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More than 2x growth in the number of IoT connections over the next 5 years – Can the companies beat the cost pressure?
More than 2x growth in the number of IoT connections over the next 5 years – Can the companies beat the cost pressure?

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The global IoT industry is looking at yet another massive leap in the number of IoT connections over the next five years. Much of this growth will be driven by strong demand for short-range IoT. Despite already accounting for more than three-fourths of the total number of IoT connections worldwide, short-range IoT is poised to witness the highest incremental growth over the next five years. Total number of IoT connections are expected to increase from 13.2 billion in 2022 to almost 35 billion in 2028.

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While this certainly means impressive top line growth for technology providers, this can also mean thinning of profit margins for them. This would primarily be attributed to the consequent rise in input costs for technology providers. An increase of this magnitude in the number of IoT-connected devices would increase with it the risk of current centralized systems in place, to authenticate, authorize and connect nodes in a network, from turning into a bottleneck. To avoid this, technology providers will have to pump huge capital investments into servers that can handle this increase in the amount of information exchange. However, too much reliance on these servers can also make the entire network go down in the event of the servers becoming unavailable.

 

What else can be done?

 

Companies can explore blockchain technology as part of their strategy to address the issue. Synopsys defines blockchain as “a distributed database that maintains a continuously growing list of ordered records, called blocks.” These blocks “are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data.

Blockchain can enable seamless coordination among billions of nodes in an IoT network. As new nodes are added to the network, the distributed ledger technology can allow companies to reduce their costs by eliminating the IoT gateways-related processing overheads. These can include hardware, traditional protocol, and communication overhead costs. Although adoption of this technology can mean high upfront costs, companies expect impressive ROI over the medium term and long term.

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Hence, IoT companies can make blockchain adoption a part of their future growth strategy. Especially for companies eyeing an aggressive expansion in the number of connections over the medium or long term, a robust mechanism to cushion themselves from cost pressure would be required.


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Dhiraj Sharma
Principal Analyst

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