Cutting-edge markets including the cloud, data centers, and even mobile either are, or are quickly becoming, significant opportunities for companies willing and able to reinvent themselves. But all of those fast-growing markets pale in comparison to what the Internet of Things (IoT) offers.
One recent study suggests that IoT-related sales will grow to become an $11 trillion -- yes, that's with a "t" -- behemoth in the next 10 years. To put that estimate into perspective, on the high-end IoT would equate to approximately 11% of the world's economy by 2025. With so much at stake, not surprisingly IoT was the subject of a lot of headline news in 2015.
There's no place like home
More than a few eyebrows were raised when the then Google, now Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), shelled out a whopping $3.2 billion for "smart" thermostat, smoke, and carbon monoxide detector Nest in Jan. of 2014. After all, Alphabet's history with hardware devices wasn't exactly something to brag about.
But Alphabet had an IoT plan, and that plan became a reality in 2015. Nest is more than a nifty smoke alarm, it's the hub of Alphabet's entire smart home aspirations. The price tag for Nest and the $555 million Alphabet paid for Dropcam got much of the headlines, but it was the deal for a little company called Revolv that changed its IoT game. Revolv helped Alphabet solve one of the biggest smart home hurdles: a solution that allows disparate IoT devices to "communicate" with each other.
Alphabet's bet on smart homes took the next step in 2015, including going mainstream via the numerous TV spots for Nest. The smart home slice of the IoT is expected to grow to nearly $60 billion by 2020, and this year Alphabet took a major step to dominate the market.
A piece of the action
As shareholders of IBM (NYSE:IBM) are well aware, it's been a tough year. Down about 14% year-to-date, investors have punished IBM for its late arrival to fast-growing markets including the cloud and IoT. But 2015 was a year that IBM CEO Ginni Rometty said, "enough is enough," and got serious about playing in the IoT field.
In the spring, IBM announced it was committing $3 billion to form and implement a new IoT-specific business unit. Since that time IBM has announced several IoT acquisitions, including a bevy of Weather Channel properties and IoT-specific software provider StrongLoop, to name a couple. Unlike Alphabet and its Nest device, IBM plans to make its mark in IoT utilizing its strength: data storage and analytics with its cognitive computing wonder Watson.
Good move on IBM's part because one thing we learned in 2015 is that as big as the IoT device market is expected to become -- Juniper Research puts the number of connected "things" at 38.5 billion in five years -- there are even larger opportunities.
Show me the data
As critical as the IoT device market will become, it will take a backseat to all the data amassed from those same gadgets. As Juniper Research puts it, data will "form the backbone of its [IoT] long-term success," and much of that information will be housed in the cloud. In fact, according to a report from Cisco (NASDAQ:CSCO) -- which is itself a big player in the fast-growing market for "smart cities" -- Software-as-a-Service will make up nearly 60% of cloud-related revenue by 2018.
Where will all that data in the cloud come from? Much of it will be collected via IoT devices in our homes, cars, and cities. That's where IBM and its industry-leading business analytics entered the picture this year, and you can bet Alphabet knows that's where its IoT bread is buttered, too. Some consumers may already feel a bit uneasy about the amount of information collected from our mobile phone and Internet usage, but that will soon prove to be just the tip of the data iceberg.
Tech industry leaders made a lot of headway in 2015 in bringing IoT to the masses, that's the good news. The better news for investors looking to benefit from one of the world's fastest growth markets is that even with the strides made this year, the best is yet to come.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.