36201_AT_Kearney_Seoul_Forum_IoT

Internet of Things: Changing the World

Seoul Forum 2015

May 28, 2015

[email protected] @AlexBlanter

Interest in the Internet of Things is off the charts

In the last 12 months:

• Nearly 4 million mentions

• 5X increase… on top of prior 6X increase

4-week moving average score:

• April 2013 – 15

• April 2014 – 50

• April 2015 – 90

9X increase in

publications over 2 years

Source: A.T. Kearney

Connected devices will be everywhere… both globally and here in South Korea

By 2020 in the World… By 2020 in Korea…

Internet of Things

Traditional connected devices

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0

5

10

15

20

25

30

2014 to 2020: 7x growth in IoT devices vs. 2x for traditional

• Country: 50M+ people, with

population density 10x

global average

• Seoul: 10M+ people, second

most densely populated city

in the world (2x New York,

and 8x Rome)

10x to 20 x connected devices per person vs. world

average: 350M to 700M in Seoul alone

• World’s highest Internet

penetration

• Internet speed 4x world

average

• 85% mobile penetration

• Significant government IT

and comms infrastructure

investments

Over 3.5 connected devices

per every human on the planet

Over 7.7 billion people Nearly 30 billion devices


What is the Internet of Things (IoT)?


We define the Internet of Things as a seamless combination of embedded intelligence ubiquitous connectivity, and deep analytical insights that create unique and disruptive value for companies, individuals, and societies. Source: A.T. Kearney

Conceptually, IoT is simple – practically…not so much

Ind

ustr

ies

Things

Value and Impact

Po

licie

s &

Sta

nd

ard

s

Identify

Sense

Connect

Collect

Analyze

Act

Enterprise

Consumer

Public Sector

There is no single Internet of Things –

there is a multitude of specific solutions,

each generating value in unique ways


Each solution will present multiple opportunities for new business


• Communication

• Control & automation

• Storage & retrieval

• Data analysis & decision

• Transactional

• Internet access and connectivity infrastructure

• Data aggregation and storage

• Computing

• App & service development enablers & APIs

• Deployment & management solutions

• Sensors & actuators

• Radios

• Embedded processors

• Smart modules

• Wearables

• Monitoring & control

• Content

• Optimization

• Mobility

• Sharing

• Interactive

• Marketplace

Our current 2015 forecast is that by 2020 IoT will impact close to 6% of the global economy

IoT will be materially disruptive – there will be winners and losers

$3.4T Revenue Redistributed

$1.7T Productivity Improvement

$370B Additional IoT Revenues

Revenues directly attributable to sale of IoT hardware, software, and services

$164B Value to End Customer

Direct reduction in costs driven by IoT and realized by end customers

Direct increase in output per unit of cost, enabled by IoT and reinvested

in productive assets and activities

Revenues realized within the world economy that will potentially move from one player to another with no net increase in total economy

Global Economy in

2020

$100T Up 7.5% since last year


Additional IoT revenues will be split in a multitude of ways

Enterprise

Consumer

Public Sector

$370B Additional IoT Revenues $205B

$135B

$30B

55%

37%

8%

Survey Results: Time to Value Rank

1

2

3

$201B 55%

$45B 12% 18% $68B

15% $56B

#of sensors

+33% yoy # sensors

Bandwidth cost

-25% yoy €/Mbs

Storage cost

Computing cost

-33% yoy €/transistor

6%

39%

Since last year

40% closer in 2015 vs. 2014


-38% yoy €/GB

Surveys consistently show IoT value delivery will hit the rapid growth phase by 2020

Value buzz

Survey Results

4% 2014

2015

2010 2015 2020 2025 2030

1

13% 22% 59% 2%

12% 16% 72% 0% 0%

IoT value delivery is accelerating


ICT will have a crucial role in most IoT solutions and scenarios

Direct

connection

Wide

Area

Network

(WAN)

Close

area

network

Personal

Area

Network

(PAN)

Connectivity solutions

Examples: Wifi, Bluetooth, Zigbee

Examples: Cellular network, Satellite

Connected TV

Smart meter

Connected car

Smart container

Connected watch

Devices

Antennas

Satellite

Connectivity solutions for IoT

Range (m)

Network infrastructures

Internet network


z

Last year has seen a global explosion of IoT activities


GE forges Internet of Things alliances with Verizon, Cisco, Intel… will also open up its Predix software platform to developers and users in 2015 as it aims to add intelligence to industrial gear

AT&T certifies tiny 3G module for IoT applications …world's smallest 3G chip module for use on the carrier's cell networks. The 16-by-26-millimeter module is intended for applications in the Internet of Things, transmitting data between devices

Qualcomm announced that its subsidiaries are achieving significant adoption of their broad connectivity, computing and solutions for the Internet of Everything

Microsoft announced a new version of Azure, an IoT-focused version of the Windows 10 operating system, and Azure Stream Analytics, designed to serve up real-time data from the world of connected objects

Intel Corp is using sensors to predict tool failure

SAP announced the launch of the SAP HANA Cloud Platform for the Internet of Things (IoT) to enable the device cloud for faster delivery of IoT business value

Bosch disclosed it would acquire ProSyst Software GmbH, a producer of software for smart devices. The company now has 3,000 software engineers working on IoT

To reward innovative Internet of Things (IoT) solutions for business customers, Deutsche Telekom Group is now accepting entries for the Business Wall of Fame contest in 8 countries

Chancellor of the Exchequer George Osborne today unveiled a £40 million plan to improve the Internet of Things (IoT) in the UK, as part of his 2015 Budget

Deutsche Telekom and China Mobile formed a joint venture that will see them provide connected car services to China's growing automotive sector

SK Telecom together with local furniture maker Hyundai Livart, has unveiled new Internet of Things-enabled household furniture

Fujitsu and Microsoft announced their collaboration to bring innovative operational excellence to manufacturing

Flanked onstage by developers of smart shoes (Boogio), farming- data sensors (Weenat) and an IoT programming (Temboo), Young Sohn, president and chief strategy officer of Samsung Electronics, unboxed Artik, new chip technology for Internet-connected devices.

Sony and Interdigital launch a JV to combine consumer electronics with wireless M2M

TSMC launches ultralow power technology platform for IoT and wearable device applications, leveraging its 8” and 12” fabs to produce microcontrollers, image sensors, WiFi and Bluetooth sensors

M&A related to companies supporting the Internet of Things continue to climb. So far in 2015, companies have spent $14.8 billion to purchase 39 companies related to IoT, surpassing the $14.3 billion spent for 62 such companies in 2014

North America and Asia Pacific are expected to be the main beneficiaries of IoT, at least in the near term

North America

1.4

Asia Pacific

1.7 Europe

2.9

Middle East

2.9 South America

3.1

Survey Ranking


In Asia, the IoT race is on as most countries are adopting new IoT policies

• Gov’t unveiled an action plan called “Internet Plus” aiming to support the integrated development of cloud computing with IoT, big data and mobile to foster the artificial intelligence industry

• Made in China 2025 initiative unveiled by China’s State Council outlining a 10 year plan including a focus on developing smart manufacturing capabilities

• The government of Shanghai, China and China-based Internet service player Tencent have signed a collaboration agreement to jointly push Shanghai's Internet of things (IoT) infrastructure

• China's Ministry of Finance and the Ministry of Industry and Information Technology (MIIT) have jointly released administrative measures to standardize the subsidies for Internet of Things

• Indian government released a Draft Policy on IoT: create IoT industry in India of USD 15 billion by 2020 and intends on developing 100 smart cities

• Singapore unveils plan in push to become smart nation: launches the Smart Nation Programme which seeks to harness ICT, networks and data to support better living, create more opportunities, and to support stronger communities

• Government included IoT as one of 5 smart-city projects in order to improve city management and plans to use an area of Kowloon East to explore the feasibility of developing a ``Smart City.

• Gov’t announced a plan to invest 5.6 trillion won ($5.1 billion) by 2020 to foster new growth engine industries including 77.2 billion won ($70 million) for IoT

• South Korea has announced plans to foster the growth of IoT and its smart car industry, with 1 trillion won allocated for this year

• IoT to be applied to the entire area of Seoul city by 2020

• Japan's Ministry of Internal Affairs and Communications (MIC) sponsors R&D Initiative, "Research and Development Project for the Ultra-high Speed and Green Photonic Networks"


Our analysis indicates that South Korea will be among the top 5 countries globally to benefit from the Internet of Things

Bubble size represents 2020 GDP size

IoT Influence on Economy = sum of applicable IoT use cases, weighted by the relative size of each in 2020

Pace of IoT Adoption = Internet and connectivity infrastructure, ease of doing business, overall pace of economic growth, and culture of innovation


At a regional level, success in IoT depends on three key factors

Key factors

The right business environment

The right local ecosystem

Companies that know how to innovate

Key components South Korea

• Advanced economy, with easy access to capital and workforce

• Favorable regulatory environment

• Critical mass of relevant industries

• Strong players capable of making the market

13th largest economy in the world

Ranked by the World Bank as #5 in ease of doing business

Telecom, consumer electronics, heavy industries, white goods…


2

5

111314

1820

2225

35

GermanySwedenUnited Kingdom

Korea, Rep.

ChinaUnited States

BrazilIndiaJapanAustralia

Top 5 Companies as a percentage of GDPTop 5 companies as a percentage of GDP


Key factors Key components Silicon Valley example




• High concentration of diverse but leading businesses

• Rich socio-economic system

• Culture conducive to collaborative innovation

• Shared history and resulting confidence



Key factors Key components Best Innovator attributes




1. Reach for the business model

2. Instill innovation culture

3. Invest in informed strategic choices

4. Leverage the network

5. Measure relentlessly


In closing…

Internet of Things will materially change what we do as individuals

and enterprises – and that will happen whether you do anything or not

Most of us in the room – and our companies and countries –

will be key beneficiaries of the Internet of Things

Truly taking advantage of the Internet of Things will require

different strategic thinking and new execution capabilities – for all involved

1

2

3


This document is exclusively intended for select clients of A.T. Kearney. Distribution, quotations, duplication, and excerpts are not permitted without A.T. Kearney’s prior written consent. The content compiled in this report is for presentation only and does not represent the complete findings or total documentation on the topic represented.

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