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IBM's Sweet Spot In A Neglected Market

This article is more than 8 years old.

Business strategists and investors focusing too intensely on IBM's quarterly financial reports have probably failed to notice the company's sweet spot in a neglected market — the mining and monetizing of an enormous volume of data created through the interaction of everyday devices or The Internet of Things (IOT).

Gartner estimates that the IoT market will be a $1.9 trillion market by 2020.

For years, IOT sounded like science fiction. For a good reason: many of the pieces that let everyday devices communicate with each other either weren’t there, or they were too expensive to acquire, install, and access.

Now, thanks to the proliferation of mobile Internet, tablets, and smartphones, IOT is a reality, creating an enormous market for hardware and software that lets everyday devices communicate with each other.

Many big technology players have already been tapping this market by acquiring device makers (e.g., Google ’s acquisition of Nest Labs, a private company that makes smart home controls like thermostats and smoke detectors) or developing platforms to tap into this market (e.g., Qualcomm).

But there is another market in the IOT with an enormous potential -- the value hidden in the information generated by the interaction of everyday devices -- which has yet to be tapped.

IBM estimates that 90 percent of all data generated by devices like smartphones, tablets, connected vehicles and appliances is never analyzed or utilized in business decision processes. As much as 60 percent of this data begins to lose value within milliseconds of being generated.

The reason in our opinion is that, so far, this market has either been too small in terms of potential corporate value-added or too costly in terms of the operation expenses required to tap into it.

But now IBM has the tools—the cloud and the analytics capabilities--to help companies tap into this neglected market. How? By integrating their legacy business process systems with the data generated by everyday devices.

That’s IBM’s sweet spot in this market.

To be fair, IBM isn’t the only big player in this market. So is Amazon, Google, Microsoft, and the like.

 But IBM's ahead of the competition, when it comes to “bundling” these capabilities, as Bryson Koehler, EVP, CTO & CIO, The Weather Company attests to it.

"I believe in the multi cloud story and believe that any serious cloud based business or application needs to be built in a cloud agnostic way. The Weather Company has been on that journey for the last three years and that's what has enabled us to deploy our Data Services Platform onto IBM SoftLayer so we can power our business and strategic opportunities with IBM beyond what we could do with Amazon Web Services alone."

IBM has invested a great deal in partnerships to help create its own ecosystem in the IOT. For instance:

   On March 31, IBM announced the formation of a new business unit dedicated to accelerating its leadership in Internet of Things (IoT) solutions and to develop new industry-specific cloud data services, IoT developer tools and expanded ecosystem partnerships.

   Also on March 31, IBM and The Weather Company announced a global partnership to integrate real-time weather insights into business to improve operational performance and decision-making. The Weather Company, and WSI -- its global B2B division -- provides 10 billion discrete forecasts per day including the collection of data from 100,000+ private weather sensors, aircraft, millions of smartphones, buildings and even moving vehicles. This partnership represents a turning point for businesses that have long been impacted by weather, but have not had the data or enhanced decision-making ability to drive positive business outcomes -- until now.  

   On April 9, IBM announced a new collaboration with Texas Instruments (TI) to help secure the IoT, as well as new IBM software, cloud services and consulting services to enable clients and partners to create and manage connected products and systems. IBM and TI are collaborating to develop IBM's highly secure, cloud-hosted provisioning and lifecycle management service for IoT devices. Through its collaboration with TI, IBM will create a Secure Registry Service that will provide trust and authentication practices and protocol across the value chain – from silicon embedded in devices/products to businesses and homes.

IBM’s sweet spot in IOT has begun to effect its top line. In the first quarter of 2015, IBM’s strategic imperatives (Cloud, Mobile, Social, Analytics, Security) revenue grew 30%, and is expected to grow to $40b by 2018.  That would certainly help the company replace revenues from declining business, and eventually turn the top and bottom lines around.