In the coming years, the Internet of things (IoT) is expected to grow enormously. As this market booms, tech heavyweights are increasingly consolidating and expanding their hold over the market. This month alone, Samsung acquired HARMEN (which specialises in connected devices, particularly car technology) for $8bn, ARM acquired Mistbase and NextG-Com, Google acquired AppBridge and Intel acquired Soft Machines amongst other big deals.
This small snapshot paints a vivid picture of how aggressively larger companies are buying up, essentially ideas, in an effort to strategically position themselves in the market for years to come.
- There are currently around 15 billion devices connected globally. By 2020, that is expected to rise, to over 50 billion, with Intel even more bullish, predicting 200 billion;
- Spending globally on IoT devices is expected to grow to around $1.7trn by 2020, according to the research firm IDC;
- Spanish telecom provider Telefonica expects that, by 2020, 90% of cars will be connected online, up considerably from 2012 when the figure was only 2%;
- IDC expects that there will be over 170 million wearable devices by 2019.
Given current trends, growth in this market would appear to be inevitable. As the market blossoms, though, there is significant opportunity for growth in markets that are likely to develop as offshoots, in servicing the primary market.
One market, in particular, that is likely to experience growth is cyber security.
Recent documents published by WikiLeaks have cast a light over some of the serious flaws in the security of devices. Confidential data exposed the CIA’s ability to hack into Samsung smart TVs and record conversations, even when it was meant to be turned off. This appears to be just the tip of the iceberg, as the documents expose security flaws in cars, fridges and a whole plethora of devices.
Recently, children’s conversations with their Wi-fi enabled teddy bears (one brand) were leaked online, giving a sinister example of what the weaknesses can be exploited for.
Gartner, a research firm specialising in IT security, has predicted that by 2020 more than 25% of attacks on enterprises will involve hacking into IoT devices, while IoT devices will comprise less than 10% of IT security budgets, given current trends.
Many of the devices that now make up the IoT are produced by companies that have no record or expertise in cyber security. When one buys a smart kettle or toaster, one is not buying an IT device from Apple or Microsoft with their years of experience in IT security but rather from a company that specialises in something completely different.
What’s more, is that these companies are very often economising on security features. Given consumer preferences, it makes little sense for manufacturers to increase the security of their products, which will incur greater costs while having a negligible effect on demand.
Hackers are increasingly targeting ‘weaker’ devices on networks so as to breach the wider network as a whole. In 2013, US retailer Target was the subject of a huge data breach, as hackers gained access to around 40 million credit card numbers. The hackers point of entry into the system was through Target’s air conditioning provider, which they exploited to access the rest of the network. The data breach cost Target in excess of $100m and caused significant brand damage.
Many, if not all networks, are only as secure as their weakest part. Once a device has been hacked, they can very often be used to attack other elements of a network which expose more devices to the harmful malware or software. As modern hackers become increasingly sophisticated, many devices (even those released in the last few years) appear comparatively archaic in terms of their software and security.
Finding the Needle in a Haystack?
The market for cyber security shows significant promise as growth looks solid for the future. However, as demand for greater cyber security expands, is there an opportunity for startups to capitalise or will the titans of industry continue to dominate?
There is always going to be the potential for a startup to disrupt a market. Although there are success stories, they are far and in between. For every Uber, there are hundreds if not thousands of companies that never make it in the market.
In regards to IT security, there is not a silver bullet so to speak, or one way to stop a cyber attack. Consequently, companies that are offering a platform of various products and services are more likely to be more effective and thus more valuable.
In the current market climate, though, any startups that show promise or value are likely to be bought up by the market behemoths. The chances of a company realistically competing with Microsoft or Intel is minutely small. Rather the aim for many investors is likely to be backing a firm that shows enough promise to be bought up.
As cyber security becomes increasingly complex, the barriers to entry in this market are only going to grow. As the Microsofts of this market devote huge manpower and money to developing their security and marketing it, the little man is getting squeezed out of the market.