Clarifying strategies in the IoT software ecosystem to identify the missing block...

There are today tens of thousands of companies active in the Internet of Things or #IoT today. Taking into account only start-ups, Angel.co lists over 4,000 companies...

Hardware IoT ecosystem is significant with microchips, sensors, communication protocols, devices and hardware platforms vendors but #software IoT ecosystem is far more crowdy and complex. It interfaces hardware via device managers, adaptation layers, etc. but it also adds "the cloud", platforms and all the applications. This is when we start to get lost! Perimeters are indeed fuzzy and it's difficult to find out who is doing what precisely.

We can sort out all of this by capitalizing on industry's standard classifications. It's mainly around vertical and horizontal markets. A vertical is specific to an industry, profession or group of customers (e.g. energy, consumer, building, etc.) while a horizontal crosses all these sectors (e.g: software, security, etc.). This vertical wording has been adopted for some time in the software industry and is currently used in the IoT domain, usually adding "smart" to it: Smart Building, Smart City, etc.

Horizontal could also be used to map IoT software actors, but not in the exact same way we've exposed it. We can use it to differentiate the various cloud platforms offerings. There are basically two typologies of actors. The first one is the "generic/multi-purpose" IoT platform such as Amazon, Google, Microsoft which addresses a large base of end customers on the consumer and B2B domain. The second is usually more industry/B2B oriented such as IBM, GE Predix, Siemens, Bosch, etc. Both of these cloud platform address multiple verticals and represent the "horizontal dimension of IoT software".

On verticals, we typically find application developers that cover a full industry: Smart Building is one them and there are plentiful on offers on this vertical. Some companies cover the whole vertical and all its various applications while others focus only a sub-category like heating ventilation and air conditioning (HVAC) or access control. Their approach on the vertical is more or less integrated: from applications to data transport (over wire or wireless) down to the cloud hosting (inhouse or not).

Then come the specialists, focusing only a "block". What we call a block can be a part of a vertical (e.g. transport of data between the application and the cloud) or can spread over multiple verticals (specialist of data transport on smart building, smart factory, etc.).

This also helps to understand the main strategies of actors. Here's a quick representation of all of this:

As we can notice above, the biggest companies are already positioned with an horizontal strategy. Some of them try to specialize a bit by also focusing on 1 or 2 verticals (e.g. Siemens in the Smart Factory and Energy). Some others like IBM with Watson try to strengthen their horiztonal strategy by adding key technologies such as Artificial Intelligence (AI) and bundling them in their offer. In this horizontal domain, there's no way to enter if you don't have a critical size today, seats are already taken! And let's be clear, we're going to have some blood as some of these companies are just not generating enough revenue for the (huge) amount of money spent...

The other strategy is to focus on a vertical. Numerous start-ups have understood this and roll out solutions on a single vertical (usually). But they are already plentiful and on each vertical, they are deployed sometimes only in one world region but scale up will come, so time is running!

So specializing on just a single block is another strategy. They will be at the cross-roads of the two previous categories and will require very high specialization and skills. Such specialists will facilitate the life of application developers by allowing them to focus on their end customer's needs while leaving the "back office job" to specialists. They will also, in return, rely on existing cloud infrastructures to limit their scope of work.

This looks like a good approach to complete this complex puzzle and it's a win-win approach for all parties!