What Will 2018 Bring To The IoT?

Money pours into IoT/IIoT technology. Security and ROI are leading topics.


The Internet of Things is widely expected to progress in 2018—especially the Industrial IoT—as industry standards get hashed out and more vendors take cybersecurity seriously.

On the home front, many Americans are growing accustomed to artificial intelligence technology from their use of Amazon Echo, Apple HomeKit, and Google Home devices. They’re talking to their remote controls to change channels and to find Internet content, especially on the streaming video services of Amazon Prime Video, Hulu, and Netflix.

Q: Alexa, what’s going to happen in the Internet of Things this year?
A: Lots of things.

Cisco Systems took an in-depth look at the top technology trends of 2018. “Over the next 12 to 18 months, these three trends are poised to connect the dots further on customer experience: artificial intelligence (AI), Internet of Things (IoT)-connected devices, and conversational interfaces,” wrote Lauren Horwitz, Cisco.com’s managing editor.

“The billions of devices, which are connected to the Internet, have been installed in various items to gather data for customer service, environmental safety and improvement, and product maintenance. IoT devices have been installed in home security systems, refrigerators, cars, oil rigs, traffic lights, and surveillance cameras to gather data on the environment, as well as human interaction with these items,” Cisco wrote.

McKinsey & Co. recently went even deeper on IoT, assessing the rise of low-power, long-range wide-area networks, among other issues in the field.

Fig. 1: Potential economic impact by segment, in billions of dollars. Source: McKinsey report

What’s clear is that money is pouring into the IoT. International Data Corp. (IDC) forecasts worldwide expenditures on the IoT will be $772.5 billion this year, up 14.6% from 2017’s global spending of $674 billion. It predicts IoT spending will have a cumulative annual growth rate of 14.4% from 2017 to 2021, reaching more than $1 trillion in 2020 and $1.1 trillion in 2021. IoT hardware will account for $239 billion in 2018, mostly for modules and sensors, according to IDC. In terms of annual revenue, IoT hardware will be followed by services, software, and connectivity in 2018.

“By 2021, more than 55% of spending on IoT projects will be for software and services,” said Carrie MacGillivray, IDC’s vice president, Internet of Things and Mobility. “Software creates the foundation upon which IoT applications and use cases can be realized. However, it is the services that help bring all the technology elements together to create a comprehensive solution that will benefit organizations and help them achieve a quicker time to value.”

IDC forecasts manufacturing will represent $189 billion in 2018 IoT spending, followed by $85 billion for transportation and $73 billion for utilities, along with almost $92 billion for cross-industry spending on connected vehicles, smart buildings, and other areas.

“Consumer IoT spending will reach $62 billion in 2018, making it the fourth largest industry segment. The leading consumer use cases will be related to the smart home, including home automation, security, and smart appliances,” said Marcus Torchia, IDC’s research director for customer insights and analysis. “Smart appliances will experience strong spending growth over the five-year forecast period and will help to make consumer the fastest growing industry segment with an overall CAGR of 21.0%.”

The Asia/Pacific region (excluding Japan) will spend $312 billion on IoT in 2018, with China providing about two-thirds of those expenditures, the market research firm says. North America will shell out $203 billion, most of that coming from the United States. Europe, the Middle East, and Africa will pitch in $171 billion. Japan will spend $68 billion, and South Korea will ante up $29 billion, trailing only China’s $209 billion and $194 billion in the U.S.

Demonstrating the importance of IoT to global enterprises, the first big deal of 2018 was a definitive agreement by Arrow Electronics to acquire eInfochips, a worldwide provider of design and managed services. Financial terms weren’t disclosed. The companies plan to complete the transaction this month.

“Upon close of this acquisition, eInfochips advances our IoT strategy, expands our offerings, and moves us into the rapidly growing IoT services market. As a result, we will deliver complex and connected IoT solutions and technologies across multiple cloud platforms,” Michael J. Long, Arrow’s chairman, president, and CEO, said in a statement. “This acquisition adds over 1,500 IoT solution architects, engineers, and software development resources to Arrow’s already leading position in IoT design services.”

Sastry Malladi, chief technology officer of Mountain View, Calif.-based FogHorn Systems, says the momentum for edge analytics and edge intelligence in the IIoT will pick up in 2018.

“Almost every notable hardware vendor has a ruggedized line of products promoting edge processing. This indicates that the market is prime for Industrial IoT (IIoT) adoption,” he says. “With technology giants announcing software stacks for the edge, there is little doubt that this momentum will only accelerate during 2018. Furthermore, traditional industries like manufacturing, which have been struggling to showcase differentiated products, will now embrace edge analytics to drive new revenue streams and/or significant yield improvements for their customers.”

Adding intelligence at the edge is one of the big technology trends that began picking up steam last year as companies began to realize there is too much data being generated across the IoT to process everything in the cloud.

“Any industry with assets being digitized and making the leap toward connecting or instrumenting brownfield environments is well positioned to leverage the value of edge intelligence,” Malladi says. “Usually, the goal of these initiatives is to have deep business impact. This can be delivered by tapping into previously unknown or unrealized efficiencies and optimizations. Often these surprising insights are uncovered only through analytics and machine learning. Industries with often limited access to bandwidth, such as oil and gas, mining, fleet and other verticals, truly benefit from edge intelligence. What’s more, those that apply edge intelligence are able to benefit from real-time decisions, as well as insights from voluminous streaming sensor data. Due to the current pain points in the IIoT space and the edge technology availability to address them, we expect to see increased interest in edge analytics/machine learning from oil and gas, energy, utilities, transportation and other sectors interested in revamping their IIoT value.”

Dealing with security differently
Vaughan Emery, president and CEO of Seattle-based CENTRI Technology, also serves as CEO of Atonomi, a startup launched by CENTRI early last year to provide a security protocol and infrastructure for the IoT through its Atonomi Network. CENTRI is working with Arm, Flex, Intel, Microsoft, and other companies to employ its security software in IoT applications. Atonomi is dealing with IoT device identity and reputation to offer secure interoperability for the IoT.

The Atonomi architecture is built upon the Ethereum platform and features three key elements: the Identity Registry, the Transaction Validation Ledger, and the Atonomi Token. The latter is a blockchain-based native cryptocurrency. According to the company, the token can facilitate device-to-device autonomous transactions.

“I’m drawing an image of a convergence of some interesting technologies,” says Emery. “IoT connects our world, and consumers continue to find value in IoT. But they struggle with the trust factor. We’ve got this intersection of broad adoption of IoT. What we’re doing at Atonomi relative to IoT trusted identity and device reputation involves our ability to now leverage our underpinning technology of bitcoin, which is blockchain, and what it allows those of us in the cybersecurity industry to now do what we have not been able to do. Quite simply, it’s we’re able to establish identity and trust through not a single vendor, but through a consensus among many stakeholders. And that’s a fundamental shift in how the industry is going to look at cybersecurity. Don’t believe one party, or a federation of parties, but believe many parties that devices can be known and trusted.”

Blockchain effectively decentralizes systems in the infrastructure. “Historically, single points of failure are where criminals focused their attention. Blockchain allows us to decentralize that data set and that infrastructure. There’s not a single point of failure to attack, but many. The other value that blockchain brings is this historical ledger that allows us to audit across many different devices and interactions and establish an image of what is acceptable and what is not normal. In IoT, we all think about what happens when these devices become bots and they’re turned against systems. With things like blockchain and that historical ledger, we can gauge what’s normal behavior. In the past, that behavior stayed inside private systems. Now, as the machine economy begins to evolve, we can see how devices behave across systems. So, IoT, blockchain, and this enablement of cryptocurrency to facilitate a machine economy – those are the things I think about, those are the things I look at, as we move into 2018.”

With all of the reports on botnets and data breaches, there is “a fear factor” in IoT these days, according to Emery. The European Union’s implementation of the General Data Protection Regulation this year, with enforcement beginning on May 25, is “part of the conversation,” he notes. “Businesses are looking at what the IoT can do for them,” Emery says. There will be consolidation in general-purpose IoT platforms, he predicts. Amazon Web Services and other big providers of public cloud services will play a leading role.

Companies are starting to build security into IoT-based devices. Still, this is a complex problem with lots of seams that can be hacked.

“With crypto engines coming into the embedded world, you now have the ability to add in security,” says Dipesh Patel, vice president of engineering for physical IP at Arm. “The cost is decreasing. But there are a host of new challenges that come with connectivity, too. For example, how do you create a network stack for a smart lock? The embedded developer knows how to develop software to control the lock, but now you’re integrating networking. It has to work with WiFi. There are more ways to break things than in the past. So 32-bit microcontrollers are great for communication, but the attack surface is increasing.”

Attackers also learn from previous attacks.

“Look at what happened after the attack on the nuclear facility in Iran,” says Asaf Ashkenazi, senior director of product management in Rambus‘ Security Division. “The same technology was used to attack energy facilities in Saudi Arabia. The problem is that all of this can be easily replicated. Another problem is that there are so many devices that OEMs are shoving designs to market faster, and the margins are very low. With a $600 mobile phone, you can invest in security. If it costs 1% or 2% of the price of the phone, that’s acceptable. But if you’re selling a device for $10 or $20, you’re looking at very little security. It’s wrong to always blame the OEM, though. The challenge is how to make security easier and cheaper to implement.”

Smart money talks
How much of a dent security has put in the IoT market as a whole isn’t clear. But what is clear is how the IoT has shifted from a novel collection of technologies to one that is central to business development and growth. Business cases and ROI are now regular topics of conversation for IIoT pilots and additions this year.

“The year 2017 was about exploring IIoT, and that led to the explosion of proof of concepts and pilot implementations,” says FogHorn’s Malladi. “While this trend will continue into 2018, we expect increased awareness about the business value edge technologies bring to the table. Companies that have been burned by the ‘Big Data Hype’ – where data was collected but little was leveraged – will assess IIoT engagements and deployments for definitive ROI. As edge technologies pick up speed in proving business value, the adoption rate will exponentially rise to meet the demands of ever-increasing IoT applications.”

He predicts IIoT standards will be driven by customer successes and company partnerships.

“IIoT is just now getting attention from the major technology players,” Malladi asserts. “If anything, 2018 will see more new products coming to market, and there will be more to choose from in terms of standards. The next year or two will see stronger alliances, unlikely partnerships and increased merger and acquisition activity as the large technology companies seek innovation inside and outside their organizations. As for standards, they will be driven by success of customers and patterns of scalable IIoT solutions.”

This year promises to be an interesting one for the IoT. In this case, “interesting” doesn’t necessarily imply dangerous or troublesome. Security is still a factor that needs to be addressed across multiple layers of hardware and software, of course. But there is sufficient momentum and investment across the board to address these issues seriously.

What is more noteworthy is that smart technology is being used to deal with real business cases. After years of hype, the IoT and IIoT have moved well beyond connected watches and smart refrigerators to market-specific applications with documented value. What a difference a year makes.

—Ed Sperling contributed to this report.


trn hi says:

should we look at IOT as a “market force” ( example Moore’s law has been a force. This refering to fIve/seven force model -Mike Porter ) rather than looking IOT as a market segment

Leave a Reply