Vendors must confront build-or-buy decisions and re-evaluate where their value lies relative to other players in their space

Across the region, governments and businesses are gearing themselves up for a digitally connected future powered by the Internet of Things (IoT).

Whether it’s production management in the manufacturing industry, freight monitoring in the transportation sector, or smart grids in the utilities space, IoT technologies are set to change the region’s industrial landscape forever.

But it’s not just governments and businesses that are embracing this connectivity-based revolution, with consumers increasingly getting in on the act too.

Indeed, of the $6.99 billion expected to be spent on IoT technologies across the Middle East and Africa (MEA) in 2018, consumers will account for around 10 per cent of the total.

From connected cars to smart light bulbs and everything in between, the consumer IoT space is finally beginning to find its feet, with MEA consumers forecast to spend well over $300 million on smart home technologies alone in 2018.

However, as the transition from stand-alone entertainment devices to connected solutions gathers pace, the consumer electronics industry continues to struggle with the technological challenges that internet enablement brings to previously non-networked devices.

The act of connecting a device to the internet introduces fundamental challenges around security, usability, applications, and solution development, and the consumer electronics industry has struggled with these challenges for more than a decade.

The transition from a non-connected world to an internet-connected one presents as many threats and opportunities as the transition from analogue to digital. And the same holds true for the array of household and personal objects now becoming part of the consumer Internet of Things.

Almost all the challenges faced by consumer IoT vendors, including security, services integration, applications integrity, and usability, are similar in scope but on a larger scale to those encountered by consumer electronics vendors in years gone by.

However, the new consumer IoT landscape places greater emphasis on two wholly new elements: data analytics and mobile applications.

Also taking on increasing importance is the ability to have devices interoperate with the larger world of IoT solutions and to have them work in concert both within the home network and across the wider internet, both domestically and globally.

The platforms supporting consumer IoT solutions have taken on these new challenges while incorporating the learnings of previous generations of connected consumer products.

But perhaps the greatest difficulty for manufacturers moving into the world of consumer IoT is understanding that the device has become ancillary to the solution.

Device elements, such as design and reliability, remain necessary for success; however, in most cases, differentiation and, consequently, margins lie elsewhere. Indeed, it is the services enabled by software, either locally or in the cloud, that provide a solution’s sustainable distinction.

To further complicate issues, consumer IoT solution providers need to consider their strategies in the context of other market players whose interests lie beyond a single point solution or even an ecosystem of solutions within the consumer Internet of Things.

These players have interests in tying their ecosystems into consumer IoT solutions in ways that serve to push agendas other than the connected solutions themselves.

Currently, users find themselves being locked into one particular platform, with the various choices including Apple’s HomeKit, Samsung’s SmartThings, Android’s Things, and Amazon’s Alexa, among others.

Such consumer IoT platforms provide key guidance for vendors transitioning from an era of unconnected devices to one where devices are not only connected to the wider world but also diminishing in relevance compared to the services they deliver and the software that makes it all possible.

At every level of device connectivity, from firmware on the device, to mobile application software, to the cloud services and data analytics engines, and across to third-party ecosystems, vendors must confront build-or-buy decisions and re-evaluate where their value lies relative to other players in their space.

The providers of consumer IoT software platforms approach the market with specific targets in mind and shape their offerings accordingly. However, the scalability of the systems and the corresponding economies means a shake-out of the platforms may be on the cards in the near- to midterm.

With such uncertainty in the air, consumer device vendors must ultimately assess how their IoT software platform partners will help them advance a business that focuses on developing and delivering service-centric solutions rather than on finding margins in the devices themselves.

The columnist is group vice-president and regional managing director for the Middle East, Africa and Turkey at global ICT market intelligence and advisory firm International Data Corporation (IDC). He can be contacted via Twitter @JyotiIDC. Content for this week’s feature leverages global, regional, and local research studies undertaken by IDC.

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