Tech Index 2022: Internet of Things/Connectivity

Faced with multiple crises – Ukraine, the continuing impact of COVID-19, supply chain disruption, inflation and the threat of recession – businesses have hard choices to make about technology investment.

Some projects, seen as desirable for the future but not immediately essential to digital transformation, are being put on the back burner. For some that includes monetizing data.

But where the Internet of Things and connectivity is concerned we’ve seen no sign of investment slowing. Advances in technology and changes in customer preferences, accelerated by the pandemic, are driving adoption.

Our survey shows that both consumer and industrial businesses continue to see IoT/connectivity as key to increasing efficiency and competitiveness.

Why IoT?

Rapid advances in network and connectivity technologies, cloud services, and hardware and software improvements have all come together to boost uptake of IoT technologies. As a result, we’re seeing an increasingly wide range of credible use cases being developed across many sectors.

Changing consumer appetites are also forcing traditional manufacturers to reinvent their business models as products incorporate more and more digital technology.

In the automotive sector we are seeing a shift away from outright car ownership to lease and subscription models. Carmakers are becoming providers of mobility as a service, with customers booking specific features of the car for a specific time period and with connectivity increasingly seen as a must have.

US and Chinese carmakers breaking into the European market are particularly pushing this model and it is forcing domestic players to reposition themselves as technology companies, often in collaboration with external vendors. This is a fundamental a shift in strategy.

With the growing dependence on data, new privacy and data protection concerns are being raised.

Carmakers face significant new regulatory challenges complying with both cross-border regulations like the EU directive on digital content and new national laws. Germany’s proposed new regulation on autonomous vehicles has provisions on cybersecurity and data transfer, which put the industry on a steep learning curve.

With satellite connectivity systems providing a credible alternative to traditional mobile networks, we are also seeing the growth of low cost/high volume products and services in diverse markets that were previously unreachable.

In Australia, Gasbot has developed smart, connected sensors that, through a combination of hardware, software and network connectivity can measure, monitor and provide notifications about LPG (propane) levels in tanks and cylinders, of which there are an estimated two billion in circulation globally. Markets for its technology are now opening up in Europe, the US and the Middle East.

Agriculture is another sector seen as ripe for such cloud-based services and as the transition to 5G gathers pace, parts of the spectrum are being freed up for low power, low bandwidth services, enabling a whole range of new use cases.

The pandemic effect

The pandemic has undoubtedly accelerated innovation in connectivity. But it has also raised new, complex challenges for businesses to address.

Many of the systems being deployed, in both the consumer and industrial sectors, are enriched by AI and predictive analytics. Now that customers are often more remote, technologies that help businesses predict customer preferences offer a competitive edge.

But new consumer protection regulations seek to allocate liability for any failures along the supply chain. For a business looking to integrate rapidly evolving IoT technology into an established product with a longer life span, such as a dishwasher, allocating liability can be difficult.

Focus on cybersecurity has also become intense in the wake of the pandemic where we saw a massive wave of ransomware attacks. Many businesses fell victim to these attacks and were forced to shut down their online systems during important trading periods such as Christmas with the loss of tens of millions in revenue.

The task of balancing the desire to monetize data with the need to protect against escalating cyber threats is far from easy.

Ways round supply disruptions

While disruptions in the supply of semiconductors over the last 18 months are easing, we’ve seen big tech companies increasingly taking matters into their own hands.

Apple is now designing and developing its own chips for some of its new AI systems, phones, tablets and desktops and Google is following suit.

It’s the first time in 30 years we’ve seen silicon being produced in a proprietary way for consumer goods, reducing reliance on volume chipmakers in Taiwan and South Korea and promising improved performance.

Great leaps forward in connectivity have already been made. Because consumer grade connectivity products are so good these days, we’re seeing even relatively large retail businesses relying on them to connect an estate of some 300-400 shops. We expect to see continued rapid advances in IoT technologies and connectivity in the rest of this decade.

Competitive edge

Businesses say improved efficiency is the main benefit of embracing the Internet of Things and better connectivity, as was the case in our last survey in 2020.

But in 2022 we’re seeing a slight increase in the number of businesses talking about other important benefits. These include better-connected internet systems, improved information flows and a boost to competitiveness.

Cyber and business disruption worries grow

Businesses continue to see potential draw backs in embracing IoT technologies and improved connectivity.

Lack of skilled staff remains a strong concern as in 2020, as does the level of investment required to adopt these new technologies, although slightly fewer expressed worries about investment this year.

There’s slightly less concern about regulatory and privacy risks – although both remain high on the list of worries. But other anxieties are growing for instance around new and old technologies being incompatible and the potential for business to be disrupted as new systems are introduced.

More plan to collaborate with external vendors

External suppliers have emerged as one of the main forces driving businesses to adopt IoT technologies.

In response it seems businesses are recognizing this isn’t a journey they can complete alone.

In our latest survey, 80% said they’re now using or plan to use external vendors to some extent to help them transition to these new technologies. That compares with less than 50% in 2020, when a clear majority said they expected to keep the process entirely in house.