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Harnessing the IoT
We’ve gone from smartphones and smart TVs to smart factories, smart health, smart cars and smart homes—connectivity has become deeply ingrained in our society. Low-cost sensors, along with cheaper and faster computing resources, are enabling the connectivity of the real world in a paradigm shift to what is called the Internet of things, or the IoT.
With growing connectivity comes still more data— we’re just scratching the surface on the scale of what data generation will be. Data creation in general is already doubling every two years, and it’s estimated machine data can grow 50 times over the next 5 years.
How can investors capitalize on the data and analytics explosion? On our team, we’re focused on companies providing the core infrastructure to individuals and enterprises to better capture, analyze and derive insights through their data. From an investment perspective, there are three buckets where we think we can find differentiation. We’re looking into companies providing core infrastructure that enables connectivity and storage. We’re interested in enterprise beneficiaries that are exposed to the growth of new IoT devices. And we’re looking at software and applications that provide the data analytics to enable real-time decision-making
As it relates to infrastructure, the 5G network is estimated to accelerate the IoT by providing a 10X boost in speed and reliability of wireless networks. This means data stored in data centers should nearly quintuple by 2021 globally, and it’s expected to stimulate over $1 trillion of economic activity. As for enterprise beneficiaries, we are cognizant that while there are approximately 1.5 billion PC users and 7 billion smartphone users, there may be over 100 billion IoT devices. And the data stored on them could be five times higher than that of today. And as for software and applications, the digitization of the enterprise is a driving force for tech budgets right now. CIOs are prioritizing spend to better understand their data and enable real-time decision-making to drive business agility and cost optimization. We believe we’ll continue to see a large inflection in software spend to process this information.
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