The Internet of Things (IoT) has evolved from early-stage innovation trigger to the peak the Hype Cycle of Emerging Technologies in 2015. The IoT is rapidly emerging as a third, and likely a bigger wave in the development of the internet, following the rise of the fixed internet in the 1990s and the mobile internet in the 2000s.
There is a lot of ongoing supply-side activity globally in the IoT space, in the form of multiple products, platforms and solutions development, regulatory frameworks development, standardization, investments, mergers and acquisitions, etc., and many companies, big and small, are actively involved in it.
For the first time in the ‘Digital Technologies’ era, India is positioned on par with leading countries, both as an innovation hub and a market for various IoT-based products and solutions. According to Convergence Catalyst analysis, IoT is expected to go mainstream after 7 or 8 years. However, even at the current nascent stage of the industry evolution, there are a number of supply and demand side trends and leading indicators that suggest a potential major role India could play in the growth of global IoT ecosystem. Some of these trends include:
- Progressive government initiatives around IoT
- Increasing focus on ESDM hardware ecosystem growth
- Evolution of IoT specific industry forums
- Large companies’ focus on IoT in India
- Rapidly growing Indian startup & entrepreneur ecosystem and investor interest
- Development of IoT solutions for Indian market with an eye on global fitment and scale and
- Growing smartphones usage and increasing consumer awareness
1. Progressive Government Initiatives Around IoT
Various government initiatives including policies & regulatory framework development, industry wide partnerships and investments for various technologies, especially IoT-based initiatives are expected to drive both the market and products & solutions development in India.
Policy Creation: Government of India’s Department of Electronics and Information Technology (DeitY) has released the first IoT policy framework proposal for India, in October 2014. This policy document, which is a part of the Indian government’s broader ‘Digital India’ vision, highlights key tactical steps for the growth of the Internet of Things ecosystem in India.
As per the policy document, the government envisions to create a market of USD 15 billion by 2020 in India, impacting the growth of connected devices from the current 200 million to 2.7 billion by 2020. The government proposes five key drivers/areas of investment for IoT in India:
- Incentives and Engagements: Tax and duty rebates for both imports (up to 100%) and domestic purchase of IoT raw materials
- Encourage R&D and Innovation: Proposal to identify core members of R&D in each field of technology that enable IoT and initiate cloud-based open source projects. Create test labs for Hardware-to-Hardware and Hardware-to-Software integration. Proposal to establish ‘International IoT Research Collaboration scheme’ (IIRC)
- Capacity Building and Incubation: To promote Institutional capacity building with ERNET as the nodal agency and 15 academic/institutional partners, with an allocation of USD 3 million. Setting up of incubation centers titled — National Centre of Excellence in association with NASSCOM and other associations, with an allocation of USD 21 million
- Demonstration Centers: Allocation of USD 21 million on public-private partnership basis as 50% funding for at least 5 projects each from different categories over a period of 3 years
- Human Resource Development: To create an IoT Education and Awareness program in DeitY for developing skill sets for IoT at all levels, the policy suggests the introduction of IoT based curriculum in B.Tech and M.Tech courses, along with introduction of research programs and short-term certification courses in this field
Public-Private Partnerships:
- Smart Cities Program: Government of India has a vision to develop smart cities in India. For this, the government has allocated a fund of over USD 6.5 billion to fund and encourage private player participation in development of these smart cities. Various IoT enabled projects for the development of these smart cities include Smart Energy, Water, Waste Management, Surveillance, Traffic Management, etc. A few smart city pilots are already underway in Kochi and Bangalore and various global companies including IBM and Cisco are involved in these pilots
- Smart Grid Projects: There are currently 14 ongoing smart grid pilot projects in India, in cities such as Pondicherry, Mysore, Kolkata, Mumbai, etc. All these projects are in public-private partnership mode. 9 of these 14 projects are managed by Power Grid Corporation of India Limited (PGCIL), a government organization
2. Increasing Focus on ESDM Hardware Ecosystem Growth
Domestic manufacturing of electronic goods, sensors and appliances is a key enabler for the growth of IoT. Currently over 65% of USD 85 Bn electronics products in India are imported. The Indian government through DeitY and IESA (India Electronics and Semiconductor Association) has initiated multiple projects to drive the domestic Electronics System Design & Manufacturing (ESDM) industry in India. A number of enabling and forward-looking policies and regulatory frameworks have been instituted to foster the growth of Indian electronics ecosystem. These policies are aimed at holistic development of the ESDM industry by offering specific incentives for the development of each element in the value chain.
Foxconn’s India Entry: Leading global mobile devices and electronics manufacturer Foxconn’s entry into India and its commitment of investing USD 5Bn (as a part of the government’s “Make In India” initiative) is expected to kickstart the electronics manufacturing and grow the component ecosystem in India. Many global and domestic smartphone companies such as Lenovo, Xiaomi, Micromax, etc are also planning to start smartphone manufacturing plants in India, post Foxconn’s announcement.
In the next 2 to 3 years, by the time these manufacturing plants ramp up to capacity and enhance their workforce skillsets, we expect them to evolve beyond smartphones to manufacture other sophisticated electronic devices including robots, automation gadgets and connected devices (for IoT).
Hardware Technology-Focused Venture Fund: Leading Silicon-Valley venture capital firm Walden International has recently announced an India fund to focus on hardware-based technology startups. This is expected to provide the requisite impetus for young Indian IoT-based companies as hardware design and development is a key component of most IoT solutions.
3. Evolution of IoT Specific Industry Forums
There are multiple industry forums and support groups in India to support and enable the growth of IoT specific solution companies in India. Support from these industry forums is extended in multiple formats such as training workshops, ideation labs, sourcing equipment, research & test labs, product roadmap assistance, business and partnership models evaluation and advisory, mentoring, investment advisory, industry networking, etc.
The current industry groups and forums supporting companies in the IoT space can be classified into three groups:
- City specific forums such as IoTBLR (Bangalore) IoT Delhi, IoT Mumbai, etc., help novices/hobbyists and people with interest in IoT space increase their awareness and understanding. These groups also help young startups with idea evaluation, test and research equipment provisioning, networking among peers, trainings, workshops and help the young companies initiate IoT projects
- Forums such as Indian Institute of Science (IISc)’s Center for Cyber-Physical Systems (CCPS) help companies developing IoT products and solutions with their technical research and mentoring
- Forums such as The Indus Entrepreneurs’ (TiE) and India Electronics & Semiconductor Association’s (IESA) ‘India IoT Forum’, NASSCOM Product, iSPIRT, etc help established firms with IoT specific business and revenue models development & evaluation, identifying geography and industry based opportunities for solution deployment, investment advisory, industry networking, value chain partnerships and enabling ecosystem growth
4. Large Companies’ Focus on IoT in India
A number of big, global technology companies with existing engineering and R&D teams in India are focusing on investing in and growing the Indian IoT ecosystem. Below are key of the initiatives by some of these companies:
- Robert Bosch is planning to open a plant for IoT specific products in India, focusing primarily on sensors and actuators development
- Cisco is working with various public and private players to drive the smart city projects in India. The company is also involved in the development of “Internet of Things Innovation Lab” in Bangalore
- Mediatek is investing significantly in growing the IoT Developer ecosystem in India
- Intel has recently launched “Maker Lab” to help young Indian IoT companies with development kits, reference boards, hardware and software tools, mentorship and business support to develop products
- IBM is extending its big data focus to include IoT
- Samsung, with its large Tizen operating system engineering team in Bangalore, is focusing on evolving its OS for various IoT solutions
- Infosys and Wipro are leveraging their extensive IT services and system integration expertise and large global client base to establish an IoT business vertical
5. Rapidly Growing Indian Startup & Entrepreneur Ecosystem and Investor Interest
India’s Technology Startup Ecosystem: India’s current 3,250+ technology startups make the country the third-largest base of startups in the world by volume, behind USA and UK. India is also the fastest-growing technology startup destination, adding about 650 startups in 2013 and more than 800 in 2014. According to NASSCOM, the number of technology startups is expected to grow to 11,500 by 2020, adding 2,000 startups that year and employing between 250,000 and 300,000 people, compared to 65,000 people in 2014.
Focus on IoT: There are many niche technology companies working on various IoT products and solutions in India. Currently, there are over 180 startups working on dedicated IoT solutions in India, and the number of these companies has tripled in three quarters between Oct, 2014 and Jun 2015. While most of these companies are primarily concentrated in Bangalore, some are based in other cities including Pune, Kochi and Hyderabad.
Of the current IoT startups in India, over 75% are working on developing products, applications and platforms. This is an encouraging sign of maturity and ‘product thinking’ among young Indian startups (and a move away from the erstwhile services-based technology companies) in India. The primary focus areas of these IoT product focused companies in India include Wearables, Healthcare, Consumer Goods, Automotives and Home Automation, in line with the global trends. There are also a few Indian companies working on developing cloud platforms in the IoT space.
India currently has over 2 million mobile app developers, and according to Google’s Admob team, this number is expected to grow to 3 million by 2017, at which point India will be the largest base of app developers in the world. Moreover, according to Vision Mobile estimates, over 40% of current global IoT solutions developers are based India and China. There is a clear indication that Indian mobile app developers are transitioning to IoT solution development.
VC Funding Scenario: All this activity in the Indian technology startup ecosystem is being duly supported by the private investments ecosystem, the pace of which is growing rapidly. The number of >USD 50 mn investments in technology startups in India have grown from 2 in 2013 to 12 in 2014 to 25 by July, 2015. Total funding for venture capital-backed technology companies increased to $5.4 billion this year (so far) from $4.7 billion in all of 2014. Even the venture arms of large technology companies’, especially the ones with strong IoT focus such as Qualcomm (Qualcomm Ventures), Intel (Intel Capital), Cisco (Cisco Capital), etc., are focusing on Indian technology startups. Cisco earmarked USD 250 million for investing in Indian technology startups, and IoT is one of their key domain areas.
6. Development of IoT Solutions for Indian Market With An Eye on Global Fitment and Scale
Both as a market and an innovation hub, India presents unique business and technology challenges including connectivity issues, power failures, logistics issues, price-sensitive consumers, relatively low consumer education of digital products and solutions, etc. However, we are witnessing a number of innovative IoT companies exploit these challenges to their advantage by strategically using Indian market as a test bed, by designing and fine-tuning their product offerings, business models and go-to-market strategies for this market, and focusing on growing across various global markets.
- GOQii: GOQii, a fitness band company operates on a unique model of providing the wearable device for free while the consumers pay a subscription fee (similar to gym membership) to the company, which employs fitness trainers and coaches who remotely monitor and analyze the data from the users’ bands and provide personalized training regiment over phone and e-mail.
This service-based revenue model is disruptive, provides end-to-end value to the user and ensures high engagement. The company is working on expanding to Middle East and US markets.
- Wizn Systems: India’s wireless data networks (3G & 4G) operate in higher spectrum bands (2100 MHz & 2300 MHz), which have inherent issues of low coverage area, poor in-room penetration and most importantly lead to higher power usage from connected devices (leading to faster battery drain). Most existing sensors in IoT-based solutions transmit data using protocols such as Wi-Fi, ZigBee or Bluetooth Low Energy, which operate at bandwidths greater than 1 Gigahertz and are, thus, not ideal for India.
Bangalore-based Wizn Systems developed a new platform that enables home-automation hubs to connect in sub 1 GHz band, control over 100 sensors (as compared to ZigBee’s 30 sensor capacity) and extend the network to over 1,000 ft (as opposed to ZigBee’s 60 ft range), and enable batteries to last over 5 years. This new platform architecture has the potential to disrupting the use of current communication protocols globally.
- Exploride: This Kochi-based company has developed a transparent, non-intrusive Heads-Up Display (HUD) for cars that could handle voice calls, text and e-mail messages, music, radio, and map-based navigation. Unlike other HUDs in the global market that can only provide output, Exploride takes inputs and can be controlled by voice and gestures. The company reached their funding target on Indiegogo in an hour, and is focusing on launching their devices globally.
Many other young Indian IoT companies such as Fin, Intugine, Altizon, Mindhelix, etc., are developing unique IoT products and platforms targeting the Indian market and are able to successfully find their applicability and growth in various global markets.
7. Growing Smartphones Usage and Increasing Consumer Awareness
As IoT-based solutions go mainstream, all the sensor-enabled connected devices need to be communicated with and controlled. And, a Smartphone is the best device for human interface and interaction with these connected devices. Going forward, smartphone is expected to evolve as hub for human-machine interaction for all IoT solutions.
Currently, India is the fastest growing smartphone market in the world. The current smartphone installed base of ~235 million is expected to cross 500 million in the next few years. Of over 300 million internet users in India, over 240 million are mobile-only internet users. India is fast evolving as a “Mobile-First” country. India currently ranks number 4 among various global markets on the gross mobile app downloads. Currently, a smartphone user in India has on average 17 apps in use on his device, growing from 6 in early 2013.
As per Convergence Catalyst estimates, over 92% of mobile device purchasers are current device owners. Indian consumers are increasingly aware of technology-based products and solutions, and are adopting them at an increasing fast rate. Information and communication technologies based applications and services are penetrating at an unprecedented rate into Indian consumers’ lives. And, the average consumer is getting increasingly comfortable with the adoption and usage of these technology based devices, applications and services. It is only logical that the end consumers’ increasing familiarity with a device that is metamorphosing as a control hub for next generation of connected devices will potentially decrease the lag in terms of education, and by extension adoption of IoT solutions in India.
Conclusion
IoT ecosystem is currently in early stages of evolution, and its maturity is a long way ahead. And, the upcoming period will be characterized by rapid innovation, disruption and continuous evolution. In the current state, young (or even, yet-to-be-named) companies have the same opportunities as established players to define and dictate the next technology growth era, and emerge as leaders. The only definitive mandate for players to remain relevant (and, emerge as leaders) in this domain is the need for “Agility” and “Staying Power”.
What we are currently witnessing in India is the structural placement of key building blocks for the sustained growth of the IoT ecosystem. And, we expect their alignment, bonding and other support system to be in place in the next few years. Currently, in the IoT evolution timeline, we are at a stage where we were during the early ‘90s of the “Internet Era”. The Google(s) and Facebook(s) of the IoT are yet to be born and/or yet to come into limelight. And, with key supply and demand drivers in place, coupled with strong ecosystem enablers, there is a strong possibility that the next big player in the technology space could emerge from India.