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SMART BUSINESS
RESEARCH REPORT
T
he Pervasive Internet and the new world of Smart Systems
are ushering in an era where people, machines, devices,
sensors, and businesses are all connected and able to interact
with one another. As these previously disaggregated parties
come together, new modes of collaboration and intelligence
will abound fostering a trend that we call “Smart Business.” Machine-
to-Machine communication (M2M) systems are merely the starting
point. The development of the Pervasive Internet and the evolution
toward Smart Business practices will enable a truly connected world.
Inputs from machines, people, video streams, maps, newsfeeds, and
sensors will be digitized and placed onto networks. This will lead to the
convergence of the physical & virtual worlds, thus enabling collective
awareness, creativity, and better decision making capabilities for societies
that increasingly rely on real-time information and interactions. Many
observers believe that this phenomenon will drive the largest growth
opportunity in the history of business.
Scope of Study
The Pervasive Internet is a global technological opportunity of unprecedented proportions.
The technology behind the Pervasive Internet will ignite an era of Smart Systems and Busi-
ness that radically transforms customer service, resources allocation, and productivity in gen-
eral. In this new era manufactured objects, general infrastructure, people, and businesses will
be connected and communicating constantly. As the world becomes connected, societies and
governments alike will be able to respond to the needs of both citizens and assets in real time.
The Internet is the primary driving force on the path to a truly connected world. First, the
Internet gave us e-mail and the Web. Then came e-commerce and the ability of consumers
and businesses to quickly purchase items, as well as the ability of retailers and businesses to
build close relationships based on customer preferences.
But the next phase will be much more profound. It includes shared and secure Internet ac-
cess for device interaction—in many cases with no human intervention at all—as well as
network-based services such as status monitoring, usage tracking, consumable replenishing,
and automated repair. These new services are based upon the convergence of networks, em-
bedded computing, control, content, and sensor feedback.
Our analysis and research is focused on understanding the strategic business implications of
growth within the emerging Smart Systems arena. The research addresses the following key
questions:
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The Emergence of Smart Business
Forecast Report Overview
• What key forces are impacting adoption of Smart Systems, M2M and connected product
solutions?
• What are the business models manifesting in each major vertical market and venue?
• How will software architecture and tools evolve over the next several years?
• What issues and hurdles are there in the market impacting adoption of Smart Services?
• Challenges in adopting new business models and making the business case to support
investments.
• Complex services and solution delivery eco-systems that require businesses to relate in
new and different ways.
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The Emergence of Smart Business
Forecast Report Overview
• Anticipation of new product, service and systems innovation modes that are not widely
adopted today.
• Fragmented M2M and Smart Systems vendor landscape that is not yet well aligned with
the larger IT infrastructure and carrier players.
Though their business models are intermingling today, all of the major categories of solution
suppliers (or as we like to call them - “The IT and Network Arms Merchants”) have histori-
cally operated within well-established business models that reflected the distinctive compe-
tencies that each group believed to be at its core. The advent of Smart Systems is causing a
blurring between these legacy business models forcing all the major suppliers to re-think their
strategies.
We do strongly believe that the Pervasive Internet and Smart Systems market opportunity is
reaching a new level of maturity; there is now substantially greater recognition of the techno-
logical capabilities and the potential benefits of connecting devices to the Internet than there
was even 2 years ago. This represents a whole new generation of technology innovation and,
if history repeats itself because certain conditions repeat, we expect to see a significant wave
of growth in Smart Systems.
Over the past five to eight years a blurring of lines has occurred between human or IT-centric
and machine-centric technologies and systems. In this report, we are introducing a new
concept -- Smart Systems and Business -- In the Smart Systems world, device/machine con-
nectivity becomes significantly more universal and segments into two broad groups:
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The Emergence of Smart Business
Forecast Report Overview
• Machine [Non-IT] -Centric Devices: This group includes all other smart networked
equipment -- any intelligent device (e.g. sensors, instruments, controllers, etc.) or intel-
ligent machine (regardless of whether it is an electronic or electro-mechanical machine
-- appliances, vehicles, HVAC systems, power equipment, diagnostic equipment, vending
machine, etc.).
Controllers
Sensors, 20 billion
Instruments
Meters To Avoid Double Counting,
Microprocessors Embedded Devices
Embedded Components Are A
Microcontrollers Sub-Set Of The Overall
Opportunity
In this report, we are not attempting to cover the many IT terminal/appliance categories
individually -- there are just too many. What we are intending to do is cover those IT device
segments that are on the boundary of machine and IT infrastructure integration as well as
the impact IT devices are beginning to have on the user and the user experience (e.g. using
your smartphone to check on power/energy usage or to schedule a ZipCar rental).
Today, we believe the true convergence of IT devices with machines and, more importantly,
the integration of these two worlds is now taking shape. Thus, we chose the concept of Smart
Systems to characterize the full measure of the evolving “connected” opportunity.
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The Emergence of Smart Business
Forecast Report Overview
Beyond mobile phones, laptops and other traditional IT devices connected to networks, the
scope of what is considered an “intelligent” device is expanding as more and different prod-
ucts get connected to the network. Health monitoring devices on the body, telematics in
vehicles for safety, automated service scheduling, and driver convenience as well as smart
grid equipment and meters that can monitor real-time electricity usage – all delivered via
the Internet. We are entering an age of enhanced asset awareness, where real-world assets
(e.g. HVAC systems, shipping containers, shop-floor machinery, pipelines, etc.) can monitor
events, execute rules, and automate business processes. Intelligent device communication is
converging with IT and network infrastructure to enable vast improvements in efficiency and
productivity.
The technology and market forces that are driving business and government interest in smart
machine to machine (M2M) solutions are many, including:
• The cost of devices will continue to plummet with advances in silicon, packaging and
integration technology making them network fluent and affordable to virtually everyone;
• Carriers are dramatically reducing their monthly fees for cellular device links -- most
network service providers worldwide have deployed IP networks on a broad scale and the
wider availability of 3G wireless networks is fostering market adoption;
• The storage capacity and processing power of computers will continue to grow expo-
nentially and enable a whole new generation of infrastructure to perform an enormous
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The Emergence of Smart Business
Forecast Report Overview
variety of data management tasks - both carriers and IT infrastructure providers are
working to develop software and data management platforms to support new man-
aged services;
• The continuing developments of IT systems, the Internet and of next generation tele-
communication network architecture will enable movement and analysis of very large
amounts of information (much beyond traditional communication and messaging)
which will extend the value of managed services;
• Finally, technology advances have improved and simplified system and user interfaces
and interactions which, in turn, is driving adoption of new business models.
Tied to these market and technology forces are a number of regulatory and economic
stimulus efforts such as smart grid and healthcare initiatives that are also fostering in-
creased market adoption. End customers participation in the design, development and
management of Smart Systems will rise during this next period of market development:
• End users will emerge as a force and place greater emphasis on vertical solutions that
readily integrate with enterprise systems, innovative solution design and more effective
service and support.
• Demand for adaptability, agility and features will grow. Innovation in product and
systems design will be heavily rewarded. Customers will creatively apply and integrate
technology in their work and personal lives to unimaginable levels.
• Customers will require a tailored experience from service providers. Not only do cus-
tomers expect suppliers to anticipate their specific needs, they will want suppliers to
project an experience for them -- Smart Systems are driving home the importance of
user experience.
STUDY COVERAGE
Harbor segments the market into ten key venues as listed below. We analyze opportunities
within each venue and related customer segments. Our coverage includes over 300 specific
devices and machine types central to the M2M community.
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Forecast Report Overview
Resources Energy Industrial Buildings Retail Healthcare IT & Networks Transporta)on Safety & Security Consumer/Professional
Stores Hospitality Services Ins)tu)onal Commercial Industrial Home Care Personal Research
•
Groceries
•
Hotels
•
Financial
•
EducaIon
•
Office
•
Process
Plants
•
ResidenIal
•
Hospitals
•
In-‐Vivo
•
Drug
R&D
•
Healthcare
•
Retail
•
Factories
•
MulI-‐Family
•
Clothing
•
Restaurants
•
Fuel
StaIons
•
Nursing
Homes
•
TesIng
Devices
•
Research
Labs
•
Mobile
•
Electronics
•
Bars/Clubs
•
Cinema
•
Stadiums/Venues
•
Hospitality
•
Warehouse
•
Mobile
POC
•
Monitoring
•
DiagnosIc
Lab
•
Furnishings
•
Cafes
•
Exercise
•
Airports
&
StaIons
•
Services
•
Laboratories
•
Clinics
•
Hardware
•
Cleaning
•
Campuses
•
Doctor
Office
•
Convenience
Devices:
POS
Terminals,
Kiosks,
Cash
Registers,
Devices:
HVAC,
VerIcal
Transport,
Fire
&
Safety,
LighIng,
Security,
Devices:
Imaging,
DiagnosIcs,
Monitor,
Surgical
Eqp
Vending
Machines,
Signs,
Tags,
etc.
Access
Control,
etc.
Beds,
Pumps,
Implants,
Test
Sys,
etc.
Professional Consumer Agriculture Mining Oil/Gas Water Supply Alterna)ve Demand Enterprise Data Centers
•
Office
Work
•
Home
AutomaIon
•
Farms
•
Surface
Mines
•
ExploraIon
•
Water
System
•
Power
Gen
• Co-‐Gen
Plants
•
Industrial
•
Large
•
Data
Centers
•
Underground
•
ExtracIon
•
Wastewater
&
•
Technical
Work
•
Mobile
Appl.
•
Vineyards
•
Transmission
•
Wind
Farms
FaciliIes
•
Enterprises
•
Carriers
•
Transport
/
Sewage
•
Services
•
Livestock
Mgt.
Mines
Sys
•
Commercial
Pipelines
•
Solar/PV
•
SMBs
•
ISPs
•
Transport
•
Reservoirs
•
DistribuIon
FaciliIes
•
IrrigaIon
•
Rivers
•
ResidenIal
Devices:
Cell
Phones,
Smart
Phones,
TV,
Devices:
Agricultural
Equip,
Mining
Machinery,
Drilling
Equip,
Pipelines,
Devices:
Turbines,
Generators,
Sub-‐StaIons,
UPS,
Devices:
Servers,
Storage,
PCs,
Routers
PCs,
Netbooks,
Imaging,
etc.
Tanks,
Watering
Equipment,
Tags,
etc.
Meters,
Breakers,
Sockets,
Switches
etc.
Switches,
Telephony,
etc.
Process
Forming
Discrete
Distribu)on
/
On-‐Road
Off-‐Road
Non-‐
Transport
Homeland
Emergency
Na)onal
&
Regional
Industries
Conver)ng
Assembly
Supply
Chain
Vehicles
Vehicles
Vehicular
Infrastructure
Security
Services
Defense
Devices:
Pumps,
Valves,
Vats,
Conveyors,
Pipelines,
Motors,
Drives,
ConverIng,
Devices:
Vehicles,
Trains,
Ships,
Planes,
Signage,
Tolls,
Tracking
Sensors
Devices:
GPS
Systems,
Radar
Systems,
Vision/Cameras,
Environmental
FabricaIon,
Assembly/Packaging,
Vessels/Tanks,
etc.
RF
Tags,
Parking
Meters,
Cameras,
etc.
Sensors,
Vehicles,
Weaponry,
Fencing,
NavigaIon/Guidance
Sys,
etc.
Device manufacturers and service companies have important roles to play, and will be the
major enablers of smart products, solutions, and systems. Virtually all markets will offer new
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The Emergence of Smart Business
Forecast Report Overview
This study examines the current state of intelligent device networking, a key element of
the Pervasive Internet and Smart Systems. It also provides a perspective on emerging op-
portunities and threats. More importantly, this research outlines how adopters are using
device networking solutions, and how device manufacturers and related service companies
should leverage networking technologies to gain advantages.
We believe that this holistic approach is now essential both for suppliers looking to maxi-
mize their returns in this market and for adopters/users to take account of the different
options available to them.
FORECAST METHODOLOGY
Harbor combines a comprehensive top-down and bottom-up approach to ensure the
most accurate forecast possible. The figure below outlines our methodology:
Device populations have been determined from government and industry statistics on
output and installed base across the wide range of devices monitored. Data for over 300
device categories in Harbor’s eight ten Venues have been researched in this way in order
to cover all areas where Harbor sees potential Pervasive Internet and Smart Services op-
portunities.
Networking penetration of these device populations has been assessed from Harbor’s
own estimates, based on input received from device suppliers and industry comparisons
across device segments. At the same time, device categories have also been assessed for
the alternative technologies that might be used to connect and integrate them. This ap-
proach seeks to minimize the potential for double counting of devices using different
connection technologies. The results of these assessments have then been cross-checked
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The Emergence of Smart Business
Forecast Report Overview
against actual connection module shipment data received from module suppliers, device
suppliers and some distributors.
• Enablement revenue is derived from a combination of the connection module ship-
ments, their average selling price and the costs for Hardware, Software and Engineering.
• Network and Carrier Services Revenue is derived from the installed base of modules
actually connected rather than those shipped and the Average Revenue Per Device
(ARPD). In turn, ARPD has been determined for each application as a percentage of
Managed Services revenue applicable for each application.
• Managed Services revenue is derived by applying an average monthly service charge
factor to device populations, based on individual venue and customer segment consider-
ations derived from industry interviews.
Ultimately, we integrate our forecast and findings into our analysis of business models, chan-
nels to market and customer buying behavior - both at the OEM stage of the value and
delivery chain as well as in the context of end customer segments.
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The Emergence of Smart Business
Forecast Report Overview
Contacts:
Mark Ritorto
Senior Analyst
415.615.9400 X21
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The Emergence of Smart Business
Forecast Report Overview
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The Emergence of Smart Business
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