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Cisco's Partnership With Philips Reflects Its Strong IoT Focus

Dec 20th 2015 at 10:41 PM

Taking a step further in its quest to develop an efficient ecosystem for the Internet of things (Iot), Cisco partnered with Philips earlier this month to sell “smart” Internet-connected lights. While the deal in itself is not particularly large, it is in line with Cisco’s partnering strategies and reflects its firm focus on the IoT domain. Cisco has been partnering with companies that can enhance its reach in different markets, and also provide a better understanding of new industries. Its recent partnership with Ericsson and a six year old alliance with EMC EMC +0.00% and VMware VMW -1.79% on cloud computing are indicative of this.

With its recent alliance with Philips, Cisco is planning to add another element to its networking solutions for enterprise customers and strengthen its IoT portfolio. The IoT domain is heating up, and many networking companies are investing in technologies that will ensure seamless connectivity between Internet-connected devices. Interestingly, the scope for scaling IoT by focusing only on connectivity is limited, while much of the potential lies with the end devices/services/applications of the IoT environment. This is where Cisco’s Internet-connected light partnership can prove useful. However, this arena is not without challenges, as the networking company faces competition from GE, Already Current and a number of startups.

We have a $26 price estimate for Cisco, implying a slight discount to the current market price.

See our full analysis of Cisco The Internet of Things Potential

The IoT domain includes computing devices other than PCs, tablets and phones. Cisco estimates that the IoT market will be worth $19 trillion over the next decade, representing a $1.7 trillion market for service providers. McKinsey estimates that IoT could have an impact of up to $6.2 trillion on the global economy by 2025. The installed base for IoT devices is estimated to grow from around 10 billion connected devices today to as many as 30 billion devices (or 50 as per some estimates) by 2020. While these estimates may vary, they are in agreement regarding the huge potential of the market. Clearly there is a lot of growth potential for networking companies such as Cisco in addition to network infrastructure players and semiconductor companies.

How The Philips Partnership Works

According to Philips, its Internet-connected lighting partnership with Cisco will help it effectively address the needs of the EUR 1 billion office lighting market. The collaboration would apparently offer the best of the lighting and IT industries in the IoT domain. The lighting offered to offices will help customers save energy and money, improve offices’ operational efficiency and enhance employee productivity. With the lighting-sensor orchestration, lights will automatically turn on when a person walks into the room and turn off when he or she walks out. It will even change intensity based on employee preferences and researches around what lighting triggers maximum productivity.

The backbone of any local IoT network is the web of connected sensors, which enables seamless data flow between various devices. However, companies working on IoT technologies are most likely to reap benefits from services, devices and applications that process the data. According to Verizon, around 80% of IoT revenues come from applications and only 5% come from connectivity. Cisco-Philips’ smart lighting should help facility managers and building owners map lighting usage and subsequently control power costs. According to Philips, lighting can account for up to 40% of a typical building’s electricity use, so smart lighting could see strong demand. In an attempt to showcase the benefits of Internet-connected lighting, Cisco is installing Philips’state-of-the-art lighting systems in its headquarters.

Oroginally published at www.forbes.com/sites/greatspeculations/2015/12/16/ciscos-partnership-with-philips-reflects-its-strong-iot-focus/

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