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IoT Executives Implementing Service-based Business Models to Reinvent Revenue Streams and Entire Businesses, According to VDC Research
Massive Installed Base of Devices Fuels IoT Services Revenue Growth
NATICK, MA | November 29, 2017 - The market for IoT services will grow at a rapid compound annual growth rate (CAGR) of 28.8% through 2021 as businesses continue to shift products towards the network-based, as-a-service business model. These findings are outlined in a VDC Research study entitled The Global Market for IoT Services, which includes quantitative and qualitative analyses, discussions of major market dynamics, insights into vendor strategy, and end-user trends.
The IoT services market is unique in that it is not only one of the fastest growing markets under study within the IoT & Embedded Technologies group at VDC, but also one of the largest due to revenue generation from the rapidly accumulating installed base of IoT devices, rather than just yearly unit shipments. Every connected system adds to the potential pool of devices that can use or consume IoT services over the useful life of the system.
“The IoT Services market is unique – rapidly growing due to revenue generation from the accumulating installed base of IoT devices, rather than just yearly unit shipments.” - Roy Murdock, IoT & Embedded Technology Analyst at VDC Research
Licensing schemes and control of the licensed software functionality separate IoT services from IoT software and hardware. Commercial hardware and software are sold outright, on a royalty/per-device basis, or licensed for use over set increments of time. Traditional products generally do not depend on a network for their resources or functionality to be consumed, and are often controlled and managed by the customer directly once purchased from the vendor. IoT services, on the other hand, are typically metered and billed in granular increments and controlled by the service provider.
IoT services are central to many organizations’ decisions to invest in IoT capabilities. As illustrated in the accompanying figure, “Finding new strategic opportunities or service-oriented business models” was top of mind among engineering managers surveyed by VDC. The usual factors – price, competition, and time-to-market – have taken a back seat in recent years, as managers look to transform products and businesses at a higher level through service-oriented business models.
“Unsurprisingly, the vertical markets with the highest installed bases of heavy machinery, such as the automotive, hospital medical device, and industrial automation markets, will also see robust IoT services growth through 2021,” said Roy Murdock, Analyst in the IoT & Embedded Technology division at VDC Research. “The ROI on services for these heavy assets is attracting much-warranted attention from IoT services customers – the OEMs and equipment providers of the world.”
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About VDC Research
Founded in 1971, VDC Research provides in-depth insights to technology vendors, end users, and investors across the globe. As a market research and consulting firm, VDC’s coverage of AutoID, enterprise mobility, industrial automation, and IoT and embedded technologies is among the most advanced in the industry, helping our clients make critical decisions with confidence. Offering syndicated reports and custom consultation, our methodologies consistently provide accurate forecasts and unmatched thought leadership for deeply technical markets. Located in Natick, Massachusetts, VDC prides itself on its close personal relationships with clients, delivering an attention to detail and a unique perspective that is second to none.