
with the key information that they need to turn their city
into a smart city. It provides analysis of the smart cities
space overall, recommendations over thresholds and
context for deployment of different smart city applications,
best practice for implementation and case studies of
deployments.
City managers should aim to stitch together smart-cities
initiatives into a cohesive implementation plan. In doing so,
the city manager must consider four categories of
influencing factors, including available benchmarks, intrinsic
city variables, the local city context and the wider context
within which the putative smart city exists.
Machina Research
Topics Covered
• Horizontal smart cities analysis – Looking at cross-city smart city
implementations, technologies, or companies, e.g. smart city
strategies for Cisco or IBM strategy.
• Smart cities case studies – Case studies of a few cities and their smart
city implementations.
• Application implementation guides – These will examine the cost,
timetables, and in-depth case studies of deployments.
• Smart cities project framework – Qualitative and quantitative guide
to the smartest cities. Includes a ranking of the smartest cities and
analysis of the different thresholds, criteria and interdependencies
that drive the business case for the adoption of smart cities solutions.
Deliverables Lead Analyst
• Three implementation guides (10-20
pages) on smart city implementations
• Twelve Research Notes (approx. 4-6
pages) on smart cities topics.
• Implementation guidebook – Pulling
together all of the smart city research
into an overall set of guidance.
• Smart cities benchmarking index –
Database of global smart cities.
• One Strategy Report (approx. 30-50
pages) on the subject of Smart Cities.
Jeremy Green
• Access to the existing library of
previous publications.
63
 Research Stream: Smarter Cars
Without doubt, the most important IoT sector for MNOs in
terms of connected device count is automotive. Cars (and
vans, trucks and fleet vehicles) are mobile assets with
human occupants, well suited to mobile technologies
designed to connect people. And there’s a lot of them.
However, the dynamics in the space are complex.
Unsurprisingly, given the size of the opportunity at stake, a
great number of potential service providers are targeting a
slice of the action. And, given the emergent status of the
market for connected cars, many of the fundamental
dynamics of the marketplace are still to play for. The
automotive sector is generating a continuous stream of
innovative solutions, ranging from autonomous driving to
new business models (‘servitisation’).
Machina Research
Topics Covered
• Operating systems – Including proprietary platforms, third party OSes
such as Android Auto and Apple CarPlay and options such as
MirrorLink.
• New business models – Shared car ownership schemes, including
those from automotive OEMs, e.g. BMW’s DriveNow, and disruptive
alternatives such as Buzzcar, RelayRides, and Zipcar.
• Alternative vehicle-related applications – A diverse range of auto-
related application developments such as Waze, and Uber.
• Autonomous driving and Advanced Drive Assistance Systems – The
technical, commercial and regulatory issues related to self-driving
cars, vehicle automation, and platooning.
• Hacking, tracking and distracting - examining these three big hurdles
the connected car needs to overcome.
Deliverables Lead Analyst
• Twelve Research Notes (approx. 4-6
pages) providing commentary on the
key themes as identified above,
• One Strategy Report (approx. 30-50
pages) on the subject of Smarter
Cars.
• Access to the existing library of
previous publications.
• Direct access to Machina Research’s
team of industry analysts.
Matt Hatton
64
Machina Research 65