Five plus years ago, the sector was massively overhyped and there was an expectation that IoT would take off quickly and disrupt multiple industries. Today, all of the data points on number of connected devices are far below those original projections. Investors were very excited about the long-term growth opportunity of IoT, but once you dig into what IoT really is, it has been a challenge to build scale. The cost of implementing an IoT solution is still very high to put together once you factor in hardware, data connectivity costs, cloud and software. As customers think about the long-term ROI benefit, the cost of putting together a solution is a major inhibitor when the derived value and business insights are still playing out. Security has also been a big challenge. Many solutions in the market were are not architected with security in mind, and management teams take this into account when considering deployments and connecting their assets.
Another key point is around vertical focus. It is already challenging to master one use case in one end-market. We often speak to companies trying to be horizontal solution providers with multiple use cases across many end-markets. Horizontal approaches are much tougher, and the struggle has colored the market in a negative way. We are seeing much more specialization and our view is that companies that have vertical focus will be the ones that have the most success.