Back in the Mesozoic age of the Internet of Everything/Everyone (IoX) – 2015 or so – I recall Cisco saying we would have 50 billion plus, IoX devices by 2020. Some more brave forecasters dared to say it would be over 100 billion. I even recall one prognosticator saying it would be 120 billon! Other predictions came in from IHS Markit (30.7 billion), Gartner (20.8 billion), and IDC (28.1 billion). Eventually, Cisco, and the rest, toned down their numbers, but the fact is that prognosticators have had a hard time being accurate in this world of super-speed, multi-vectored technological development – be it the IoX, 5G, smart cities, smart cars, AI, yada, yada. However, not everybody was that far off (see below) and, no one ever comes back and says “we were wrong.”
Many of these predictions rely on the fabled “compound annual growth rate (CAGR) formula” (it can be found at the end of this missive). It is a relatively simple formula, and all one has to do is plug in some numbers and the period of time and, voilà, we have a prediction. I have to wonder if some of the prognosticators use this approach, simply because it is a relatively easy way to decompile the numbers.
However, as the second decade of the 21st century grew long in the tooth, research from a variety of sources such as Business Insider, IoT Analytics, Gartner, Intel (as well as those mentioned previously), became much more fluid with revisions from monthly to yearly (hmmm… seems that CAGR may not be the best way to forecast (or better research is suggested – you know, garbage in, garbage out).
Today, that trend continues. However, as dynamic as the technology sector is (all, not just wireless) I know CAGR and forecasting is critical to businesses. I have to wonder if predicting numbers or dollars, in such volatile times, has lost some of its value. For example, one of the latest 2019 predictions for IoX devices says 64 billion in 2025 – I will let you know how close that was in 2025.
However, I also know that some forecasters are more knowledgeable than others. Frankly, I believe one must play in the industry to know it, not just watch it and analyze numbers.
I got on this kick because I received an email from Mobile Experts. I know some of the people there fairly well – probably better than contacts I have at other research organizations, such as ABI, Forrester, even Booze Allen Hamilton. I also think they are one of the better research companies when it comes to this industry. Along with 451 and 151 Advisors, I feel they are pretty spot-on when it comes to knowing wireless technology.
While Mobility Experts predicted, back in 2015, an installed base of 5.8 billion in 2020, the real number ended up being 3.6 billion. But, they were one of the more realistic forecasts. Had one based their CAGR on them, one would be much better off today than had it been based on Cisco numbers.
That is why industry expertise is so important. Even so, the best of breed still missed the call by about 60 percent (which is realistic in this environment. It is the 500 to 1000 percent error margins that, I believe, detracts from analyst, or company credibility).
However, for some time now, and tangential to CAGR, I have been of the opinion that, just because we have the ability to do it, does not mean it will get done on the timetable in which it can be done. We seem to, periodically, forget to add in elements such as the factor in human capriciousness, lateral technological factors (like, supply chain issues, unforeseen build problems, etc.), global geopolitical conditions (China), governmental involvement and other mitigating factors. There is an entire laundry list of affecting factors that can derail the pace of technology.
In July of 2017, I had written a missive on what I thought might happen, and when. This is a paragraph from that missive: “The year 2020 is supposed to be a pivotal point for both 5G and the IoX. We are 2-1/2 years away from that. The early claims that, in 2020, at least 50 billion devices will be on the IoX is now more like 10 or 20 billion. The IoX will exist, in its true form only when everything and everyone is on it. That is not going to happen by 2020. Truthfully, I really don’t have a clue as to when it will happen. Or when the moment arrives that we now have the IoX.”
I know people and companies like forecasts. In fact, most companies would not succeed without them. They are an indispensable tool in the business ecosystem. However, in the tech sector, I believe they are often just a stab in the dark.
Yet, they continue to proliferate. Below are a few more from back in the day. You can see for yourself that this just did not happen the way it was predicted.
“Advanced Research Report by Dell’Oro on Small cells (January 2015), the total Small cell market (including carrier) is expected to grow ten-fold to more than $5 billion by 2019, accounting for more than 10 percent of the combined macro and small cell spending – Global Small Cell Networks Market 2019 Industry Research Report.” Today there are what – a couple of hundred thousand (not counting residential consumer)?
“Research companies like Infonetics and Gartner are predicting that there will be 250 million connected cars on the roads by 2020, the Internet of Things (IoX) will be up and running and 5G will be launched.” OK, if you say so. In reality, while many cars have the ability to connect, today, maybe 60 to 80 million of those are actually connected by the owner. And the IoX is has barely started to emerge.
OK, back to the IoX. We are still a long way from 20 billion devices as 2019 draws to a close. And, the same mitigating factors apply to many other markets. To recap, I mentioned many of the reasons for stunted growth earlier.
Our industry (and technology, in general) actually, has a phenomenal grasp of ideas, concepts, devices, platforms, etc. and what we should do to bring them to reality. The reality check came when we realized we did not really know how to do it. And, by “how” I do not mean the physical aspect. I mean dealing with the tangential blows that came from the peripheral fundamentals I mentioned early on.
How do we figure those in? That is a tough question since most of them are fluid and unpredictable, and wreak havoc with the CAGR and other forecasting methodologies.
We have to keep forecasting. It is an elemental tool of business. And, some of what we forecast actually turns out to be accurate (to a reasonable degree), therefore, allowing us to “bank” on the numbers. However, the reality is that while ramping up to forecasts is a necessary business track, so is having a plan B if (or when) the forecasts turn out to be wrong.
EV = ending value
BV= beginning value
n = number of years
(note: this formula is also expressed with EB and BB).