Edge Computing — Space Analysis
Edge computing has long been seen as a space to watch out for and the space with potential implications across industries. Let’s explore some reasons why and what’s at stake from the business side of things.
We’ll take a step forward if there’s potential to invest/startup in this space.
What is Edge Computing?
Edge Computing is a decentralised architecture to bring processing geographically closer to the user as opposed to traditional data centres which could be, sometimes, across continents
Some of the prominent features of using Edge Computing include:
- Low Latency — With processing being closer to source and less traffic hits the servers, in comparison to a data centre architecture, processing requests takes lesser time leading to lower latency.
- Decentralised — Being decentralised can lead to less congestion and importantly save the whole network from any targeted attacks.
- Low Compute/Storage — Edge centres usually have fewer compute and storage resources in comparison to traditional data centres. Intensive tasks like batch processing are better at a data centre, but the edge could still be leveraged for pre-processing.
This combination of features can be leveraged across applications including Industry 4.0 (at shop floors, manufacturing for monitoring purposes), AR/VR (low latency could improve the experience) and Smart cities (all the data from multiple sensors across cities could be processed for smart electric grids and other optimizations.)
Some concepts of Edge computing could be witnessed in Cloud Delivery Networks (CDNs) — Technology that allows you to stream content with relative ease
Market Scenario
North America has the largest market with a good growth rate of 32%, but it’s Asia, which is growing at an impressive 40% annually.
Coming to players involved in the market, prominent names of Google, AT&T, Amazon and Microsoft are leading the space setting up infrastructure as an extension of their cloud or telecommunications services.
Other players like F5, Cisco are targetting this space with niche products optimized for edge and competing with startups coming up with networking solutions and sensors for the same.
The presence of multiple players makes this space majorly fragmented with potential for startups to find a niche and consolidate a position.
Coming to industries, Energy leads the way with roughly 17% of revenue currently and Industrial IoT being the major use case with over 35% of total revenue.
Analysis Methodology
As you might have slightly understood, edge computing is more an infrastructure architecture concept than a technology consumer could use directly. This leads to two segments one could target to analyse/startup in:
- Enablers — Technological infrastructure to set up / facilitate edge computing facilities (Ex: Servers, 5G networks, Routers etc.)
- Utilizers — leverage above infrastructure to provide service to business/individual consumers (Ex: AR/VR, autonomous vehicles, etc.)
Coming to evaluation criteria, I’ve thought of include:
Given it’s an upcoming space, the analysis could have some hint of subjectivity with certain optimism/pragmatism surrounding a certain field.
Enabler's analysis
As discussed above, Enabler’s included infrastructure-related services which fundamentally enable Edge computing
- Networking Equipment — Routers, load balancers at edge location site for networking — With prominent players like Cisco, F5 this segment could be tough for a startup.
- Compute/Storage Services — Servers /Storage devices at edge locations to process requests — Amazon, Microsoft, Google with cloud experience are making inroads along with VMware, HP and other providers making it tough for startups to make a breakthrough.
- Sensors — Each industry, each process needs a separate set of sensors — TSMC, NXP are top players but niche players to the specific industries could arise.
- Communication — Technologies like 5G are crucial for edge to consumer communication — AT&T, Reliance have a lead-in respective geographies. Newer technology is a prospect but heavy infra requirement could be a hindrance to startups.
- Hosting Facilities — Companies to build and maintain edge centres with racking, cooling and power maintenance for the same.
Looking at the above analysis, some conclusions about this segment include:
- Compute, Networking and Storage are mature markets with prominent players in their space and this space could be avoided.
- Sensors specialised in each industry is a great investment.
- Communication like 5G and potential needs could be a space, though contested by major players.
Utilizer’s Analysis
While utilizers may not be counted in edge computing space while looking at growth and market sizes, it’ll be rather short-sighted to not consider beneficiaries of edge computing as potential fields to look and analysis
- Industrial IOT — Machine sensor data could enable adaptive processes and maintenance — Niche providers for each industrial use case could be the way to go.
- Autonomous Travel — Reduced latency means better responsiveness — High production cost with existing players like Tesla means a tough entry for new startups. But sensors (LiDar) and algorithm related startups to improve autonomous travel could be a potential area.
- Smart Cities/Homes — Monitoring enables smart electricity grids, traffic management — Smart homes might have serious competition but smart city implementation opens a wide market.
- AR/VR — Enables real-time collaboration and guidance related applications — Big players like Oculus, Microsoft have an edge but niche players have the scope to enter and grow.
- Integration — Software to enable edge resource maintenance and integration to leverage use cases — New solutions for each pain point arising with adoption could be a potential startup, akin to how cloud allowed for cloud integration tools.
Low Latency and integration with IoT devices are core functionalities that could be leveraged across other industries like Healthcare, gaming.
Looking at the above analysis, some conclusions about this segment include:
- Autonomous vehicles with titans Tesla, Ford making their way, combined with high investment / R&D makes it unattractive.
- Industrial IoT, AR/VR applications across multiple industries makes for an attractive space.
- Smart cities sensors to optimisation of water, electricity resources with governments are something to look forward to.
- Services that ease the integration of enablers and utilizers have potential.
Conclusion
This analysis just scratched the surface of what’s a large ocean of possibilities in this space. With further levels to be analysed with each of the above segments. For example, LiDar sensor for AR/VR — it’s a tertiary beneficiary of edge computing.
Another important lever is geography and industry!
Each industry and geography opens up its own problems waiting to be solved and opportunities for startups to tackle them.
The above analysis could potentially change if one focuses on a specific geography or industry.
If you’ve reached the end of this article, you’re already one of the best persons :)
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