91% of IoT developers use Open source

Did you know that 91% of IoT developers use open source technology in their projects? Our latest Premium report in the IoT series –Open source in the Internet of Things -not only confirms the figure but also sheds light to a number of tools and strategies that developers employ for open source, open hardware and open data.

The Open Source in IoT report provides developer program managers with objective data-backed insights on the use of open source technology by IoT developers and helps them to manage the use of open source in their projects. Some of the key questions that this report answers include:

  • How mainstream is open source in the Internet of Things? Is it just for hobbyists and idealists, or is there more to it than that?
  • Which developer demographics use open source and why?
  • How can I make sense of the hundreds of open source, open hardware, and open data licenses that are out there?
  • Should your project be open or closed? How can you use open source to achieve commercial success?

The data in this report comes from our 10th edition Developer Economics survey (Q4 2015). 3,700 Internet of Things developers answered questions about their use of and attitude towards open source technology.

To give you an idea of the findings of the IoT report we have prepared an infographic depicting some of the key findings. Have a look at some of the most interesting trends that have been extracted from the report and give a very  representative outline of the the mindset of IoT developers and their contribution to the open source community  :

91% of IoT developers use open source

Six key trends in the IoT developer economy for 2016

Every company should master developer ecosystem skills. Our new IoT Megatrends 2016 report sheds light on the state of the art in the IoT developer economy, distilling the major data points and insights from our research into six important trends in IoT.

Software is eating the world. [tweetable]Access to developers has become a competitive advantage in every industry[/tweetable]. Today a business in media, games, finance, or transportation, can only compete by using software to improve productivity and efficiency through every part of the business. Businesses in healthcare, construction and agriculture now find they need to use software developers to remain competitive.

As the Internet of Things takes hold and more and more traditional products get a software component, this trend only accelerates. Already, [tweetable]over 5 million developers are active in the Internet of Things in early 2016[/tweetable]. This year, we estimate that their number will grow by 800 thousand developers. That’s about the population of South Dakota, Macau, or Cyprus. [tweetable]By 2020, there will be close to 10 million Internet of Things developers[/tweetable].

6 key trends for 2016

In our 60+ page IoT Megatrends 2016 report, we highlight 6 key IoT developer trends for 2016.

Developers are more and more the center of commercial strategy. If you’re not into developers, you’re not doing it right. If you believe that the Internet of Things is only about making new, stand-alone devices and solutions, then think again. More and more key players in every IoT market build their strategy around developers who can extend the product beyond what it was when it left the factory. From Amazon and SmartThings in the home, Apple and Pebble on your watch, and Ford and Automatic in your car, all the way to ThingWorx and IBM in industrial settings, 3D Robotics and DJI in drones, and Oculus and Microsoft on your virtual reality headset – developers are key to success in the marketplace. And it’s clear to see why. Our report offers four ways that developers can extend a business: as innovators, customers, extenders, and distributors.The trend towards placing developers in the center of commercial strategy is in full swing. For example, Industrial IoT counts almost as high a percentage of professional developers as the mobile ecosystem does, while the smart home sector trails behind.

Battle of the Smart Home Hubs. Every major consumer technology is vying to become the hub of your home nowadays, from Amazon (Echo) and AT&T (Digital Life) to Xiaomi and Xfinity (by Comcast). It shouldn’t surprise then that with 1.4 million developers, the smart home is the most popular IoT sector. Smart home hubs compete on three axes – new touchpoints, new interaction models and developers – each of which raises important questions for the future. Touchpoints like voice control, next-generation remote controls, apps, and messaging are the core of the user experience, but most solutions don’t come from the maker of the smart home hub itself. Who will control the customer relationship in the future, harvesting user loyalty? Conversational platforms (voice, chat) in particular are coming up strong. Meanwhile, the rise of artificial intelligence fundamentally challenges the central role of developers as creators of use cases. Will developers go extinct? For now, key players still count on developers to drive value creation, also in AI-driven conversation platforms.

The 4 frontiers of wearable platforms. Innovation in wearables is in full swing. Wearables move from consumer electronics devices to being unobtrusively embedded in clothing, which make the technology more and more relevant for traditional fashion companies. Soon, brands will compete on digital identity – an opportunity to create a powerful connection with users. Smartwatches and AR/VR platforms will compete on who has most apps. In smartwatches, Android Wear is under pressure from new platform challengers. On the one hands, Chinese internet companies build their own Android derivatives for wearables. On the other, victims of the Android smartphone strategy build direct challenger platforms based on Tizen or webOS. Finally, our research shows that [tweetable]data-centric apps are more lucrative than simple smartwatch apps or new wearable devices[/tweetable], but that few developers go that way today.

From Connected Car to software-defined transportation. The innovation focus in Connected Cars is shifting from the dashboard to vehicle data, and in the future to data-driven transportation platforms. Car makers struggle to keep control over and to gain access to the necessary supply chain, expertise, and data to be leaders in this evolution. Will car makers miss automotive computing just like Microsoft missed mobile? We’ve explored this trend in depth here.

Consumer and Enterprise technology converge. Consumer and enterprise technology are increasingly converging in most industries. The smart home of today will become the smart office of tomorrow, as smart locks turn into access control and smart TVs into meeting room equipment. The equivalent of wearable-sensor-driven health apps in the enterprise are people analytics, such as the Humanyze platform. And Jeff Immelt, head of GE, famously said this about data technologies developed at Amazon, Google, or Facebook making their way into the industrial world: “If you went to bed last night as an industrial company, you’re going to wake up this morning as a software and analytics company.” Consumer, and not enterprise technology will be the foundation for the converged future. Why? Consumer markets offer much faster product evolution and validation with customers. Consumer-grade ease of installation coupled with enterprise-grade security will be the future. [tweetable]Developers from their side will be increasingly mobile between consumer and enterprise markets[/tweetable].

The hottest business models in IoT. The prevalent business models in the Internet of Things are moving from product sales to recurring revenue, and from products to services. Industrial IoT technology creates opportunities for vendors to sell access to assets like jet engines or locomotives as a service, rather than selling the machines themselves. In the home, smart appliances (e.g. washing machines) are becoming an e-commerce point of sale for consumables (e.g. washing powder). Companies like Nest, Oscar Health Insurance, or Automatic have paved the way for moving from a ‘consumer pays’ model to a ‘consumer gets paid’ model, subsidizing devices with other revenue streams like insurance or energy company rebates.

The full IoT Megatrends 2016 report can be downloaded here for free.

Just out: Developer Megatrends H1 2015

Software developers are a driving force in every industry and a source of competitive advantage. They are the kingmakers of modern business. In our 50+ page Developer Megatrends H1 2015 report (download it here or see the SlideShare presentation), we highlight 4 key developer trends for 2015.

Every day the evidence is mounting: software developers are a driving force in every industry and a source of competitive advantage. They are the kingmakers of modern business.

For mobile devices, there is no doubt. 1.5 million apps on iOS and Android each have propelled us into a new era of mobile computing and given rise to whole industries that weren’t even possible before. Look no further than the havoc that Uber is wreaking in the transportation industry. Developers are not finished with mobile, either. [tweetable]Every year, 800,000 new mobile developers join the pack[/tweetable]. That’s about the population of South Dakota, Macau or Cyprus, every year.

Developers are invading more and more industries and verticals. Our Q1 2015 Developer Economics survey showed that 53% of mobile developers are already involved in the Internet of Things, with many more to come. [tweetable]Our latest estimates put the amount of IoT developers over 4 million individuals[/tweetable].

Developers are conquering the wrist, with 3,500+ Apple Watch apps and 2,300+ Android Wear apps. They’re conquering the car. Android Auto and Apple Carplay will be available on dozens of car models this year. 250+ OBD apps provide aftermarket solutions for car data, with growing support from big players in telecom and insurance. Developers are conquering the home, taking advantage of new technologies and platforms like Samsung SmartThings, Apple HomeKit, Google Weave, Eclipse Smart Home or dozens of device APIs. Developers are even conquering the sky. Major drone players like DJI (from Phantom fame), 3D Robotics (dronekit.io) or Airware are providing SDKs for drone apps, helping developers to put drones to use in industry, agriculture, construction or mining. Cities, healthcare, clothing, factories, … – They’ll all fall to the wave of innovation made by developers.

When we say developers, we don’t just mean hobbyists tinkerers. Developers matter a great deal to businesses. From telecom to fashion, from logistics to lighting, today’s competitive battles are won and lost by attracting developers. To cite just one example, Salesforce took the #1 spot in CRM systems from Oracle, in large part due to its 1.4M strong developer ecosystem. Every modern company must master developer ecosystem skills if it is to thrive in the information age.

4 key developer trends in 2015

In our 50+ page Developer Megatrends H1 2015 report, we highlight 4 key developer trends for 2015.

Developers escape from the app store. Revenue from app store sales or in-app advertising grew by 70% in one year, according to IDC and App Annie. Great news! Or is it? The truth is that [tweetable]the app store alone cannot sustain the mobile developer population[/tweetable]. 60%+ of developers are under the app poverty line and only 1 in 9 is in the safe zone. Most money in the app economy is not made from the app store, but from app-driven e-commerce. Selling offline goods and services via apps represents 71% of the app economy in 2015 – and it’s earned by only 9% of developers! Whether using apps as a channel (like Amazon), building a mobile-first business (like Uber) or using apps as a platform (like WeChat), e-commerce is winning app revenue model and will remain so for the foreseeable future.

Developers escape from consumer markets. There is another way to dodge the poverty trap: target enterprises. Only 20% of mobile developers target enterprises, but 46% of them makes over $10K per month, versus 19% for consumer-oriented developers. Making the jump to enterprise might be easier than it seems. There is substantial overlap in what consumer and enterprise app developers are working on. [tweetable]Many apps can be simply repositioned or repurposed to attract an enterprise audience rather than consumers[/tweetable]. We see a similar pattern among Internet of Things developers. Winning app and IoT developers will repurpose consumer technology and business models to solve the most important enterprise problems, and dodge the poverty trap by doing so.

Apps escape from screens. The app paradigm of bite-sized software is replicated outside of smartphones: it can be found on the watch, desktop, car, TV, browser, and in the home. The nature of apps is changing too. From yesterday’s traditional app like Angry Birds (where the value is delivered by the app itself), we’ve moved to the companion app. In Honeywell’s thermostat-controlling Lyric app, the value is in the device, and the app is just the remote control. [tweetable]The value in tomorrow’s apps will come from making sense of data[/tweetable]. Apps like Apple Health process triggers and signals across devices, sensors and APIs. As a consequence, data developers and data platforms will soon be king.

Platforms escape from mobile. What’s the future of mobile platforms, given the stalemate in platform wars and the evolution to data-centric apps that moves the focus away from mobile OS? Mobile ecosystems like Android and iOS move to the Internet of Things in force, fully leveraging their developer and user bases to gain traction fast across all major IoT verticals. Others like e-commerce players are following in their footsteps, attracting devs with distribution capability and engaged users. Here’s the billion dollar question then: [tweetable]will the network effects from mobile carry over to IoT[/tweetable]? Will the mobile platform duopoly be sustained in IoT? In the future, IoT device selection by consumers and enterprises will be determined by “will it work with my existing services and devices”. We predicted this as early as 2010. In the 2012 edition of the Megatrends report, we talked about the evolving meaning of convergence. From converged networks, to converged devices, to experience roaming. That prediction is now playing out in full.

Download the full Developer Megatrends H1 2015 here.

To understand Internet of Things you need to understand Zenefits

Internet of Things is a buzzword in many board rooms in 2015. Enterprises from logistics to construction to healthcare, are seeing IoT as the source of data-driven cost savings and competitive advantage. For example allowing building operators to drastically save maintenance costs or allowing farms to have real-time insights that can systematically increase the yield of their crops. But there is a much bigger business model shift taking place. One that will cause traditional industry boundaries to collide and some to even collapse.

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To understand how IoT will change the business world, you need to understand Zenefits.

Zenefits is one of those unicorns media loves to talk about and VCs would crave to fund. Since launching in May 2013, Zenefits reached $20 million run-rate by the end of 2014, and is projected to reach $100M run-rate by end 2015. And it just raised a whopping $500 million series C at a $4.5 billion valuation. Andreessen Horowitz, the famed venture capital firm now lists Zenefits as its largest investment to date.

Zenefits is an insurance broker disguised as free online HR software. The California company offers SaaS HR services to over 10,000 small and medium-sized businesses to help them manage all their HR processes in one place. Best of all it’s free. Zenefits earns commissions on health, dental, vision, life, disability, or any other insurance, every time their SMB customers open up a new health plan or onboard a new employee through its SaaS solution (In the US, every company has to offer their employees minimum health care).

zenefits-dashboard-screenshot

Zenefits adds value in helping small companies manage the complexities of HR. It captures value as an insurance broker.

In essence, Zenefits is an insurance company that offers free SaaS services to acquire customers. SaaS requires low-cost low-touch sales and so Zenefits profits on the delta between the customer acquisition cost (CACs) in the HR and SaaS industries. Of course, Zenefits creates a captive audience which it then can resell into more insurance services and higher profits.

Our ‘low-touch’ online model exceeded our expectations, affirming the continued health of our core business [source]

Wired magazine calls Zenefits’ business model “crafty and unusual”; crafty in using indirect models to profit, but as we’ll soon see Zenefits’ cross-industry business model is not unusual, but relatively unknown.

In fact cross-industry subsidies are business as usual for mobile industry disruptors including Google (providing the Android OS for free), Amazon (providing e-readers at cost), Xiaomi (providing mobile phones at cost) and WeChat (providing communications apps and storage services for free). At VisionMobile we’ve been studying how these companies have disrupted the mobile industry through Asymmetric Business Models (see our earlier report on the topic) a business model that crosses industries, by forcing profits to migrate from one industry to another. And we argued in that paper:

In the digital era, companies can get an unfair competitive advantage by breaking industry boundaries.

The next diagram shows how Google, Facebook, Amazon and Xiaomi have been transferring profits across industry boundaries, and thereby enjoying an unfair advantage.

asymetric-business-models-transfer-profits-across-industries

Apple has an unfair advantage over Nokia by offering a library of over 1 million apps and 40 million songs, while capturing value in premium connected devices. Google has an unfair advantage over Yahoo and Microsoft in Search when capturing value in online advertising by creating value in the free Android that allows smartphone, tablet and IoT makers to compete. Amazon has an unfair advantage over eBay and Wallmart, by offering Kindle tablets at cost while capturing value from that captive audience in e-commerce sales. Xiaomi as unfair advantage over Samsung by offering rock-bottom priced devices and wearables to its fan base, while capturing value in e-commerce services. WeChat has an unfair advantage over telecom operators by offering free messaging and voice calling while capturing value in e-Commerce, brokering anything from branded emoticons to car sales.

Last but not least Facebook. [tweetable]What Facebook lacks in vision it makes up in execution[/tweetable]. Its Facebook Messenger, now at 700 million users, has been copying the asymmetric business model of WeChat by allowing games to be bought and played within Messenger. David Marcus, head of Messaging products at Facebook sees voice calling within Messenger as a platform for much bigger things:

VoIP is just one way that the company hopes to use the messaging app as a platform for much bigger things, including online payments.

IoT is taking industry collision to the next level

What Zenefits, Google and weChat have pioneered, IoT is taking to the next level. Internet of Things is adding connectivity and computing to thousands of everyday products. Today, most of these objects are following a “one device, one app” paradigm – by slapping an app to a thermostat, car or building management system.

Over time, we believe a new paradigm of “one device, apps everywhere” will prevail. In this paradigm, data is not a function of the device, but a product.

Think of a fitness band that uploads data into a health service, and allows you to run low-cost, daily health check-ups. Think of a door lock whose data is used to make intelligent decisions about the temperature you set your home to. Think of a smart home security system whose data is used to make decisions on home insurance premiums.

Now that we have an understanding on how Zenefits, Xiaomi, Amazon and weChat use asymmetric business models, we can see that IoT will effectively unlock data from connected things in any industry and monetise that data in another industry. Fitness band makers will capture value in health services. Door lock makers will capture value in the energy market. Car makers will capture value in employee productivity management. Telecom operators will capture value in selling insurance.

Effectively, IoT allows hardware vendors to divorce the business model of the device from that of the data that are generated by that device. Once divorced, the business model can “invade” complementary industries.

Naturally, companies who use asymmetric business models will wield an impossible-to-beat advantage to their competitors who are caught unawares by new players that do not plan to make profits in their industry. And as we argued earlier in our post on Commerce of Things, an unconnected object will be a missed business opportunity. At the same time, connected objects can threaten your business with unfair competition from other industries.

Xiaomi is leading this new era of asymmetric business model era by example – far beyond the cost disruption that mainstream press think it is – and is just about to disrupt the home security industry. Xiaomi just launched their first home security solution for 199 RMB, a set of beautifully designed white-coloured products that, can be easily mistaken for Apple China products selling at 199 USD and not 199 RMB. Yes, at a price of about 30 USD for a full set of home security products, that connect and complement nicely other Xiaomi devices from mobile phones to air purifiers, it is obvious that Xiaomi is not looking at making profit on these devices themselves, but on leveraging data collected from their customers (the “Mi fans”) to provide even more valuable services to them over time. If we assume that Xiaomi is selling these products at cost like they do with their mobile devices, they are in effect securing a first entry in the valuable “home IoT” segment at zero cost of customer acquisition. Traditional home security companies better brace for impact.

xiomi-home-sensors

For those companies in IoT, and even those bringing the IoT and ABM buzzwords in their boardrooms, here’s the recipe for your next executive strategy meeting:

Find any industry with a lower customer acquisition cost than yours (e.g. SaaS). Develop or acquire a product in that industry that is a complement to your core business and wrap it around your business.

And just like in the mobile industry, [tweetable]most IoT devices will eventually be offered at cost, if not below cost[/tweetable], so beware of newcomers to your industry bearing gifts.

Be prepared to challenge the age-old definitions of industries and markets. The world is becoming an unusual meal of business model spaghetti.

Andreas and Nicolas

P.S. For readers in Europe, it can be worrying that US and Asia seems so far ahead in using asymmetric business models, from Amazon and Google to Xiaomi and weChat. If Europe wants to stay competitive, including in the digital era, it needs to use such competitive business models, too.

–Andreas Constantinou
As CEO and Founder, Andreas oversees the growth and strategy of VisionMobile. He has twelve years experience in mobile, having worked with the top brand names in the mobile industry including Telefonica, AT&T, Telenor, Vodafone, Deutsche Telekom, MTS, Nokia, Sony, RIM, HTC, Qualcomm, Ericsson and Microsoft. Over the last five years, Andreas has grown VisionMobile into the leading, most respected research firm on app economy and developer economics, with a client base and reputation that out rivals companies many times the size.
Andreas on LinkedIn

–Nicolas Sauvage
Nicolas Sauvage is a “Software guy”, since first programming at 8 years old, and forever passionate about Software contributing to a better Connected World. He joined the management team of NXP Software in Feb 2011, and took various responsibilities over time including leading the OEM Business Line, worldwide sales, product management, Head of Korea, Head of Greater China. He is an Alumni of TTPCom, OpenPlug, London Business School and INSEAD.
Nicolas Sauvage on LinkedIn

The Commerce of Things

You might be forgiven for thinking that Internet of Things stands for adding apps to a watch, or connecting a thermostat to the internet.

This is where IoT stands today. More broadly, IoT is about adding computing capabilities to a physical object, and allowing it to interact with the world around it. But this is only the beginning. As we argued earlier, IoT is fast escaping both Internet and Things. And it’s about to change e-Commerce in ways we never expected.

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An unconnected ‘thing’ is a missed business opportunity

Today, it’s well understood that adding computing and Internet to a car, a watch, a thermostat, or a chair can allow the manufacturer to capture value beyond the purchase of that object and into data-driven business models. Car makers can now offer post-sales services, like vehicle diagnostics that alert you when it’s time to have your car serviced by a dealer. Or smartwatch apps that alert you when you’ve forgotten to put your seatbelt on. Watchmakers can create stickiness as you can now use your watch to unlock your front door, or control your thermostat without leaving the couch. Thermostat makers can now expand into energy management. Office furniture makers can now extend their business into productivity management.

[tweetable]Makers of connected ‘things’ can subsidise them to make money from data-driven services[/tweetable]. We suspect that new norms will form in industry after industry, as goods manufacturers and services vendors experiment with these new business models. What is clear is that selling unconnected ‘things’ will increasingly look like a missed opportunity.

Amazon’s wake up call

But there is a much bigger revolution at play. We believe that [tweetable]IoT will fundamentally change the shape of e-Commerce[/tweetable].

With IoT, washing machine makers can now not just deliver detergent just in time by knowing when your supplies run out. They can also recommend the right detergent, based on your usage, type of clothes, on demand. Car makers can recommend where you buy your gas, by understanding your drive journey, availability of gas stations, pricing on-demand discounts, and gas station commission. Watchmakers can command a commission from health insurers, as they can monitor your heart rate, temperature, fitness habits and determine what risk zone you are in. In short, IoT makers can now afford a negative BOM (bill of materials) “a la Dell”, by subsidising the cost of hardware with the revenues from bundled e-commerce services.

Internet of Things will allow any connected “thing” to become an affiliate for e-Commerce goods that are consumed together with the “thing” – what in economics are termed complements. Any connected object could become a distribution surface and customer acquisition channel for e-Commerce goods and services of every kind and description. IoT extends e-Commerce affiliate and user acquisition schemes beyond websites, mobile and apps, into every physical object.

Amazon’s Dash offers an early glimpse of this model. Place a Tide button on your washing machine, a Huggies button next to your baby’s changing room, or a Gillette button in your bathroom and pronto, your supplies are at your door the following day. More importantly, Dash acts on your intention to buy before you change your mind and pop over to the 7 Eleven convenience store. Similarly, Amazon’s Echo, allows you to order anything from the comfort of your living room, and without lifting a finger. What’s interesting is that nor washing machine neither FMCG companies are directly involved in Amazon’s effort. Amazon’s moves should be a wake-up call for the white goods industry.

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The Physical Affiliate

e-Commerce affiliate sales can happen in two ways: firstly, by pre-sales hardcoding of the e-Commerce service into the physical object. Think how Mozilla was able to make over $200M annually by preloading the Firefox browser bar with Google search, before moving to Yahoo. Affiliate sales can also be dynamic. Think how BMW can recommend a different brand of oil for the maintenance of the car based on price, oil efficiency observed on the car and many other similar cars, and the driver’ analyzed behavior on the road. Naturally, makers like BMW who can create value by tracking user behaviour will also be able to capture more value as an e-Commerce affiliate.

White goods manufacturers can now extend their business models across the product lifecycle. They can also own the device real-estate that offers e-commerce discovery and distribution, and act as a customer acquisition channel for e-commerce goods and services. More likely, this customer broker role will be seized by more agile e-Commerce players.

And all of this while adding value to the customer. Think: I’d like to buy a watch and improve my fitness at the same time, and get better health insurance cover. Or I’d like to buy a car and save money from fuel, every time. Or I ‘d like to buy a thermostat and have the peace of mind that I’m never spending more on energy bills than I need to. All these Jobs To Be Done are not for the few, the wealthy or the early adopters. In this smarter world, they are for the many.

Closing the attribution loop

More importantly, [tweetable]Internet of Things will allow e-Commerce to stretch across the breadth of the customer journey[/tweetable]. Consider how limited e-Commerce is today in understanding the customer journey: you search on Google for something to buy, click on what fits your purchase intent, including advertisement link, then lead to a purchase on the device being used. Along that path, Google receives a kickback (typically on a cost-per-click, CPC) from the advertiser on the assumption that a small percentage of those clicking the link will buy, making the business case for paying the CPC. There is no way for advertisers to know when a real purchase was made in a brick-and-mortar shop, let alone make someone with purchase intent visit that physical shop in the first place. This is the holy grail of advertising business, i.e. being able to track consumer behaviour from awareness to intent to purchase to purchase, and across web, mobile and increasingly number of physical connected touch points. By embedding the e-Commerce discovery and distribution surface on physical objects, and more connected touchpoints across the customer journey, you are now able to cross the last mile from awareness to purchase intent to purchase.

Put simply, connected devices will become the optimum point-of-sale for e-commerce, search boxes and app stores for services, at the ideal place and ideal context of a purchase intent.

The rise of programmatic e-Commerce

Moreover, consider billions of “things” doubling as e-Commerce points of sale (PoS). This will result in the unbundling and extension of PoS for e-commerce outside the web (think Amazon.com), app and product (think Kindle) silos controlled by e-commerce players. It will lead to programmatic auctions for e-Commerce Call To Action (CTAs), as the most market-efficient way for matching demand with supply. This will mean that the programmatic, real-time bidding (RTB) for ads today will carry over to e-commerce and into the real world.

More importantly, by retaining attribution across the customer journey and touchpoints, programmatic e-Commerce will be able to monetise by Cost-per-Action (CPA) in the physical world while providing enhanced value experience beyond what the comparable but unconnected appliance could ever bring. We can clearly expect a major reshuffle of the advertising industry and a further cycle of VC investment and consolidation that it will entail.

–Andreas Constantinou
As CEO and Founder, Andreas oversees the growth and strategy of VisionMobile. He has twelve years experience in mobile, having worked with the top brand names in the mobile industry including Telefonica, AT&T, Telenor, Vodafone, Deutsche Telekom, MTS, Nokia, Sony, RIM, HTC, Qualcomm, Ericsson and Microsoft. Over the last five years, Andreas has grown VisionMobile into the leading, most respected research firm on app economy and developer economics, with a client base and reputation that out rivals companies many times the size.
Andreas on LinkedIn

–Nicolas Sauvage
Nicolas Sauvage is a “Software guy”, since first programming at 8 years old, and forever passionate about Software contributing to a better Connected World. He joined the management team of NXP Software in Feb 2011, and took various responsibilities over time including leading the OEM Business Line, worldwide sales, product management, Head of Korea, Head of Greater China. He is an Alumni of TTPCom, OpenPlug, London Business School and INSEAD.
Nicolas Sauvage on LinkedIn

The currency of the Internet of Things is data

In last week’s blog post, we said that IoT is breaking free from Internet and Things. That is, Internet of Things is not about how to add a service to my product, but about turning the information generated by all those sensors, devices, things and services into knowledge about the environment and meaningful action. [tweetable]Making sense of data is the core value driver in the Internet of Things[/tweetable]. Let’s explore this idea a bit further. We continue with insights from our most recent publication, IoT Developer Megatrends – a short publication on the most important trends for IoT.

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Adding connectivity and services to existing products and machines often leads to a “one device, one app” situation. This proliferation of apps quickly becomes unwieldy to manage. A basic improvement would be to combine multiple devices into one user experience. Most of the emerging Smart Home solutions (e.g. Ninja Sphere, ImperiHome) focus on the ability to control all your devices from one place.

But why stop there? Services that create knowledge and drive meaningful action by mashing up multiple data sources are on the rise. Not all those sources have to be sensors or devices.

A good example is the Nest Learning Thermostat. To intelligently adjust the temperature in your house, the thermostat uses a lot more info than just the current temperature. It detects your presence with sensors. It talks to other appliances from Nest itself (smoke detectors), Whirlpool (washers), August (locks), Automatic (car adapters), Hue (lights) and others. Nest even works together with electricity companies who pay users to automatically turn down cooling during peak times on the electricity grid. The possibilities to make Nest smarter by pulling in more outside data are endless.

Other good examples are health & fitness platforms like Apple HealthKit or Google Fit. They pull together data from all your wearables, smart scales, apps and more into a full picture of you. That data could also be shared with medical professionals – the birth of a new type of medicine?

It’s easy to see that using more sources of information creates more opportunities for innovation than just connecting a single device, or even than listing multiple devices in a single service. By combining devices in one service, you add up their functionalities. By mashing up data, you multiply possibilities.

However, combining data from different sources presents some tough engineering problems. It comes as no surprise to see the rise of data-centric platforms and tools that help developers to pull together and mash up information. Examples include Samsung’s SmartThings and Apple’s HomeKit in the Smart Home; Dash and Mojio in the car; Validic and Jawbone’s UP platform in health.

A single platform for the Internet of Things?

The insight that mashing up data provides more opportunities for innovation will help us to answer another question that’s on many people’s mind. [tweetable]The Internet of Things is not one market, but a collection of many diverse verticals[/tweetable]: from Smart Home and Wearables to Smart Cities and Industrial IoT. Will a single platform cater to all these verticals, or will sector-specific platforms win out?

At this moment, both types of platform exist. In our IoT Developer and Platform Landscape 2015 report, we list 50+ vertical platforms and a similar amount of general purpose ones. In these early days of the Internet of Things, vertical platforms probably have the advantage: it’s easier for them to create beachhead markets in specific verticals from which to expand. But will this focus hurt them in the long term?

If combining more sources of information leads to more opportunities, then limiting platforms to a single vertical is an unhelpful constraint, not a useful focus. If your car pings your thermostat when you’re about to leave from work, is that a Smart Car scenario, or a Smart Home scenario? Both, and neither. It’s a Smart Life scenario.

At some point, [tweetable]IoT platforms will have to cross vertical boundaries to reach their full potential[/tweetable]. Already, key players like Google, Apple and Samsung are active in all key verticals concurrently. We predict that the top IoT platforms in 2020 will be cross-vertical. Sector-specific platforms will be niche or in decline.

What the Internet of Things is NOT about

It seems that if your company doesn’t have an IoT strategy nowadays, you might as well quit. But not just any strategy will do. Let’s look at some of the hot topics in IoT today that are unlikely to make a dent in market adoption. Here are some insights from our most recent publication, IoT Developer Megatrends – a short publication on the most important trends for IoT.

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Here’s what everyone knows about the Internet of Things. It’s going to be enormous. We’ll have tens of billions of devices by the end of the decade. This is a multi-trillion dollar opportunity over the next years. All the major players in consumer electronics, mobile, cloud, factory automation, enterprise IT and more will be fiercely competing for a piece of that pie. All this information shouts: [tweetable]if your company doesn’t have an IoT strategy you might as well quit[/tweetable].

Not just any strategy, of course. The history of technology is littered with great concepts and engineering feats that never became mainstream products. It’s worth looking at some of the hot topics in IoT today that are unlikely to make a dent in market adoption.

What IoT is not

A lot of the buzz in the media and on industry forums is about the Internet of Things technology itself. Standards. Security. Privacy. Whether to use Bluetooth, Wifi, cellular or mesh networks. If history is any guide, all of these important questions will get solved over time, but none are an actual roadblock to market adoption. iOS and Android didn’t depend on app standards to revolutionize the smartphone industry, for example.

Meanwhile, product designers have discovered IoT and are adding connectivity (internet) and services to their products with blazing speed. Washing machines, socks, ovens, shoes, cars, door locks, toothbrushes and even flower pots are becoming “smart”. The problem with this “product with an app” approach is that all those disconnected, individual apps will soon become impossible for users to manage.

The Internet of Things isn’t even so much about things. For example, companies like Google-owned Waze achieve better traffic intelligence by crowdsourcing smartphone data rather than through an extensive network of road sensors, typical for a Smart City project. True smart cities have taken note, and are starting to use Waze’s data. Waze literally never shipped a thing.

Breaking Free of Internet and Things

Here’s an uncontroversial, but often forgotten truth. [tweetable]The value of IoT products doesn’t come from the technology or the internet or the things[/tweetable]. Value is created in IoT by making sense of data, turning it into knowledge and meaningful action. It’s not the parking sensor that matters, but finding a free parking spot quickly and without frustration.

This perspective on the Internet of Things has some interesting implications. We predict that the most interesting IoT applications in 2020 will use data that already exists today, rather than new sensors.

Why? Value is created by making sense of data, and many data will have more than one possible source (like in the Waze vs traffic sensor example). New devices will be more expensive to build, install and maintain than solutions that mine existing sources of data. When a solution can be found that doesn’t require new sensors or hardware, it will prevail. Already, companies like Cellint use data from mobile network operators to monitor traffic jams in cities.

Internet of Things is not about how to add a service to my product, but about making my product work with every other service. It’s about how all those sensors, devices, things and services can be integrated into the user’s digital lifestyle. IoT is breaking free from Internet and Things.

IoT developers: The baby boomers of the smartphone wars?

Internet of Things comes to life thanks to wide availability of inexpensive and powerful hardware components. Chris Anderson, the former editor of Wired, calls this “the peace dividend of the smartphone war”:

“The components in a smartphone — the sensors, the GPS, the camera, the ARM core processors, the wireless, the memory, the battery — all that stuff, which is being driven by the incredible economies of scale and innovation machines at Apple, Google, and others, is available for a few dollars. They were essentially ‘unobtainium’ 10 years ago. This is stuff that used to be military industrial technology; you can buy it at RadioShack now,”

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Before the smartphone industry started to give back its “peace dividend”, product ideas were years ahead of what companies could achieve with the state of the art hardware. For example, Apple’s vision of Knowledge Navigator saw the light of day 20 years before iPhone launch. Things are different today. Ben Evans writes in “The home and the mobile supply chain” blog:

“Today it sometimes seems like things are the other way around. Want to make a connected door lock? Camera collar for your dog? Intelligent scale? Eye tracker? The electronic components all there, more or less off the shelf. The challenge is in the vision for what the product should be, what people would do with it and how you would take it to market.”

In other words, hardware technology is abundant today. It’s no longer the bottleneck. IoT breakthroughs will happen not by making more powerful processors or larger memories, but by identifying new applications for the sensors, devices and connectivity. Numerous IoT startups and crowd-funded teams are now tackling problems across a wide spectrum of industries that previously required billions of dollars from large corporations or governments.

Much like demand for smartphones is fueled by apps, the [tweetable]demand for Internet of Things will be driven by developers tinkering with hardware, software and data[/tweetable], and discovering new applications for the abundant hardware technology. These developers will create countless apps, services and devices that no single company could ever imagine, let alone create on its own. This developer-driven demand will create Internet of Things markets that are several times bigger than the ones we could ever predict with a spreadsheet that extrapolates today’s market.

Many of these IoT developers will come from the mobile app market. Paraphrasing on Chris Anderson, if components are the peace dividend of the smartphone wars, IoT developers are the post-war baby boomers.

The data from our recent Developer Economics survey of 8,000+ mobile developers shows that [tweetable]53% of mobile developers are already involved in IoT either making products[/tweetable], as a side project or as a hobby.

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Wearables attract highest developer interest – 78% of mobile developers that are interested in IoT are targeting or plan to target this vertical. Wearables are followed by smart home and connected car verticals with 74% and 52% respectively.

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We believe that mobile developers will play a pivotal role in the evolution of IoT extending their innovation beyond mobile apps. Apple and Google already work hard to get mobile developers use their fledging IoT platforms, including wearables (Apple Watch, Android Wear), smart home (Apple HomeKit, Nest Developer Program) and connected car (Apple CarPlay and Android Auto).

As we are readying to publish our “IoT Developer 2015 Trends” report, we will be sharing more data and insights about IoT developers and Internet of Things evolution.

How We Learned to Built Hardware, the Agile way

I ‘m part of a hardware research group at Telefónica Digital called “Physical Internet Lab”. Three years ago we started a small group under the Emerging Technologies area of the company focusing on the Internet of Things. The commitment of the group was (and is), in ambitious terms, “to democratize the Internet of Things” opening it to as many makers, developers and users as possible. Our goal has been not entirely altruistic: Telefónica as a network operator has a lot of value to add in the Internet of Things economy.

On day to day basis we build prototypes and products, usually connected objects or components like the Thinking Things building blocks.

Setting up the lab three years ago was no easy task. We wanted to work at the crossroads of the Internet, the Things and the People. But our development skills were almost 100% software related. In the process we built a team skilled on all three sides. And we figured out how to do agile hardware.

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Of Agility and Hardware

We ‘ve come full circle. Telefónica I+D (the Telefonica Digital development branch) was created 25 years ago to produce hardware innovations such as X.25 and ATM switches. We did that in the classical engineering fashion: writing long and rigid lists of requirements, splitting the work across solution providers, integrating and then testing following a waterfall schema.

Over time Telefónica I+D adapted quickly to the technology changes and by the mid-nineties we were developing mostly software. First we followed the same engineering process; then we moved towards more iterative methods. In the last 10 years we have adapted fully to agile methodologies.

As we were building the laboratory we found ourselves getting back to hardware. But the company now could not understand a slow-moving unit. The lab had to be agile. So we had to bring agile methodologies to hardware development.

The first difficulties came with the corporate facilities. Hardware work demands physical proximity and we could not afford to have a distributed team depending on collaboration tools on the Internet. At the same time, soldering fumes or drilling noises were not welcome in our modern, bright, open spaces. So the team had to move to a closed office in an old building in Madrid city center.

Moving to the city center was a boon: in minutes we could reach many shops and services, buying anything from hammers to plastic boxes. Visitors now found it easier to visit us in a centric garage-like office. This was great for our open approach as we wanted to help and interact with other companies and organizations.

Purchasing tools was another problem. The corporate procedures were tuned for large-scale purchases such as server farms or external services. Buying a handful of resistors for 10 euros could take several weeks, creating bottlenecks to our work. Fortunately the purchasing department showed a great deal of sensibility. We worked together to redesign the process. Now we buy any component or tool in a single day while still working by the book.

Putting together the Agile team

Hardware work implies multiple teams across several companies with extremely specialized profiles. When setting up the lab we opted for a small and autonomous team, able to build a hardware prototype with no external dependencies.

A small team allows us to work closely integrated, in the same location, continuously coordinating our work. A small team also means that budgets are smaller and is well suited to experimenting, failing, learning and adapting.

Basic agile methodologies such as Scrum expect some degree of overlap between the specializations of team members, so that different people can execute the same tasks naturally balancing the work load. But hardware work is different. It demands a lot of specialization. In our case most of the tasks can be executed only by one team member. As a result, the Scrum methods and tools have to be modified to reflect this reality.

Our internal workflow follows many steps. The first step is the Industrial Designer, a role which is somewhat of a novelty in the Telefonica Digital payroll. Carlos (that’s his name) starts his work in the CAD station designing the physical product: plastic pieces, metal straps, cloth, magnets. Then he builds the design using the currently available 3D prototyping tools such as the laser cutter, the CNC tool (i.e. a computer controlled drill) and a variety of 3D printers. These tools give much flavor to the lab.

In some cases we start from an existing object that we hack so that we can explain a new concept. Carlos at the same time designs and builds, which is a bit out of his job profile. Software developers are multi-taskers, too – they design and type, while software architects can also code. In the hardware industry this is somewhat unusual and typical engineers expect someone else to physically build what they have created. In the lab we follow the software philosophy. It is leaner, and gives the designer a real feel of the piece or circuit construction. This approach demands some tolerance and patience from engineers who have to get their hands dirty.

The same philosophy applies to the next step in the workflow: the electronics engineering part. The electronics engineer first designs new circuits, then prototypes them. We even design and build the PCBs to check that everything fits in place.

The agile doctrine underlines the importance of early user testing. Early use provides rapid feedback focusing the most important characteristics of the product and showing what isn’t relevant for customers. To shorten the time-to-test we use 3D printing and prototyping technologies.

In electronics engineering we massively use Open Hardware. Open Hardware gives us access to lots of ready-to-use designs that we can employ in product testing. In a sense, Open Hardware behaves now like Linux and Open Software in the mid-nineties. It allows us to focus on the real technical or design challenge rather than reinventing the wheel for every test.

Electronics and physical design teams work side by side, so they can verify in real time how components fit in the same object. Our objects become more than simple plastic boxes, as they are tightly coupled with the internal electronics.

Electronics engineers work also with the firmware developers. The firmware developers write the code for the embedded microprocessors. They also have to deal with connectivity issues and power management.

In our Physical Internet Lab, electronics and firmware engineers work side by side. In most situations knowing what will firmware do simplifies hardware design. Similarly, software developers can ask for fine changes in the hardware designs nearly in real time.

On the other side of firmware sits backend development. In our typical systems architecture, distributed devices communicate with a backend service in the cloud. We push as much intelligence as possible to the backend service, so our designs can evolve without touching the deployed hardware or executing firmware updates. We like to think that the back-end gives every object nearly infinite computing power and knowledge, as it can interact with any other Internet service.

Again back-end and firmware developers work side by side. This tight collaboration resolves any integration problems before they appear, and encourages electronics and firmware developers to take issues to the more powerful (and more agile) back-end platforms.

The final technical step is the front-end development, usually based on web and native apps. Again we do a lot of work locally in the lab, well integrated across the team.
The frontend is also tested in complete end-to-end scenarios. Automatic testing tools execute scripts that run against the firmware and the frontend.

And of course, there is a Quality Assurance side. We are extending continuous integration, test driven development and automatic testing to the embedded firmware. At the same time we have to handle more hardware specific tasks such as sensor calibration, assuring robustness and strength.

Physical Interaction Design

The web/application interface and physical design are the two endpoints of the “development chain” of our group. They form the two interfaces exposed to the final user. At the final part of our workflow, the physical interaction designer, works with both web / app and physical design.

The physical interaction designer is responsible for the design of the connected object as a whole. He takes care of building a single object with a coherent interaction model in the physical world and in the Internet.

Without the physical interaction designer we would have to separately design the physical object and the application or web interface. The result would be a split-personality product, usually an amalgamation of data stuck on top of a square box. The physical interaction designer combines the capabilities of the physical object and the Internet interface in a coherent manner.

Physical interaction design, bringing together the Internet and physical objects is a completely new field. There are a handful of specialized schools in the world, and we are working too with UX designers with strong industrial design background.

Everyday physical objects have usually long stories and designs optimized through centuries of use. We still have a lot to learn on how to take the Internet beyond of the smartphone/tablet/PC onto this physical object world. Customers will not adopt Internet of Things devices if they are a step behind of the design standards they have become accustomed in software interfaces.

Agility plays a role here, once again. Developing and prototyping quickly we can try interaction designs with users, test our assumptions and build a sizeable bunch of knowledge around user interaction with connected objects.

External providers

Of course we have to work with external providers, especially when dealing with complex technologies or industrialization. For development we often use online services for as PCB manufacturing or 3D printing. They are extremely easy to use, robust, fast, and offer a direct web interface instead of long negotiations with a salesperson.

For the final manufacturing we interact with real, serious manufacturers. Agile, as a software development doctrine has no solutions to this task. But Agile can be seen as a spin-off of Lean philosophy, which was created to deal specifically with manufacturing issues.

One of the main lessons from the Lean methods is that service providers have to be tightly integrated in the business process. We have found this is very important also for us. The lab has spent considerable efforts building trust relationships with service providers and manufacturers, integrating their teams with the lab. Schedules and plans are shared under an openness philosophy. We have established even real time communication so their teams get continuous feedback from the engineers in the lab.

The future of agile hardware

We have yet a long way to create a truly Agile Hardware lab. Physical work is sometimes slower than software development. Some other times (especially when prototyping on Open Hardware designs) they are blindingly fast and have to pause and wait for software components. Speed differences keep the group working on different “user stories” at the same time.

External dependences are many, and the lab will never be, in that sense, completely autonomous. But we can find yet faster service providers and build leaner and more integrated workflows with them.

Regarding Quality Assurance we have to handle correctly the physical device characterization and fit the expensive and slow certifications in the product workflow.
The bright side is that Agile methodologies provide and require continuous improvement. Every sprint or work cycle forces us to learn and adapt our methodology and organization, looking for a better process. Perhaps in a couple of years we’ll have a completely different process in a completely different lab, and it will be all right.

Will China take the lead in IoT?

In our June 2013 paper “The M2M Ecosystem Recipe” we argued that the Internet of Things is ready for a broad developer ecosystem. We may have finally found a promising candidate in an unexpected corner of the world (or perhaps not): China. Stijn Schuermans investigates how the open hardware platform alliance of Baidu and JingDong stacks up against our 3 control point model. Is there reason to be bullish on this initiative?

Will China take the lead in IoT?

The Internet of Things is ready for a broad developer ecosystem. That was the key message of our June 2013 paper “The M2M Ecosystem Recipe”. Since then, we’ve been on the lookout for an IoT platform that covers all three crucial ingredients that are necessary for the ecosystem to take off: service creation, service distribution and service consumption. We may have finally found one, and in an unexpected corner of the world (or perhaps not): China. Continue reading Will China take the lead in IoT?