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New demand, new markets: What edge computing means for hardware companies

McKinsey & Company

With over 100 edge use cases identified, the fast-growing need to power connected devices demands a custom response from vendors.

As connected devices proliferate and their capabilities expand, so does the need for real-time decision making untethered from cloud computing’s latency, and from connectivity in some cases. This movement of computational capacity out of the cloud—to the edge—is opening up a new sector: edge computing.

By circumventing the need to access the cloud to make decisions, edge computing provides real-time local data analysis to devices, which can include everything from remote mining equipment and autonomous vehiclesto digital billboards, wearable health appliances, and more.

IoT devices tend to operate under different conditions from those of the controlled environments of offices and factories, driving demand for a whole new set of technologies that can allow computing in those situations. Take the scenario of a military drone deployed on a tactical surveillance mission in a high-intensity combat zone. It is essential for the drone to be able to collect, process, and transmit high-quality data in real time, despite numerous challenges, including remote location, limited connectivity, and extreme environmental conditions.

While the drone can use mobile satellite connectivity to access the secure military cloud, it’s much faster if it does the computing onboard, using lightweight data storage and compute power. This way of computing—on the edge of the cloud—lets the drone stay in sync with both the command center and troops on the ground, without the latency that computing in the cloud involves. Once the job is done, the drone returns to base and can connect with the larger system, now transferring its data to the cloud, where it can be used to feed algorithms and other advanced analytics activities.

In considering the sheer variety and volume of edge use cases, it becomes clear that the demand for the edge computing technologies that enable them will in turn create myriad opportunities in a vast number of industries. In this article, we map out more than 100 edge computing use cases across 11 sectors that we believe could create more than $200 billion in hardware value in the next five to seven years (Exhibit 1).

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