- IHS Markit forecasts a 33.1 percent compound annual growth rate for application enablement platform (AEP) revenue, from 2017 to 2022, rising to $83 billion in 2022.
- New AEP introductions appear to have peaked in 2015, and AEP vendor exiting from the market, via acquisition or business closings, are increasing, suggesting vendor consolidation is underway.
- AEP monetization and pricing models are in flux. Because they are overly complex for many customers, many AEP vendors are working to simplify pricing models.
AEPs are an IoT platform segment that facilitates IoT device and data management. IoT application developers and adopters increasingly use AEPs across a range of industry verticals, to simplify IoT application development and management. While AEP vendors initially focused on providing the features and functions common across all IoT applications – and comprising roughly 80 percent of application code base – many vendors are extending their offering into specific vertical solutions, especially for connected cars, smart cities, and industrial automation.
IHS Markit forecasts a 38 percent compound annual growth rate from 2017 to 2022 for the rise in the cumulative number of IoT devices under management by an AEP, rising to 6.7 billion devices under management by 2022. Likewise, we project a 33.1% compound annual growth rate in the growth of annual AEP revenue over the same period, growing to $83.0 billion in 2022. This growth is enabled by the increasing adoption of IoT solutions across a range of industries and use cases, coupled with the growing desire of many customers to outsource as much IoT development as possible, to focus on core-competency aspects of their business.
The number of new AEPs introduced to the market held steady year over year until 2009, when new AEP introductions peaked at 44 introduced in 2015. However, since that time the number of new AEP introductions has declined sharply and the number of AEP vendor exits (through acquisition or by closing operations) started to increase in 2011, peaking in 2017.
According to IHS Markit, consolidation will happen for two key reasons: first, there is a market perception of there being too many “me too” platforms that are undifferentiated from each other; second, especially since 2014 many very large infrastructure vendors have entered the AEP market. These new vendors could potentially acquire other AEP vendors and greatly increase competitive pressure on the remaining vendors.
A principal AEP vendor concern is the degree of uncertainty concerning how best to price AEP offerings. Generally, device management functionality is priced around $0.50 to $1.00 per device per month, while data management functionality is priced around $0.20 per device per year. However, owing to the wide variability in the specific features and functionality offered, whether the monetization model is consumption-based, value-oriented, or revenue share, and the type of AEP vendor (e.g., cloud infrastructure vendor versus platform specialist), there is wide variability in the actual pricing any customer will receive. Furthermore, customers view pricing models as overly complex and difficult to resolve.
Application Enablement Platform Report Synopsis
The IHS Markit Application Enablement Platforms Report – 2018 tracks the AEP segment of the IoT platforms market. AEPs provide device and data management functionality for IoT applications. The report includes worldwide and regional market size, forecasts through 2022, and an analysis of key technical and market trends influencing the growth opportunity in the AEP segment.