2015 was a big year for the Internet of Things (IoT). In our minds, it seems to have been the year nearly all big companies developed an IoT strategy. At the risk of sounding cliche, you could say IoT became mainstream in 2015.

But with 2016 just around the corner, we’re thinking ahead. Below, we’ve detailed five critical Internet of Things challenges you’re likely to see companies deal with in the coming year. Whether your company’s core business is in the IoT space or it is just dipping its toes in the “the fog,” you should try to stay on top of (or better yet, ahead of) the issues outlined below.

1. Security

We’ve seen some massive security breaches with connected devices in past years. For example, the massive Target breach of 2014 stemmed from a connected HVAC vendor. A lot of companies in the IoT space are growing quickly, and they are more concerned with getting their products to market than ensuring customers’ data is safe or their own security infrastructures are dependable. Some hackers have taken advantage of IoT devices that are connected to a company’s WiFi network, and they have been able to hack into corporate infrastructures without any physical access. We believe security will be the number one Internet of Things challenge of 2016 and beyond, and we expect to see at least one or two high-profile hacks and security issues in the next year.

See also: How To Mitigate Internet Of Things Security Challenges In Development

2. Standardization

As 2G cellular is phased out across the globe, many connected product developers are having to move to different platforms. This can be very labor intensive, and at times, cost prohibitive. This issue has caused some major traditional cell carriers and infrastructure providers to begin fighting over the establishment of an IoT standard. LTE-M and LTE-NB have emerged as potential candidates, but nothing has been decided and agreed upon. We’re certain you’ll hear more about cellular companies determining what the next standard generation of Cellular M2M will look like in 2016, though nothing is likely to be commercialized in this space until 2018 and beyond.

On the low power, wide-area network (LPWAN) side,companies like SigFox, Ingenu, LoRa Alliance, Weightless, Link Labs (Symphony Link) and others all offer different standards with different costs and benefits (you can download our whitepaper here). We’d guess all of these listed companies and protocols will still be around through 2016, but you’ll likely start to see some of them gain momentum while others tail off due to technical shortcomings or other business challenges they can’t yet foresee. As such, you’ll begin to see the emergence of some “winners” (and unfortunately losers) in the LPWAN space.

3. IoT Strategy

Another IoT challenge we’re anticipating is what large companies start to do with their IoT strategies. Many of these companies haven’t yet defined their roles in the Internet of Things, and we’re looking forward to seeing those roles emerge over the next year. From the big companies that currently supply a significant amount of network hardware to the world, like Cisco, IBM, Microsoft, Google, and Apple, to cellular operators like AT&T, Verizon, and Orange, you can bet these big players will invest a lot of time and money toward  finding their niches in the IoT market. It will be important for these companies to understand what customers want out of IoT—the companies that fail to do this will have to either revisit their strategies or risk getting left behind.

4. Disruptive Consumer Applications

In 2016, we’ll be on the lookout for the next killer application in IoT. In previous years, we’ve seen companies come up with great ways to increase operational efficiency for industrial and enterprise IoT, but we haven’t yet seen a game-changing customer IoT device (despite what Apple would have you believe about the Apple Watch). In 2016, we’re betting several companies will try to hone-in on what consumers care about, and then create a disruptive consumer IoT application in response.

5. Startup Challenges

There are tons of startups in the IoT space, and many of those startups will be reaching what we call the “valley of death” next year. There has been a lot of hype in the market in the last few years, and the current investment climate has made raising capital fairly easy for many companies. But 2016 will likely be very different, and these startups will really need to start showing their value. We’re betting you’ll see some acquisitions from bigger companies trying to push their way into the IoT space, and you’ll probably also see some companies disappear because they can’t figure out how to take the next steps for growth.

Conclusion

2016 will be a year of reckoning in some ways. The market has expanded, but we’ve reached peak of IoT hype—and the fall from that peak can be catastrophic for some companies. Despite these IoT challenges, there is still a big market out there and the potential for billions (if not trillions) of devices to be connected. That potential will see itself through—and in 2016, we’ll see which companies will be a part of that potential.

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Jennifer Halstead

Written by Jennifer Halstead

Jennifer Halstead, MBA, CPA brings more than 20 years financial industry experience to Link Labs. She began her career in finance within the pharmaceutical industry and has continued in both public accounting and private companies. She passed the CPA exam with the 3rd highest score in the state and completed her MBA with an accounting concentration (summa cum laude). Jennifer has worked with several software companies and has led multiple venture financing, merger and acquisitions deals. She has helped companies expand internationally and has managed the finance department of a startup to 33 consecutive quarters of growth prior to acquisition. After the acquisition, she served as the Controller of Dell Software Group’s Data Protection Division where she managed a portfolio of multiple hardware and software products to scale and achieve over triple-digit growth worldwide in 18 months. Jennifer brings a depth of finance experience to the Link Labs team.

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