I’ve long been suspicious of IoT forecasting, especially value-related forecasts. For one thing, forecasters rarely define what they are forecasting with sufficient precision for those forecasts to be meaningful, and they never reveal the underlying assumptions of their methodology. Now one organisation, Beacham Research, is doing a “The Emperor Has No Clothes” thing and casting doubts on the veracity of all these forecasts. More of that anon.
The Comms Alliance IoT think tank’s just released report really shows up the wide variations in IoT forecasts. On page eight it usefully gathers together predictions of value and number of connected devices from various well-known industry names. The variations are enormous.
Take value, “Industry projections for the global economic value of the Internet of thing in 2020” range from $1.9 trillion (Gartner) to $14.4 trillion (Cisco) by way of $4.5 trillion (Machina Research) and $7.1 trillion (IDC), but are they valuing the same things?
“Industry estimates of connected devices in 2020” shows even greater variation: from a ‘mere’ 21 billion from IMS to a whopping 100 billion from the Hammersmith Group. Value leader Cisco comes in midway at 50 billion.
It would take a great deal of delving into the respective reports to tease out the commonality, or lack thereof, in these forecasts, but one is particularly illuminating. Elsewhere, Cisco says: “With a total Value at Stake of $19 trillion from 2013 to 2022, IoE represents a profound market transition.”
And what does it mean by “Value at Stake”? It’s “the potential bottom-line value that can be created, or that will migrate among companies and industries, based on their ability to harness IoE over the next decade.”
I’m not even sure what ‘bottom line value’ means. Is it the same as profit? Does “value that migrates among companies and industries,” means that if company A makes dollar of revenue/profit by taking business from company B because it has deployed IoT, that is $1 of IoT value?
IoT forecasts “unrealistic” & “damaging”
Now, Beecham Research, which claims to be “an internationally recognised thought leader in IoT market development”, is warning companies contemplating IoT not to believe “all the hype and over optimistic predictions,” saying: “These numbers [may] be ’unrealistic’ and ’potentially damaging’ to the industry if they are believed and companies build their business plans and funding expectations on such ‘false promises’.”
Beecham CEO, “Robin Duke-Woolley, says: “We know that today, excluding mobile phones and general purpose devices like tablets, there are significantly less than one billion connected devices worldwide. To suggest that growth rates exceeding 50 percent per annum are credible when the long-term growth in this market has been consistently in the range 20-30 percent per annum prompts the question – why and what is likely to accelerate the overall growth rate so spectacularly? There is no answer to that.”
He also points out: “Even if those numbers could be achieved in shipments, there is not nearly enough resource available to install and implement them.”
He’s particularly scathing of predictions of trillions of dollars of new revenue. “We need to get real here. The total GDP of the United States – the biggest national economy in the world – is currently 18 trillion dollars annually. To suggest that new revenue from IoT will approach even 10 percent of this over a 5 to 10 year period is unrealistic and unhelpful.”
Cisco’s bottom line value is $19 trillion over the ten years 2013-2022. Revenue will be growing rapidly over that period so let’s assume the figure is $3 trillion in 2022 and compare that to global GDP, about $78 trillio, rather than US GDP. On that basis by 2022 those billions of devices (pick a number) and their ‘value’ would amount to a tad under four percent of global GDP.
“New revenue from IoT” equal to this amount does seem unrealistic, but to suggest that there will be some IoT component in four percent of global GDP by 2022 seems not unreasonable.
Half the problem with forecasts is not the figures, it’s the lack of precise definition of what is being forecast.