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ARC Advisory Group’s recently released update of our industrial IoT edge software platforms market analysis reveals that, despite double-digit growth in 2019, this segment continues to struggle to meet its revenue potential. This fact is evident in not only the figures for the overall market, where relative growth is calculated relative to relatively small 2018 revenues, but also by consistent reporting of missed 2019 revenue targets across the supply base. A variety of causal factors were behind these results, but extended time to scale, security concerns, timeline for adoption of cloud-native technology at the edge, and lingering doubts in some corners as to the edge value proposition had overarching impact.
The new research reveals that OEM markets for connected end products have scaled at a slower than anticipated pace, including due to the frequent need to accommodate scheduled maintenance cycles when “landing and expanding” successful new pilot installations into legacy equipment. End customers in connected operations applications have similarly ramped up their PoCs at a slow pace, including due to challenges faced when transitioning from pilots to production.
Despite these findings, the long-term value proposition for industrial IoT edge solutions remains solid. Cloud-based solutions need data from connected assets in order to maximize efforts to reduce cost, increase revenue, or achieve product and service innovation. Issues with latency, security, and distrust of off-prem execution necessitate that much of this activity take place at the edge, but the pace of scaling remains a market challenge.
Enterprise Cloud Providers Target the Industrial IoT Edge Solutions
As cloud-based enterprise applications have become the norm, cloud solutions from suppliers, such as AWS and Microsoft, are extending to the edge to access their source data and fulfill their digital transformation value proposition. This is particularly evident in AI, ML, and video analytics applications, where edge capabilities promise significant value in both data preprocessing and local execution of cloud-trained models. ARC finds that customers accustomed to cloud-based business applications and use of the cloud for management of on-prem hardware and applications are increasingly likely to include cloud providers in the edge solution selection process. IT organizations involved in the selection process also typically bring the cloud providers into the discussion.
Cloud providers are adding edge functionality and associated services that are a natural extension of their core capabilities in areas such as device management and security. Customers evaluating edge solutions from the cloud players should note that, in our experience to date, the enterprise cloud-based solutions tend to represent a more toolset vs. solution approach at the edge while industrial domain knowledge can vary. This can result in significant investments in both time and development to tailor these more horizontal solutions to your installation, typically by the enterprise-level IT organization and data scientists.
This contrasts to dedicated edge solutions that can generate much quicker time to value and overcome real deficiencies when extending the cloud to endpoint devices. These deficiencies include latency of edge to cloud communications and security and operational concerns regarding sending data to and from off-prem components of the infrastructure. Industrial IoT edge solutions also provide support for the OT environment in areas such as built-in support for northbound and southbound connectivity, easy-to-use industrial development and visualization tools, and domain-specific vertical architectures, while integrating the cloud component for data plumbing, compute, and store infrastructure.
Some customers likewise look to avoid cloud lock-in all the way to the edge, which third party edge solutions can typically address. Virtually all edge platform providers provide native integration with enterprise clouds and participate in the cloud marketplaces or ecosystems, with many leveraging open source technologies designed to limit cloud lock-in.
Material for this blog was generated from ARC Advisory Group’s recently released Industrial Internet of Things (IoT) Edge Software Platforms Market Research. This research explores current and historical market performance and related technology and business trends, identifies leading technology suppliers, and provides five-year global forecasts by region, industry, new vs. retrofit, platform functionality, revenue category, deployment model, execution environment, sales channel, and customer type. Further information on ARC’s coverage of the industrial IoT edge can be found on our dedicated Industrial IoT edge webpage.