Growing opportunities in the Internet of Things

Growing opportunities in the Internet of Things

Maturing underlying technologies will make Internet of Things technologies easier to implement and help companies and investors seize new opportunities.
After years of hype, anticipation, and steady uptake, the Internet of Things (IoT) seems poised to cross over into mainstream business use. The number of businesses that use the IoT technologies has increased from 13 percent in 2014 to about 25 percent today. And the worldwide number of IoT-connected devices is projected to increase to 43 billion by 2023, an almost threefold increase from 2018.

This level of uptake is both a result and an impetus of the developing technologies that underpin the IoT. For one, technological advancement means that IoT technology will become easier to implement, opening the door for a wider variety of companies to benefit from IoT applications. Indeed, although large enterprises began to invest their sizable resources in IoT technologies years ago, the beneficiaries of this latest wave of IoT maturity will be small and medium-size enterprises. While they may not have the means to execute bespoke implementations, they can still invest in easy-to-use IoT solutions.

As frequent investors in midsize companies, private equity (PE) funds should re-evaluate the IoT as a sector that can help create significant value. To that end, this article will serve as an overview of the growing market for the IoT, the technology’s major applications, and the elements within the IoT technology stack. These insights can then be translated into business benefits for PE funds interested in becoming involved with the IoT as investors, owners, and partners.

Consistent growth

Advanced principal technologies and a proliferation of devices have helped fuel the growth of IoT technologies. In fact, investments in IoT technology are projected to grow at 13.6 percent per year through 2022 . Further growth in the coming years will be possible thanks to new sensors, more computing power, and reliable mobile connectivity.

Sensor technology—embedded in IoT devices—will continue to become cheaper, more advanced, and more widely available. In turn, this availability and cost-effectiveness will make new sensor applications possible, including large-scale monitoring and detection. Meanwhile, computing power has increased about 100 times in the past 15 years.3 Applications such as real-time analytics and artificial intelligence can thus shift activity from local devices toward cloud and edge computing solutions.4 In addition, improved mobile connectivity with the advent of 5G will allow new applications for experiences such as augmented and virtual reality.

Finally, the IoT market will grow because existing IT devices will need to be linked to the IoT. Growth in traditional connected IT devices is admittedly moderate—about 2 percent per year. However, the installed base of more than five billion smartphones, two billion personal computers, and one billion tablets indicates a massive market for device integration.5

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