5 Disruptive Tech Trends That Could Dominate in 2016
Innovation and growth can be powerful return drivers for investors positioned in the right businesses. For this reason, we asked five of our top contributors to share with our readers the most disruptive tech trends to watch in 2016 and, perhaps more important, the companies that stand to benefit materially from these breakthrough innovations.
In the followingroundtable, we take a deep look at crucial techdevelopments to watch next yearand how to profit from them.
Andres Cardenal (IoT). The Internet of Things, or IoT, may sound like a complex idea, but it's a simple yet powerful concept. Devices around the world, whether it's a smartphone, a home appliance, or an airplane, include a varying amount of sensors inside them. Those sensors are increasingly interconnecting via Wi-Fi and other technologies. IoT is about interconnecting, and creating intelligence from all the devices around us.
As Tim Brugger explains in a moment, IoT is setting the stage for major developments in areas such as Big Data, and IBM is a key player in both segments. For example, the company is making big inroads in transportation and machinery, where it has established alliances with leading players such as Airbus and Cummins.
IBM is leveraging its technologies and massive amounts of data in different areas such as environment, weather, and maps to help planes fly smoother, saving fuel and reducing operational risks. Engines powered by IoT technologies can predict when maintenance is required before anything goes wrong, and they're also optimized for more efficient running.
This game-changing technology can offer enormous cost savings and massive productivity enhancements over the years. The possibilities are enormously exciting when it comes to the multiple benefits of IoT, and everything indicates that the technology is set to continue gaining traction in 2016 and beyond.
Tim Brugger (Big Data): In part because the world around us is becoming "connected" through a growing number of IoT sensors, mobile devices, and the world's affinity for the Internet, the sheer volume of information available is already staggering. And by most accounts, we're just skimming the surface. All that data offers a world of opportunities for businesses to better market to prospective customers, develop in-depth user profiles, and enhance our daily lives, among other possibilities.
The problem is that business execs are already uncertain what to do with all the information, or Big Data. According to a recent study, Big Data will become a $33 billion industry this year, and a whopping 89% of business leaders believe Big Data will "revolutionize business operations the same way the Internet did." But how? That's where predictive analytics and cognitive computing providers such as IBM enter the picture.
In January 2014, IBM said it was investing $1 billion to fund a new business unit featuring its Watson supercomputer. Since then, IBM's Watson division has made multiple acquisitions to expand its reach, including the recent $1 billion deal for Merge Healthcare. IBM also announced new deals with Boston Children's Hospital, among others, and is opening a new Watson world headquarters soon. And it's working.
IBM wouldn't divulge specific revenue results of its Big Data push, but it did help drive a more than 20% jump in its business analytics unit last quarter, after accounting for currency headwinds. Conservative estimates suggest that Big Data will become a nearly $100 billion market in 10 years, but it will be a disruptive technology long before that. And IBM is poised to lead the charge.
Daniel B. Kline (endless payment): While subscriptions have always been a factor on the enterprise side of the software business, they're now moving into the consumer end of things. The leader has beenMicrosoft , which has managed to move a large part of its Office customer base into a subscription model.
In the most recent quarter, the company grew its Office 365 subscriber base to 15.2 million users, up 3 million from the previous quarter. In doing so, essentially the company has locked in a recurring revenue stream. In the past, those numbers were harder to predict because consumers would often skip one or more upgrades to the productivity suite, opting to stick with older software they already owned. Offering Office as a subscription product also opens it up to a potentially larger audience since it no longer requires a large upfront outlay of cash.
Microsoft isn't the only major player using the model, asAdobe has made its popular suite of creativity tools available strictly on a subscription basis. That's a blow to the people who would use the same version of Photoshop for years without upgrading, but it also allows people who might not have been able to pay hundreds of dollars at once access to the products.
The endless payment is a model that appears to appeal to millennials, and even wireless phone-service providers are adopting it. It has pluses for the company and the consumer: The business gets a long-term predictable revenue stream, and the consumer gets access to the latest software (and, in the case of phones, hardware).
Of course, the consumer never gets to pay off the software or device, but the younger generation specifically seems OK with that as long as the product keeps improving. This model opens up technology to more people in the same way that leasing a car lets someone buy more vehicle than he or she could otherwise afford. It's a disruptive model that will almost certainly become more prevalent quickly.
Tim Green(budget smartphones): The way most people buy smartphones in the U.S. is going through a dramatic change. Phone subsidies and two-year contracts are largely a thing of the past, and customers will now pay for their data plans and devices separately. This may not seem like that big of a change, and indeed, users of high-end phones probably won't see a significant increase or decrease in their total monthly bill, assuming their phone is paid for in installments. But budget phones made no sense under the subsidy system, and 2016 could be the year that cheap, good-enough phones go mainstream.
Under the subsidy system, a customer's monthly bill was the same regardless of what phone was purchased. The phones themselves were subsidized, with a phone that would retail for $650 generally costing $200, and a phone retailing for $450 potentially being free. Prices varied by carrier, but any phone with a retail price of $450 or lower would be either free or available for a very low price. In other words, there was no real price difference between a $200 phone and a $450 phone, making budget phones an illogical choice.
Now that customers will pay the full price of phones, either upfront or in installments, budget phones are genuinely cheaper for consumers. There are a variety of phones running Google's Android operating system that sell for $200 or less and are perfectly capable devices, such as the Zenfone 2 from Asus and the Moto G from Motorola. I would expect the average selling price of phones in the U.S. to decline as the built-in bias toward high-end phones disappears, and Google may even win some market share back from a certain maker of iDevices.
Steve Symington(drones): Of all the tech trends to enter the spotlight in 2016, I think few will be more visible than the rise of small unmanned aerial vehicles -- more popularly known as drones -- for both consumer and commercial uses. For that, we can partly thank increasingly affordable, capable drones from companies such as China-based DJI, which currently commands around 70% of the estimated $1.4 billion market. According to recent research from Goldman Sachs, that market could nearly double next year, and almost triple by 2017.
It was hardly surprising earlier this year, then, when GoPro confirmed plans to help spur this growth with the launch of its own quadcopter in the first half of 2016. Specifically, GoPro CEO Nick Woodman elaborated during last quarter's conference call that it will be a "differentiated quadcopter capture solution" with a "much improved out-of-box user experience" -- a stance that's in line with GoPro's typical focus on usability. Combine that with the fact GoPro already enjoys an impressive distribution network for its flagship HERO series cameras, and it seems clear its entrance should only serve to make small drones that much more ubiquitous in 2016.
The article 5 Disruptive Tech Trends That Could Dominate in 2016 originally appeared on Fool.com.
Andrs Cardenal owns shares of Google (A shares), Google (C shares), and International Business Machines. Daniel Kline owns shares of Microsoft. Steve Symington has no position in any stocks mentioned. Tim Brugger has no position in any stocks mentioned. Timothy Green owns shares of International Business Machines. The Motley Fool owns and recommends Google (A shares), Google (C shares), and GoPro. The Motley Fool owns shares of Microsoft. The Motley Fool recommends Adobe Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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