IoT Application Platforms – What Company Will Take the Next Bite?

Few areas of technology or business can match the current levels of interest and anticipation surrounding the internet of things (IoT). Embedded engineering organizations and enterprises alike are struggling to keep pace with the expected rate of IoT change. They are rapidly modifying their business plans to pursue new service revenue opportunities enabled by the IoT. But challenges from tighter time-to-market windows and project requirements that extend far beyond existing internal skill sets is yet again recasting the traditional software build-versus-buy calculation. More organizations now recognize the need for new third-party development and management platforms to help them jumpstart IoT application creation and monetization.

VDC Research initiated coverage of this dynamic segment with the recent publication of the IoT Application Development and Deployment Platform (ADDP) market report. The executive summary is available here. We forecast revenue from IoT ADDP solutions is forecast to expand at over 40% compound annual growth rate (CAGR) through 2016. As one might expect, this pace of revenue growth in the ADDP segment and the IoT at large has drawn the attention of larger software and system solution providers.

As part of PTC’s strategy to supply “closed-loop lifecycle management” for systems engineering, the company bought two of the leading ADDP suppliers. (See more on this strategy here) PTC acquired ThingWorx in December 2013 and Axeda in August 2014. In March 2015, IBM announced plans to invest $3 billion in a new 'Internet of Things' unit over the next four years. But the Amazon acquisition of 2lemetry, also in March 2015, demonstrates that interest in entering this sector is not be limited to organizations currently competing in the ALM or PLM solutions market.

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As the IoT matures, more embedded devices and back-end enterprise systems will continue to be linked together over communication networks in order to provide differentiating and lucrative services. Companies viewing the rapidly expanding ADDP opportunity as an adjacent market will come from broad range of segments including providers of operating systems, semiconductors, telecommunication networks, computing hardware/modules, enterprise back-end systems, and other software solutions. Independent providers of IoT application platforms should plan for new competitors and potential suitors from a number of domains.

Stay tuned, we expect that more companies with deep pockets and expansive sales distribution will likely follow the lead of Amazon and PTC by entering the ADDP segment via acquisition in the next few years.


For more information, we invite you inquire about our research and download the executive summary of our IoT Application Development and Deployment Platform; it is available here.


Under Pressure: Your Embedded System Needs to Modernize Requirements Management (RM)

Recording of This Webinar from VDC Research and Jama Software is Now Available

 New variables continue to emerge, making software development in both the embedded/systems and enterprise/IT domains more complex – and in many ways, more similar. For instance, the requirement to design software in accordance with regulatory mandates, which is increasingly common in the embedded industries, now also extends into several segments of the enterprise, such as banking. Likewise, the Cloud and IoT are becoming more of a focal point for technology and innovation in both realms. This is driving an explosion in new software-focused business plans, devices, categories, and features, which are more closely tied to high-value corporate and consumer activities. The future of connected, intelligent products – while providing new opportunities – also raises the expectations for continued content delivery and functionality evolution.

As reliance on software to deliver value and differentiation increases, the amount and range of employees involved in the management of software creation is expanding. More organizational stakeholders, including many who may lack direct software development experience, now need direct insight into the software development lifecycle in both embedded and enterprise organizations. And with this expanding pool of software development stakeholders, it’s increasingly important to ensure the proper  processes and the right tooling – like a formal requirements management solution – are in place to help facilitate effective communication and collaboration through the full development lifecycle. Among other changes, it will be critical for these tools to provide socially collaborative features, to automatically link critical development data from other tools, and to present it in an easy-to-comprehend format for all development stakeholders.

With the Shift from Project- to Product-Based Software Design Approaches, IT Developers More Closely Resemble Their Embedded Peers.

New Picture

The embedded – enterprise/IT convergence also includes organizational strategies for software development teams. Many IT groups are now trying to move from a project-based approach for software delivery to one that defines products and organizes teams around them. This organizational structure more closely resembles the typical configuration in embedded or systems development teams. While significant differences remain in place, we also see that decisions around tooling, programming languages, and development methodologies show similar signs of convergence between the embedded and enterprise development markets. As IT organizations continue to evolve, they will have a greater need for system lifecycle management tools focused on optimizing iterative development methodologies with capabilities such as contextual collaboration, impact analysis, and decision tracking over a traditional focus on formal reviews or approvals and change management.


To hear more about this and other pressures facing developers that raise the importance of requirements management solutions, I encourage you to listen to our recent webinar with Jama Software

Click here to for the webinar recording. To learn more about the research and products offered by VDC Research’s IoT and Embedded Software Development practice, click here.


Where To Next For PTC After ColdLight Analytics Acquisition?

PTC logoAt this month’s LiveWorx event put on by PTC (formerly known as Parametric Technology Corp.), the news highlight was the company’s acquisition of IoT analytics firm ColdLight. (See press release here.) ColdLight’s Neuron software for cloud or on-premise datacenters applies machine learning technology to M2M and IoT data, automating predictive analytics tasks. The ColdLight acquisition was a logical extension to PTC’s prior acquisition of ThingWorx and Axeda in the IoT space.

At the front end of the product development process, PTC has assembled software offerings for product lifecycle management (Windchill), computer-aided design (Creo), application lifecycle management and systems engineering (Integrity). Combined with service lifecycle management and the IoT pieces, PTC has essentially created a set of end-to-end solutions for IoT product development and deployment. However, VDC believes that PTC could do more to fill out the middle of its end-to-end portfolio.

Design of embedded devices generally consists of three major areas: mechanical engineering, electronic engineering, and software development. PTC has the first and last of those well covered, but it offers little in the way of electronic engineering tools, save for electronic design automation software for circuit boards, acquired with the company OHIO Design Automation back in 2004 (and since integrated into Windchill).

There are many types of electronic hardware system development tools, and it may be challenging for PTC to dip another toe into that market without diving in completely. Nevertheless, VDC believes that one particular type of electronic design tool would dovetail nicely with PTC’s software development offerings without necessarily getting the company in over its head in electronic design:  virtual prototyping/simulation. Such tools enable the simulation of electronic hardware systems. Although virtual prototyping is often used by semiconductor makers to simulate the behavior of their own chips prior to fabrication, a growing market for virtual prototyping is as a tool for software developers to get a head start on their development work prior to the existence of physical prototypes of the electronic hardware.

PTC already offers mechanical/CAD simulation for Creo. An electronic hardware simulation tool could enable earlier software development for customers using PTC’s Integrity, acting as a bridge between hardware and software development.

Wherever PTC chooses to aim next, its acquisition days aren't over.


India Takes Giant Steps Toward Smart Cities

With many benefits of IoT becoming apparent, more countries are implementing smart city reforms. This year, India has been the most ambitious in its IoT plans with an allocated budget of Rs. 7060 crores ($1.6 billion USD).

Prior to his May 2014 election, Prime Minister Narendra Modi promised to transform 100 regions of India into smart cities by 2022. As India’s economy continues to rapidly increase with 60% of India’s GDP coming from urban jobs, Modi hopes that the development of new cities will accommodate for the rapid urbanization. By creating satellite cities and improving existing cities, India hopes to improve urban living and increase urban spaces. The Internet of Things will be the driving force behind these smart cities as parking, transportation, urban lighting, waste management, city maintenance, remote healthcare, safety, energy, water management, and traffic management will transform into connected systems. Companies like Alcatel-Lucent, Accenture, ABB, Cubic, Honeywell, Intel, Siemens, and Oracle will help develop these devices and bring them into the new cities.

Other countries like U.S. and Japan believe in the smart cities idea too, and they’ve officially announced their support for Modi’s Smart City Policy.

India is already in its first stage in implementing this policy, and 20 cities have been selected to undergo initial transformation. Several cities and rural towns, including Delhi, Dholera, and a region in Gujarat, have begun development. Delhi will replace its 18,500 street light poles to smart LED street lights and install solar panels in its schools. Dholera’s initiative is expected to launch this year. A financial centre called Gujarat International Finance Tec-City (GIFT) located on the previously barren banks of the Sabarmati River already has two office blocks and modern underground infrastructure, and will serve as a new financial hub of India.

Recently the Yokohama City Council of Japan offered to help convert the Indian port town of Kakinada into a smart city. Japan’s cities will help guide India towards a smooth technological transition, strengthening the two countries’ tight bonds, and encouraging India to support mutually beneficial economic policies toward Japan in the future.

If all IoT was implemented perfectly into the cities, India would have clean water, better traffic, less urban congestion, and a maximum of 45 minutes transit times across smart cities in less than ten years; that’s what India imagines its future decongested, urbanized country to look like. However, VDC is not yet assuming such optimistic conclusions. Despite all the progressive intent, India has not made much improvement in privacy and security issues, nor has it established what factors qualify a city to be considered a “Smart City.” Karuna Gopal, president of the Foundation of Futuristic Cities, stated that India just started working on its standards and protocols earlier this year and these have not yet been released, despite construction of smart cities already underway. Without any framework or guideline in place, India is creating smart cities that may ultimately lack one or more important aspects of IoT.

No other country has made such a large commitment toward reforming so many cities with IoT, and in order to execute this project smoothly, VDC recommends that India set basic guidelines, frameworks and standards to use, so all the city and regional developers and governments can work together toward a common goal: a smart country.

Whether or not India achieves Modi’s intended outcomes won’t be known until at least 2022. Stay tuned as India gradually transforms its cities with infrastructure that informs citizens and improves services for potable water, electricity, public transport, parking, health care, and education. India’s smart city transformation is likely to be a marathon process.

This post was researched and written by VDC intern Jamie Yang, with editing by Steve Hoffenberg.


RSA Security Conference 2015: Data from Things, and Data about Things

At recent trade shows such as CES and Embedded World, attendees couldn’t swing a dead cat without hitting a sign reading “Internet of Things.” But at this week’s RSA Conference for the cybersecurity industry at San Francisco’s Moscone Center, the focus was squarely on security for conventional IT and cloud computing systems, with IoT-centric offerings sparse. That’s not to say IoT was missing, but rather that it’s presence was relatively low key, which is perhaps a good thing after the past year’s worth of hype. Besides, many system implementations that could be considered IoT are extensions of conventional IT. And increasingly, the IoT is becoming about the Data from Things and Data about Things, rather than the things themselves. With that in mind, in this blog post we’ll highlight two companies at the show with distinct new technologies that are using data in creative ways applicable to cybersecurity and IoT.

ThetaRay is an Israeli startup founded by a group of engineers with deep roots in databases and analytics. The crux of the company’s solution is a type of big data analytics, but it’s not about the content of the data, it’s about the movement of the data. A number of security solutions from other vendors are similarly oriented, but one of the factors that sets ThetaRay apart is speed. Using its patented algorithms and techniques, company CEO Mark Gazit and VP of Marketing and Business Development Lior Moyal told VDC that ThetaRay:

  • can detect abnormal data operations in just milliseconds without knowing anything about what’s in the data
  • runs on essentially off-the-shelf server hardware (Intel i7, 32GB RAM, and a GPU)
  • can not only uncover zero day malware activities, it can also discover security problems not related to malware (In one case, they say it detected money laundering in a bank’s system.)
  • can improve operational efficiencies in SCADA and industrial automation systems. (In another case, it detected the manufacture of a faulty high end lithium-ion battery system—before the battery itself was tested—by uncovering anomalies in the flow of data from the factory’s production equipment.)
  • only generates 1/25th as many false positives as other anomaly-detection solutions.

If ThetaRay’s solution sounds almost too good to be true, it doesn’t come cheaply. Prices for a software license start at $150K a year. Major financial institutions are a prime target market, and General Electric is both an investor and a customer.

In another twist on data analytics, the Atlanta-based company Bastille uses radio frequency emissions from devices to enhance enterprise security. The hardware portion of the product is an RF sensor box that can detect electromagnetic emissions over a huge frequency range from 60 MHz to 6 GHz. It recognizes 120 wireless protocols, enabling it to detect the presence of Wi-Fi, cellular, Bluetooth, Zigbee, Z-Wave, etc. and distinguish both the type of device and its unique identity. Bastille founder and CEO Chris Rouland told VDC that an installation would employ at least 10 of the sensor boxes (approx. $3K each) to cover a building and use triangulation to establish the precise location and movements of each device. Combined with other data, such as employee badge swipes and time stamps, its analytics software can create profiles of the wireless devices normally carried and used by each employee. If any given device exhibits uncharacteristic behavior, for example a mobile phone suddenly transmits gigabytes of data, analytics can alert system administrators and identify the owner of the device. (That scenario could be either deliberate, i.e. due to a disgruntled employee stealing data, or inadvertent due to malware.) In facilities with restricted areas, geo-fencing could alert if wireless devices enter forbidden zones. Rouland foresees markets in everything from military and financial institutions, to retail stores where managers don’t want employees checking Facebook on their phones while on the job.

Unlike most IoT applications, Bastille’s technology leverages incidental data rather than intentional data. In public spaces, that might evoke shades of Big Brother, but we can envision many commercial and industrial applications for which there is no other comparable solution able to use Data about Things to help secure other Things.


IBM’s $3 Billion Stake into IoT: A Low-Risk Gamble

IBM has announced it is establishing a new Internet of Things business unit with more than 2,000 consultants, researchers, and developers, and will invest $3 billion in it over the next four years. Three business areas are being highlighted:

  • IoT Open Cloud Platform for Industries – vertical market oriented big data analytics services
  • Bluemix IoT Zone – expansion of IBM’s platform-as-a-service to improve development and deployment of IoT apps
  • IoT Ecosystem – additional partners for secure integration of IoT data and services (existing partners include AT&T and ARM)

(We won’t rehash all the details of the announcement, which you can read here.) Ibm_logo

VDC finds this IBM initiative particularly noteworthy, for several reasons:

  • By establishing a dedicated IoT group, IBM is putting in place structures to speed both technical and business development targeting IoT. It will be interesting to see how the unit: a) navigates a complex weave of horizontal and vertical technologies and markets; and b) intersects and overlaps (and perhaps clashes or not) with IBM’s enterprise IT services.
  • By announcing the size of its investment up front, IBM is communicating the degree of its commitment to IoT. However, considering the amounts of money being spent collectively by other major companies claiming turf in the IoT (Cisco, GE, Google, Intel, etc.), significant mid-size participants (e.g. ARM, PTC), and hundreds of minor players and wannabees, $3 billion might only equate to table stakes necessary to reserve a seat at the high rollers’ table.
  • IBM’s announcement makes no mention of any external investments, i.e. acquisitions or startup funding. Since the year 2000, IBM has acquired more than 125 companies, including more than a dozen for which the price exceeded $1 billion, so we have little doubt that IoT-related acquisitions are in the offing.
  • Unlike Google’s $3.2 billion acquisition of Nest, which has modest short term but substantial long term potential, IBM’s $3 billion to scale up and expand its existing IoT capabilities can go a long way to generating real IoT revenue in the short term. While most consumers are yet to be convinced of the need for a “smart home” (unaware that their cable TV boxes and electric meters are already part of the IoT), enterprises are already seeing the benefits of the IoT on many levels, including customer satisfaction, recurring revenue, cost savings on service parts and labor, and product refinement. Considering IBM’s position in the IT industry, $3 billion seems like a low risk bet.

To look at it another way: as IoT becomes further integrated into day-to-day business IT and operations, what would have been IBM’s risk if it didn’t invest big money in IoT?


With Azure IoT Suite, Microsoft Spreads Further into IoT. Is it Far Enough?

On March 16th at Microsoft’s Convergence Conference in Atlanta, the company announced its forthcoming Azure IoT Suite of cloud services. (See official Microsoft announcement here.) Microsoft has existing IoT-oriented services with Azure cloud—including Event Hubs to ingest data, and Stream Analytics (currently in preview testing) to process and analyze data. The announcement did not provide many details on the new services that would be added, but in general terms it said Azure IoT Suite “manages, analyzes and presents [data] as usable information to the people who need it to make better decision.” Specific features mentioned include remote monitoring, asset management and predictive maintenance.

Microsoft also reiterated that the forthcoming Windows 10 operating system would include a Windows 10 IoT version intended for embedded devices. (This was originally mentioned last fall by CEO Satya Nadella, and in February 2015 Microsoft said it would make the new IoT OS available at no charge for use with the Raspberry Pi 2.)

Here at VDC Research, one of our areas of keen interest for IoT is security. Microsoft hasn’t said much about security features that will be built into Windows 10 IoT specifically, but Windows 10 in general is slated for a variety of security improvements, including OS support for two-factor authentication and app-by-app access to VPN.

On the cloud side, Azure already offers numerous security features, including Microsoft’s Active Directory structure, which controls authentication and authorization. Plus, for customers with extra-high security requirements, Azure ExpressRoute can be used to connect local networks to Azure via fiber optics that are physically separated from the public Internet.

With both an embedded operating system and its own major cloud infrastructure, plus its recent acquisition of Revolution Analytics, Microsoft is in a strong position to offer IoT services. The company’s IoT ambitions perhaps could benefit even further from pieces filling in the middle:

  • a true IoT application platform, similar to what Amazon just acquired with 2lemetry; and
  • a field-deployable IoT gateway (hardware) solution, along the lines of Intel’s intelligent gateway designs. [Microsoft has demonstrated a software reference architecture called Azure Cloud Gateway Accelerator, project codename Reykjavik, which performs protocol/message translations (among other tasks), but it requires an IoT-capable device or a field gateway to get data to the cloud.]

We’re awaiting further word from Microsoft on IoT-related features coming to Windows 10 and Azure.


Will Patents Hinder IoT Openness?

Coined by Kevin Ashton in 1999, the term “Internet of Things” (IoT) has only recently become a widespread concept. Use of the term began its slow emergence from the tech world in 2003-2004 when popular publications like The Guardian and Scientific American wrote articles on IoT. However, based on Google Trends, interest by tech companies and the public began rising around 2009 with a dramatic increase in 2013, a year filled with smart home appliances and tech giants’ connected device innovations.

To delve more into the increasing interest in the Internet of Things, VDC conducted an analysis of U.S. patent applications and patent awards specifically mentioning “Internet of Things” or “IoT.” In the chart below, the green line represents the number of IoT-specific U.S. patent applications, and the purple line represents the number of IoT-specific patents awarded. (Note that the average award of a U.S. patent takes more than two years from its date of application.)

IoT Patent Chart
Not only is “Internet of Things” being mentioned in more patent applications, but more applications mentioning IoT are also being awarded patents. A peak number of patents mentioning IoT were awarded in the most recent quarter, 2014Q4, and an increase to this peak is nearly certain in 2015.

Undoubtedly there are many more patent applications and awards related to IoT that don’t specifically mention the term in their filing documents. However, the small but growing use of the term in patents, as shown in the chart, is an indicator that we are just at the leading edge of what is likely to become a large wave of IoT-oriented patents.

While earlier IoT technologies and communication methods were often openly published, many IoT methods are now being retained as intellectual property through patents. Examples include, “Internet of Things Lawful Interception” (application #20130057388), “Methods, devices and systems for establishing end-to-end secure connections and for securely communicating data packets” (application #20140143855), and “Mobile communications devices and transmission methods for transmitting machine type communication data thereof “(patent #8,681,701).

Of course there is a fine balance between the stimulation of innovation via openness vs. the economic incentive of owning intellectual property, but increased patenting of IoT communications techniques could adversely impact the future structure of the IoT, making it less open. On the other hand, the increasing number of IoT patents might merely reflect the spread of the term’s marketing buzz. In either case, navigating a plethora of IoT patents is likely to increase development burden and possibly hinder product introductions for nascent IoT companies.

This post was researched and written by VDC intern Jamie Yang, with assistance from Steve Hoffenberg.


IoT Lessons from the Blizzard of 2015


A few lessons for the IoT industry in the wake of this week’s blizzard:

  • Forecasts based on historical patterns represent probabilities, not certainties. Here in the Boston area, we received the full dumpload of predicted snowfall from the blizzard, but in New York City and regions further south, weather forecasters were apologizing for their overestimates. When big data analyses of complex IoT systems make predictions, don’t expect them to be right 100% of the time.
  • Whichever way the wind blows, snow drifts into peaks and troughs. The IoT market is not homogenous, so some categories of devices and services will grow faster than others. This is normal, but favorable wind direction is hard to predict.
  • The Snowdrift Dilemma fosters cooperation. In game theory, the Snowdrift Dilemma is a variation of the Prisoner’s Dilemma, but the Snowdrift scenario is more likely to produce cooperation between parties that would otherwise have little or no incentive to work together. When digging out from a snow storm, many hands make light work. In the IoT, even competitors need to cooperate on communications standards, security warnings, and market awareness.
  • Ignore warnings at your own peril. No matter how loudly forecasters shout about an impending storm, there are always a few people who blithely ignore them. IoT users can approach warnings logically. If sensor conditions signal the need for replacement of a part that is likely to fail prematurely, evaluate the relative cost of the replacement at a convenient time vs. the cost of a failure at an inconvenient time.
  • Don’t wait until the last minute to prepare. People who didn’t stock up on supplies until the snow started falling found that grocery stores were already depleted of staples like milk, fresh meat, and toilet paper. Those who stocked up when the predictions came in a day or two earlier had no problem. And those who routinely kept plenty of non-perishable foods on hand didn’t even have to think about it. In IoT systems, sooner or later downtime or security breaches will happen. Prepare your response well ahead of time. And don’t forget the toilet paper.


QNX Ex-Owner Harman International Acquires Red Bend Software


Harman International is best known as an audio electronics maker, owning numerous brand names targeting consumers and professionals, including AKG, Crown, dbx, Harman Kardon, Infinity, JBL, Lexicon, Mark Levinson, and Revel. As old-school “car stereos” have evolved in recent years into multifunction “infotainment systems,” Harman has also become a major player in automotive electronics.

Red_Bend_Logo_HorizontalOn January 22, Harman announced its acquisition for $170 million of Red Bend Software, which is the leading provider of software and services for Firmware Over The Air (FOTA) updating for mobile devices and automobiles. (See press release here.) Harman simultaneously announced its acquisition of software services firm Symphony Teleca, although Red Bend has more interesting implications for IoT.

QNXBack in 2004, Harman had acquired for $138 million QNX Software Systems, developer of the real-time operating system QNX Neutrino, as well as a number of other embedded software solutions which have since become especially popular in the automotive market. Fast forward to 2010 when Harman sold off QNX for $200 million to Research In Motion (RIM, since re-named Blackberry Limited for its line of mobile phones). At the time, Harman said about its sale of QNX, “This move allows Harman to continue its relationship with QNX and the advanced software solutions it provides to Harman and our customers. At the same time, this deal achieves value for all stakeholders and is an important step in a new strengthened relationship with RIM.”

Perhaps Harman’s sale of QNX was influenced by economic conditions during the Great Recession, but it leads us back to Harman’s acquisition of Red Bend, and it raises a few questions:

  • Would Harman have been able to leverage synergy between Red Bend and QNX in the automotive market if it had retained ownership of both? If not, why not? If so, might the value of such synergy have outweighed the gains realized by selling QNX?

  • What value does Harman now see in Red Bend that it no longer saw in QNX?

  • Considering that much of Red Bend’s current business is in the mobile phone industry, does Harman view Red Bend as a stepping stone into that market?

  • What would it take for Harman to believe that a potential future sale of Red Bend might “achieve value” for stakeholders and produce “a new strengthened relationship”?

We‘ll leave these questions for readers to ponder for themselves


Recent Posts

IoT Application Platforms – What Company Will Take the Next Bite?

Under Pressure: Your Embedded System Needs to Modernize Requirements Management (RM)

Where To Next For PTC After ColdLight Analytics Acquisition?

India Takes Giant Steps Toward Smart Cities

RSA Security Conference 2015: Data from Things, and Data about Things

IBM’s $3 Billion Stake into IoT: A Low-Risk Gamble

With Azure IoT Suite, Microsoft Spreads Further into IoT. Is it Far Enough?

Will Patents Hinder IoT Openness?

IoT Lessons from the Blizzard of 2015

QNX Ex-Owner Harman International Acquires Red Bend Software

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