Data exchange will be a key enabler.
By Sam Lucero, Sr. Principal Analyst, IoT Services & Technologies at Omdia
Over the next 50 years, I think we’ll increasingly be talking about how IoT application data is widely shared and exchanged on data marketplaces. To date, the main story of IoT has been the opportunities and challenges companies and organizations have faced in deploying their own IoT applications. Whether these “adopters” pull together the application stack themselves, or acquire it as a service, their experience has revolved around managing devices in the field, connecting these devices over diverse connectivity networks, and integrating the resulting data with other enterprise IT systems.
Smartphones, the most popular consumer electronic device in the world, seemingly could provide a model for IoT. We no longer expect handset manufacturers or mobile carriers to create smartphone apps: app stores and the resulting reuse of the smartphone “platform” by millions of third-party app developers have greatly increased innovation and customer options. Data exchange has the potential to unleash similar innovation in the IoT market.
IoT data exchange represents an opportunity to move beyond application siloes as the primary form of IoT data utilization. This approach also potentially presents the most efficient option to acquire the wealth of date needed to achieve the greatest value from an IoT solution. Sharing, exchanging, and reusing data negates, or at least reduces, the need for every IoT application provider or adopter to deploy its own remote sensors and devices in the field, and to maintain its own IoT infrastructure.
Scalability will be a key challenge to the full realization of an IoT data exchange vision. Machine-initiated communications and control-based use cases are far more diverse than human-centric communications. Although human-centric internet communications benefit from a relatively narrow set of use cases (i.e., a human interacting with screen-based digital content) and an intelligent agent at the end point (i.e., a human that can interpret and interact with a wide diversity of information), machine-initiated communications and control do not enjoy such benefits. IoT data exchanges will need to further develop means for semantic interoperability to encapsulate a vastly complex world and further develop a capacity for programmatic exchange (i.e., removing or reducing the need for human involvement to manage transactions).
The transition to a full IoT data exchange model of data usage could represent an important inflection point in the market and an opportunity for currently small providers to grow significantly. Certainly, there are large, established technology vendors becoming increasingly focused on IoT data exchange. However, these firms have not established themselves in the IoT data exchange market with anything approaching the dominance of a Google or Facebook in the “Web 2.0” market, for instance. A window of opportunity exists for new entrants, with new ideas, to gain traction.
Ultimately, for data exchange to be more than a niche element of the IoT market, it needs to become automated and programmatic, like how data is exchanged on digital advertising markets. Companies interested in offering an IoT data market or data exchange should explore the following:
- Contributing to and using the work underway at various standards development organizations to provide semantic interoperability.
- Considering how blockchain and distributed ledger technology can help enable decentralized operation and reduce the need for trust in the market maker (please refer to the “Further reading” section for more details).
- Exploring how emerging technologies like machine learning (ML) can be applied to data exchange, for example in automating data discovery.
- Normalizing pricing – Pricing on IoT data exchanges is at such an early stage that one interviewee has hired economic consultants to help define the value of exchanged data. Meanwhile, two German automakers hired another interviewee purely to consult on how connected car data should be priced. In the end, another aspect of scalability will be the need to normalize pricing models to help remove this source of friction from the market and make transactions more programmatic.
- Developing ecosystems – Network effects should be leveraged when possible, but this may be hard to do across the diverse IoT landscape. IoT DEP vendors should consider a tiered strategy to grow market awareness and presence:
- Enabling private exchanges – An early path to revenue is to provide a DEP to customers that want to create their own private exchanges with suppliers or other key stakeholders. This activity also brings the customer and its partners onto the DEP vendor’s platform and using its technology, and this familiarity could ease their way to using the DEP vendor’s platform for wider, more public data exchange.
- Focusing on key early markets – Omdia has identified four early markets that are displaying early traction in their use of data exchanges, as highlighted earlier in the summary. DEP vendors should consider focusing on one or more of these areas in a “land and expand” strategy: build awareness and momentum in one market and use that success to encourage adoption in additional markets.
- Enabling cross-sector data exchange – While the goal of many of the DEP vendors interviewed for this report was to support broad, cross-sector data exchange, this also seems to be the hardest tier with which to start. Here, a special emphasis on capabilities to support scalability will be needed. Tackling this tier may be easier to accomplish after traction in the first two tiers mentioned above is achieved. Barring this earlier traction, DEP vendors should consider heavy involvement in standards development activity to raise the vendor’s profile as a relevant stakeholder and be an option to consider for organizations seeking IoT data exchange capabilities.
- Leveraging government and industry initiatives – Finally, DEP vendors should investigate the activities of initiatives like GAIA-X in Europe, or Society 5.0 in Japan and explore if participating in such activities might help raise the vendor’s profile in the market.
IoT data exchange is a nascent segment of the market currently. I believe we are at an inflection point in this segment’s growth, however, and it will play a key role in how the overall IoT market unfolds over the next 50 years.