Cracking the Code of IoT - Data Growth and Its Implications
I decided to start my IoT series with the data growth. This is an overused market trend that almost everybody knows. I will try to take a different approach and will try to add additional insights beyond the obvious fact.
Internet data traffic growth is happening while I'm typing this and is growing in the exponential scale, we all know it.
Let me start by listing the main growth drivers:
None of these factors are infinite and they are not in sync or equally factored into the growth pattern. This creates unpredictability in the growth pattern. Yes, we all agree that the growth is real but what is the rate of growth?
My hypothesis is that we will be soon entering into a slowed growth phase.
To test my hypothesis, I decided to observe the historical electric consumption data from EIA as a guideline. Similar factors as listed above were also applicable for electricity consumption(number of users, devices, and the device power requirements). Therefore, it is normal to expect similar patterns in both types of consumption (data vs electricity).
In the graph below, I plotted the historical growth in electric consumption in logarithmic scale. I noticed multiple inflection points as compared to the exponential trend line for electric consumption.
Some of the inflection points represent decreasing growth, potentially due to some of the contributing factors reaching saturation (e.g number of users and amount of time) as well as macro economic conditions. We also observe another type of inflection point that represents increasing growth, potentially due to the weighted impact of some contributing factors such as a massive increase in the number of devices, power requirements, discovery of new technology, economic growth... etc.
If I create the similar plot for data consumption, you will see that we are beyond the second type of inflection point which means we are experiencing an increased rate of growth in data consumption.
When the mobile traffic and the video consumption increased, while a significant amount of investment poured into the infrastructure (mobile and wireline) nurturing conditions were created for the increased traffic growth. As we go deep into IoT era, the number of devices and the bandwidth requirements will continue to increase but unfortunately, at some point in the near term, the infrastructure won't be able to sustain the demand (we are already experiencing the lag).
I also plotted a forecast traffic (blue dashed lines) which may be of by a year or so but aren't we already observing the supporting evidence of slowing growth such as flattened infrastructure investment, use case disruptions, and market fragmentation?
I believe starting in 2020 (+- 1 year) we will witness another cycle of significant infrastructure investments at which point we will also observe market consolidation and economies of scale for the IoT ecosystem. The investment will not only come from incumbents but also from new entrants.
I believe that this observation/theory is important in terms of setting the right expectations. Please feel free to share your opinion.
In my next article, I will try to address the supply side of the market. Stay tuned.
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