Singapore, 20 November 2015 – The Internet of Things (IoT) is expected to continue its transformative potential across industries in the foreseeable future. This momentum is expected to continue in 2016, with services expected to lead spending in the IoT space. Frost & Sullivan estimates the IoT market to be valued at US$24.2 billion in 2015 and will reach US$79.3 billion in 2020 with a CAGR of 26.8% from 2015 to 2020, with services accounting for nearly three quarters of the market in 2020.
“The major IoT opportunities will be in the deployment and management of IoT projects. This will lead to a requirement for new skill sets which are currently scarce in the APAC region,” noted Mr. Andrew Milroy, Senior Vice President, ICT, Frost & Sullivan, Asia Pacific.
There will also be a shift towards computing decentralization as the IT industry gradually shifts towards using more IoT technology. Examples include P2P networks becoming more widely used, allowing connected devices to communicate directly with each other rather instead of being routed through a centralized data centre.
Milroy also expects IoT to be heavily influenced by ‘Cloudification’ and this will lead to its own set of challenges. These include the large amounts of data involved, realignment of existing processes and security solutions.
Cyber Security is also paramount as the security paradigm is increasingly shifting to the physical domain in 2016. The increasing use of mobile devices and the gradual spread of the Internet of Things will offer many more attack vectors, and increases the risks of successful attacks enormously. The ongoing convergence of operational technology with information technology will enable the successful attackers to have much greater impacts than before. Industrial control systems are more vulnerable than ever before and security will be the number one consideration as these systems are modified or developed. In 2016, it is evident that security will be prioritized and built into the architecture of any new systems before they are implemented.
Less than 5% of the data captured by sensors today are used for optimization analytics and this figure has a potential to increase significantly as more and more devices get connected to the Internet. With the growth of data coming from IoT becoming a reality, Big Data providers are starting to sit up and take note and incorporate solutions that cater to this growth. As it becomes clear that IoT data will potentially dwarf social media and traditional internet data, Big Data providers have started working closely with IoT vendors to create platforms to support data management, data analytics and enable data collaboration. Enterprises today utilize insights collected to drive efficiency in their internal processes and we are seeing more use cases where big data is used as an extension of an enterprise’s core revenue but this will require a change in their existing business model. This will take time for revenue to grow because their customers will also need to change their procurement processes to cater to this.
Digital disruption is set to be the norm across industries as they look to transform to keep their business relevant amidst the ever changing technological landscape. According to Milroy, this trend will lead new business models and is set to stay.
“The Product as a Service model will become the norm in many industries. Over 70% of Fortune 500 companies will operate Product as a Service business models, with the Automotive Industry and Electronics Industry expected to lead this revolution at 15% and 13% respectively,” noted Milroy.
Key examples of Product as a Service include auto makers offering car sharing services on a pay per use system (Automotive), medical device manufacturers offering health monitoring systems (Healthcare) and IT hardware providers offering separation of products and services businesses (IT).
2016: Digital Services Outlook
A new set of digital services are emerging as opportunities. The 2 big opportunities for APAC are mobile payments and e-commerce. For SEA alone, the e-commerce segment is expected to grow at a CAGR of 23% from 2015-2020 and will be valued at nearly US$20 billion for ASEAN countries with Indonesia, Malaysia and Singapore expected to show the strongest growth. Indonesia will also become the largest e-commerce market by 2020.
The key drivers for e-commerce growth include expanding middle class population, changing consumption and purchasing patterns. Also, one other emerging area will be mobile payments, which will account for more than 10% of total payment transactions in APAC by 2020 with emerging APAC countries showing higher growth.
“We expect mobile payments to also offer major opportunities for traditional PoS players to move into new mobile payment platforms,” noted Ajay Sunder, Vice President, ICT, Frost & Sullivan, Asia Pacific.
2016: Data Centre and Cloud Computing Outlook
The Asia-Pacific data centre market is a state of flux with most service providers are in the process of fine-tuning their strategies around data centres and cloud computing. On one hand, the industry is witnessing large scale data centre construction frenzy and with increasing demand from cloud-enabled technologies, such as Big Data and IoT, there is greater competition than ever before. This is leading to price erosion in the market as well as industry consolidation due to lower than expected Return on Investments. Putting that into context, Frost & Sullivan predicts that the industry will witness greater consolidation in the market, driven by the need to offload data centre assets. This will drive the entry of new players, such as utilities and real estate companies, into the market as we see backward and forward integration.
At the technology level, Hybrid IT has established itself as the new normal and will continue to dominate enterprise IT decision making in 2016. Lastly, Frost & Sullivan expects 25% of all enterprise IT workloads to move to the cloud by 2020, up from 12 % in 2015. Overall, the data centre and cloud computing services market is expected to grow at a healthy CAGR of 20.5% to reach US$77.3 billion in 2020 from US$30.4 billion in 2015.
2016: IoT Outlook
The Internet of Things (IoT) market is one of the fastest growing segments in the Asia Pacific technology industry. The total Asia Pacific spending on IoT spending is forecasted to be US$79 billion by 2020. This offers real opportunities, especially in areas of transportation, logistics, manufacturing and consumer technology, which are expected to be fast growing segments over the next three years.
The Internet of Things market is evolving from one where the focus is on connecting of devices to one of using the information collected to create new services and business models. This is fundamentally changing the way companies market their products and services.
“With IoT, companies are moving from transactional product sales to a longer term relationship and service model, where everything can be offered as a service or ‘servicetization of industries’. As IoT moves from consumer and enterprise centric applications to vertical/ industrial applications, the potential growth of IoT is expected to exponentially grow over the next 5 years,” noted Mark Koh, Senior Industry Analyst, ICT, Frost & Sullivan, Asia Pacific.
2016: Cyber Security Outlook
Cyber Security has become one of the hottest topics now, not only among enterprises, but also government organizations due to the physical consequences. The spending in cybersecurity, as such, is expected to grow fast in the upcoming years, especially the spending on security solutions to protect critical infrastructure and ICS systems. Investment in solutions and services to defend against advanced malware, advanced persistent threat, targeted attacks or DDoS attacks is also poised to increase significantly in the upcoming year.
In particular, the Industrial Control System Security market is forecast to grow rapidly at a CAGR of 45.2% from 2015-2020, reaching revenues of US$1.5 billion at the end of the forecast period. The importance placed on ICS security by governments in the APAC region is the key driving force for the strong growth.
The need to have the capability to manage risks to enable comprehensive security policy throughout organizations is driving enterprises and organizations to invest more in advanced security solutions, expertise as well as threat intelligence. Enterprises are increasingly taking a more proactive approach towards cybersecurity to be able to stay ahead of any potential risks, enhancing their holistic defense strategy.
“Adopting an eco-system approach toward security will not only allow enterprises to have the capability to prevent, detect and remediate the threats using technology tools, but also help them build a strong capability of management of both internal and external threats with suitable governance process,” noted Edison Yu, Director, ICT, Frost & Sullivan, Asia Pacific.
2016: Unified Communications & Collaboration Outlook
The Asia-Pacific Unified Communications & Collaboration (UCC) market progressing well towards maturity as increasingly it is perceived as a strategic investment. Organizations’ continuous need to improve overall efficiency, productivity and competitiveness will drive demand for UCC solutions. The Asia-Pacific UCC market presents a US$9.1 billion opportunity by 2020, growing steadily at a CAGR of 5.2%.
The UCC market is going through rapid transformations in technology and in the way it is delivered. This will drive momentum shift towards UC services instead of the existing on-premise deployment. The UC Services is expected to contribute up to 40% of the market in 5 years compared to current 30%.
“The way people collaborate is in the midst of an enormous shift. The convergence of synchronous and asynchronous tools will lead to all-in-one virtual workspaces that offer always-on collaboration opportunities with teams in a mobile-centric world. Users will demand a converged communication platform that offers seamless experience where focus will be on business outcome rather than technology,” noted Krishna Baidya, Associate Director, ICT, Frost & Sullivan, Asia Pacific.