IoTUK INDUSTRY INSIGHTS MAPPING THE IoT NATION(Brillo) 7, Apple (Apple Homekit)8, Huawei (Agile IoT)9, Toshiba (TZ1000)10, Tencent11, and Samsung in partnership with Telefonica “Thinking

Mapping the IoT Nation IoTUK Industry InsightsGet in touch: IoTUK.org.uk @[email protected]

IoTUK INDUSTRY INSIGHTS

MAPPING THE IoT NATION IoTUK INSIGHT PAPERS

AUGUST 2016

1Mapping the IoT Nation IoTUK Industry InsightsGet in touch: IoTUK.org.uk @[email protected]

The Internet of Things ( IoT) ecosystem in the UK is incredibly vibrant and evolving rapidly. Since December 2015, IoTUK has been exploring different parts of it, mapping the breadth of activities so that we can start to build a picture of IoT in the UK. Our work has included desk-research, face-to-face and telephone interviews, case-study investigation, and gathering a financial evidence base of publically announced investments. We are compiling our work into the IoT Nation Database, providing an evidence-base to help evaluate the UK as a world-leading IoT Nation.

The results of our work will appear in a series of short ‘Insight Papers’ to be published over the coming months. We present the first three papers as a series as they provide insight into the overall market drivers, opportunities and challenges for IoT in the UK, spanning research funding in the academic sector, by venture capitalists and private investors, and by corporate enterprises.

The first paper considers academic R&D activity in the UK, and seeks to understand the range and reach of the deep technical expertise being developed to support IoT technologies, protocols and capabilities. The UK currently ranks fifth globally in the production of academic publications and conference papers on IoT (Source: Reed Elsevier Scopus database1). IoTUK’s investigations discovered 135 separate research projects, representing £122m in funding from 2015-2018, of which 89% was from UK sources2. The studies that are currently being undertaken in the UK are going to have a profound impact on our lives. The IoT will transform industries such as health and social care through better remote monitoring techniques, create a joined-up transportation network, and bring investment into the UK, ensuring our place at the heart of the global IoT community and at the forefront of this burgeoning technology trend.

Our second paper looks at UK private investment in IoT companies and starts to build a picture of the volume, value and destination of UK IoT investments. The early-stage picture looks promising - we have identified 45 companies across the UK that have received private funding, ranging from a few thousand to multi-million pounds; the companies receiving investment range from small startups to established companies with new IoT ideas. In total, we have identified over £42m of publicly announced, private funding, much of it made since mid-20153. However as an investment category IoT is relatively new to the market and deals in 2015 tended to be smaller in value; according to Ascendant Corporate Finance, who have been tracking the UK and Irish VC markets since 1997, total technology investment for 2015 was £2.59bn in 534 deals by 421 investors4. IoT investing then, represents around 8% of deals being negotiated in 2015, but only 2% of the value offered.

We have explored where the money is being invested and the findings are illuminating; 50% of known private funds have been invested in London based companies; we also find that companies with service based ideas, particularly those with a focus on domestic appliances and buildings are succeeding in attracting funding.

Corporate enterprises form the subject of our third insight paper. According to a February 2016 report from SAS and the Centre for Economics and Business Research5, the IoT will enliven the economy to the tune of £81bn and bring 67,000 jobs to the UK by 2020. Whilst much of the financial value is expected to come from efficiency savings, the excitement really starts when we start to look at what this means when it comes to business innovation and technological opportunities.

1 The Reed Elsevier Scopus database is the largest global abstract and citation database of peer-reviewed literature: scientific journals, books and conference proceedings – www.elsevier.com/solutions/scopus

2 See the IoTUK Insights report – “Research”, August 2016

3 See the IoTUK Insights report – “Investment”, August 2016

4 See the Digital Catapult blog post from Stuart McKnight of Ascendant, April 2016 www.digitalcatapultcentre.org.uk/rise-of-the-angels

5 www.sas.com/en_gb/offers/16q1/cebr-big-data-internet-of-things.html


The UK is home to a rapidly growing community of companies developing and commercialising IoT component technologies, products and services which are already having an impact on businesses, in homes and in individuals’ lives. IoTUK is building a database of those companies (167 companies are listed so far) so we can track the activity in the supply side of the UK’s IoT industry to demonstrate both breadth and scale, to highlight some of the significant commercial products being developed, and to analyse how IoT-focused suppliers are distributed by type, size, application area and location. Our report presents early-stage findings from the IoT Nation Database.

Subsequent papers will investigate IoT projects, demonstrators and public implementations, the UK contribution to global standards and platforms, collaborations and meet-ups and some of the exciting companies in the IoT space. Early in 2017 we will publish our findings about the economic impact of IoT activity for the UK in the future, based on our findings from a 12-month research period from 2015/16.

We plan to produce more of these papers this year - please let us know if you have ideas for areas we should cover by emailing [email protected]


ESTABLISHING AN EVIDENCE-BASE FOR THE UK AS AN IOT NATION

Hype regarding the Internet of Things has been intensifying over the past 5 years – although the term has been in use for closer to two decades. The phrase was first used by Kevin Ashton of Procter & Gamble in 1999, to describe linking Radio Frequency ID (RFID) messages to the internet6. Since then it has come to describe a future in which trillions of devices – from invisibly placed sensors and tags to consumer technology to massive industrial machines - are all connected to and sending data across a wide variety of network types, using internet protocol.

In practical terms, global IoT in 2016 is a relatively immature market, one in which key standards and protocols are only just beginning to become established - although there has been significant development over the last 18 months. Since the end of 2014 Google (Brillo)7, Apple (Apple Homekit)8, Huawei (Agile IoT)9, Toshiba (TZ1000)10, Tencent11, and Samsung in partnership with Telefonica “Thinking Things”12 have all the announced the release of IoT operating systems or hardware and software schema for developers to use in building devices and applications for IoT services. The increase of standardisation from both device manufacturers and operating system providers will lead to a rapid escalation in consumer and enterprise-grade IoT services over the next six to 18 months, as developers seek to monetise what have, until now, often been research-led use cases.

6 www.rfidjournal.com/articles/view?4986, “That Internet of Things Thing”: Kevin Ashton, June 2009

7 developers.google.com/brillo and www.theverge.com/2016/1/5/10714466/google-brillo-weave-first-products-announced-ces-2016

8 www.apple.com/uk/ios/homekit and www.pocket-lint.com/news/129922-apple-homekit-and-home-app-what-are-they-and-how-do-they-workNeeds citation

9 pr.huawei.com/en/news/hw-433506-agile.htm#.V6oEO5MrLsE

10 toshiba.semicon-storage.com/ap-en/product/assp/applite.html

11 See the South China Morning Post, 29th April, 2015 www.scmp.com/tech/enterprises/article/1779923/tencent-unveils-smartphone-and-internet-things-os-challenge-xiaomi

12 www.thinkingthings.telefonica.com/about/


Network-led developments born from the RFID and M2M sector, where industrial processes in areas like shipping, logistics, mining and extraction, manufacturing and production already use radio-based technologies to track assets through processes. These developments are often focused on extending the networks that these tracking sensors can work across, making it possible to monitor the effectiveness of processes more accurately and more completely, saving money. Examples include telematics implementation at Balfour Beatty13, helping them to manage driving risk across their 30,000 strong workforce in the UK, reducing driving incidents and cutting their fuel bills through better driving practices.

Focused on the range and reach of the connectedness that IoT delivers

Specifically concerned with on and off-net traffic flows and how they are managed across multiple network types

Often take an approach of improving the efficiency of existing processes

Tend towards industrial process-led solutions

13 See the O2 Business case study news.o2.co.uk/2014/04/07/driving-safety-at-balfour-beatty

IOT DEVELOPMENTS GENERALLY COME FROM ONE OF THREE AREAS:

NETWORK LED

Lease, Retal & Share Car Magagment

Vehicle Diagnostics

Vehicle Navagation

Stolen Vehicle Recovery

Vehicle Platform

Roadside Assistance

In-Vehicle Voice

Usage-Based Insurance

In-Vehicle Entertainment

& Internet Access

In-Vehicle Emergency Call

Stystem

Assisted Living

Worried Well Remote Monitoring

Worried Well Personal

Monitoring

TelemedicineClinical Trials

Clinical Remote

Monitoring

Connected Medical

Environments

Land Agriculture

Fishing Extractive Industires

Construction Equipment Monitoring

Vending Machines

Defence

Specialist Office

Now Energy Sources

Smart Metering

Smart Grid & Distribution Monitoring

Retail & Leisure Specialist

Applications

Retail Goods Monitoring &

Payment

Boundary Control

Warehouse & Storage

Public Space Advertising

Supply Chain

Road Fleet Management

Emergency Services

Homeland Security

Manufacturing & ProcessingPublic

Transport

Road Traffic Management

Electric Vehicle Charging

Environment & Public Safety

Environmental Monitoring

Building Automation

Micro Generation

Building Security

Construction Site Monitoring

Commercial Appliances

White Goods

Office Equipment

Network Infrastructure

Network Equipment

AV Displays

AV Sources

Personal Multimedia

Tracking Applications

Household Information

Devices

Other Consumer Electronics

PC’s & Laptops

Handsets & Tablets

Connected Car

Connected Health

Connected Industry

Connected Living & Working

Connected

First Responder Connectivity

Source: Machina Research 2015


Device-led developments initially stemming from the scientific research community, where tiny, low-power sensors have been used in experiments as diverse as the detailed tracking of bees14 and the creation of 8-legged robots that can learn how to walk15. These developments are often led by changes in device capability, for example sensors with longer battery life or that can respond to a greater range of contextual triggers. IoT devices took off in 2013 with early-adopter popularity of fitness trackers and in 2014 smart watches, despite a number of false starts (connected fridges, connected toasters).

Focus on the types and capabilities of the devices embedded in the IoT network

Specifically concerned with the adaptive, responsive and predictive nature of sensor-based devices

Often take an approach of applying new data-led or technical capabilities to change existing processes

Tend towards technology prompted solutions

DEVICE LED

14 Woodgate, JL; Makinson, JC; Lim, Ka S; Reynolds, AM; Chittka, L: “Lifelong Radar Tracking of Bumble Bees” August 4th, 2016 journals.plos.org/plosone/article?id=10.1371/journal.pone.0160333

15 Unwin-Wright, S; Sanders, D; Chen,S: “Terrain Prediction for an Eight-Legged Robot” 25th October 2001 users.ecs.soton.ac.uk/sqc/listP/JRS2002-19-2.pdf

Source: Gartner. 2015

AN

ALY

SE SENSE

ACT

COMMUNICATE

SENSE


Experience-led developments as IoT services start to mature, the combination of connectedness, machine-generated actions driven by sensing devices and human-generated responses creates a class of services that can significantly change the quality and range of experiences that users of IoT benefit from. It ’s the difference between a digital service and a smart service. The critical factor in delivering this class of IoT service is data analysis – especially the range, flexibility and contextual sensitivity of data to pre-emptively or intuitively deliver services.

Focus on the nature and characteristics of the experience of users of IoT services

Specifically concerned with the development of machine or network-initiated services vs human-initiated services

Often takes the approach of developing data-driven learned or adaptive responses (“intelligent machine”)

Tend towards systematic, data driven solutions

EXPERIENCE LED

Pre-internet Internet of content

Integrated multiplayer system

Internet of services

Internet of people

Internet of things

++ ++ ++ ++“Human to human” “www” “Web 2.0” “Social media” “Machine to machine”

• Fixed and mobile telephony

• SMS

Source: Alcatel Lucent, 2015

• e-mail

• Information

• Entertainment

• e-productivity

• e-commerce

• Skype

• Facebook

• Youtube

• Identification, tracking, monitoring, metering

• Automation, actuation, payment

+ smart networks

+ smart I.T platforms and services

+ smart phones and applications

+ smart devices,

objects, data

+ smart Data and ambient context


The UK digital economy totalled 1.56m jobs in 2014, growing 2.8x faster than the rest of the economy

There were 58,000 active digital businesses in the UK, generating £161Bn turnover

Digital businesses revenues grew 32% faster than the rest of the economy

But IoT & connected devices made up less than 1% of the UK digital marketplace

As with the global marketplace, IoT in the UK is a relatively immature industry. Multiple players, from telecoms and infrastructure providers; hardware, device and processor manufacturers; technology platform vendors; software and applications companies; and data analysis and processing businesses are all involved in the IoT value chain. But, to establish the UK as an IoT nation - with a healthy and self-sustaining economy of SME businesses delivering new business models, technologies and services to the market – the relative under-representation of IoT businesses in the UK economy highlighted in the recent TechNation 2016 report needs to be addressed16.

16 TechCity and Nesta, “TechNation 2016: Transforming UK Industries”, February 2016 www.techcityuk.com/wp-content/uploads/2016/02/Tech-Nation-2016_FINAL-ONLINE-1.pdf

Digital Tech businesses as a % of total market

Healthtech

Edtech

IoT & connected devices

Social Networks

Online Gambling

Gaming

Fintech

Cyber security

Digital media & entertainment

E-commerce & marketplace

Digital Advertising & marketing

Telecommunications & networking

Enterprise software & cloud computing

Data management & analytics

App & Software development

20% 15% 10% 5% 0%

Source: TechNation 2016 report, TechCity and Nesta

IN 2015, UK IOT ACTIVITY WAS UNDER-REPRESENTED IN A GROWING DIGITAL MARKET


The UK has a leadership position in IoT research (#5 globally in 2015) 135 specific projects, £122m in funding, 89% UK-funded18

Focus areas for public funding spend are cyber-security, healthcare, privacy and trust, transport. Although most private-sector activity by scale is in smart-home19

VC/private investor spend (£42m+ 2015) is mostly in software, in smart-home and smart-buildings. Healthcare and security are called out as “hot” next markets20

Trickle-down from research spend or VC funding is not at optimum geographically SMEs, especially outside London, struggle to participate in the global IoT market21

According to Reed Elsevier’s Scopus database, in 2016 the UK ranks fifth in the global league table of IoT research publications. In fact, although China (#1) and the USA (#2) produced more than 55% of all academic publications and conference papers tracked by Scopus from 1967 to the end of 2015, the UK’s output over the same period was the same 5.5% as Germany (#3) and Italy (#4)17. A thriving research environment attracts funding, both public sector and private sector, and effective collaborations can drive innovations, technological developments and new business models and ways of working. IoTUK’s mapping research found:

17 Op.Cit

18 Op. Cit IoTUK Insights – “Research”

19 Op. Cit IoTUK Insights – “Investment”

20 Ibid

21 Ibid

IN 2016, EVIDENCE OF IOT MARKET DEVELOPMENT IS INCREASING SIGNIFICANTLY


The IoT marketplace is currently dominated by large, multi-national businesses with deep pockets, assertive marketing messages and incumbent market-share to protect. On the buyer-side, some high potential markets like health, place and utilities have risk-averse procurement models in the context of agile technology development spend. There is an over-reliance on scale economics as a success factor in selecting IoT partners, which keeps costs of entry unreasonably high for small players. A lack of standards and interoperability further restricts market activity to players with scale big enough to set their own standards. As a result – the organisations proving successful are those for whom there is a structural dis-incentive to disrupt – and the development of cross-cutting technology, platform and infrastructure plays is consequently held back.

KNOWLEDGE INTEROPERABILITY INFRASTRUCTURE/PLATFORMS

TECHNICAL SKILL/ TECHNOLOGY

CAPITAL

CUSTOMERS

It ’s a complex and confusing market, with very little benchmark data or authoritative

market evaluation

Standards are unproven, or still being formulated.

Working across ecosystems is challenging

Costs of entry are too high; regionally, infrastructure provision is inconsistent.

Demonstrating technical competency at scale is challenging (first-engineering phase)

Outside of London, Cambridge and Glasgow,

little private sector funding is available.

Lack of commercial risk models hampers the

development of cross-sector ecosystems to help leverage scale

}{High-potential but risk-averse markets like

healthcare have lengthy and unhelpful buying practices

{ } { } { } { } { }

BUT THERE ARE STILL CHALLENGES TO BE MET TO MAXIMISE ECONOMIC IMPACT OF IOT

What are the blockers for SMEs in IoT?


IOTUK IS THE WORLD’S MOST AMBITIOUS FULLY-INTEGRATED IOT ACCELERATION PROGRAMME

WE WORK IN PARTNERSHIP ACROSS THE END-TO-END SPECTRUM OF NEW TECHNOLOGY AND BUSINESS DEVELOPMENT FOR IOT:

From the exploratory and experimental R&D being investigated in the PETRAS Hub,

through early stage ideation and product development via our hardware accelerators with Start-Up Bootcamp and R/GA,

into large-scale demonstration programmes and product/service commercialisation in two specific domains for IoT - Healthcare and Smart Cities - via the NHS Testbeds and the CityVerve project in Manchester,

with economic/clinical implementation models from the Future Cities Catapult and NHS England to encourage more rapid adoption of outputs from the demonstrators.

We create, nurture and grow communities of SME businesses to develop into IoT success stories

We review, analyse and explain developments in the IoT market, both at home and abroad, to help businesses maximise their market and investment potential using our insight

We promote best practice sharing, collaborative learning and participation across and between the partners in the IoTUK ecosystem, our communities, and beyond

We champion success stories from our networks, sharing ideas about effective business models and showcasing excellence from our SME community both to UK and international audiences

We contribute to the development of accessible standards for IoT, and support the evolution of government policy to support ongoing success for UK businesses on an international scale

We offer direct intervention through our Boost and Mentoring programmes with the aim to directly impact more than 250 SMEs over the three-year period of the programme, measuring both GVA indicators and sentiment indicators for positive results

We support the establishment of the UK as a world leader in IoT products, services and capabilities

THROUGHOUT THE ENTIRE DEVELOPMENT CYCLE THE DIGITAL CATAPULT’S ROLE WITHIN IOTUK IS TO CHAMPION AND FACILITATE THE PARTICIPATION AND BENEFICIAL PROGRESS OF UK SME BUSINESSES IN IOT MARKETS

Documents

IoTUK INDUSTRY INSIGHTS MAPPING THE IoT NATION(Brillo) 7, Apple (Apple Homekit)8, Huawei (Agile IoT)9, Toshiba (TZ1000)10, Tencent11, and Samsung in partnership with Telefonica “Thinking