Edge computing is a form of information technology (IT) that has been breaking new ground in recent years. Yet what is it, exactly, and how does it differ from other, innovative forms of IT like cloud computing? In this industry report, our team at Bure Valley Group outlines the nature of this exciting technology, where it has come from and trends for investors to watch in the coming years. We will also examine the global market capitalisation, established players and compelling new entrants to monitor (for early-stage investors).
What is edge computing?
Edge computing, at its heart, is about data storage, handling, delivery and processing – from billions of devices across the globe. More and more devices – PCs, smartphones and tablets – are internet-connected and require intense, real-time computing power to serve their users. This requires information to be accessed and consumed. Think of any app which you use often on your smartphone, such as your online banking. You need the app to be secure, to be easy to access and not suffer any latency issues when you log in (e.g. you want your most recent transactions to appear on your statement, immediately). One of the best ways to ensure data is delivered in real time is to store the data locally, rather than on a server across the world.
Edge computing brings data closer to the user by acting as a local data storage centre, which sits on the “edge” of larger cloud storage networks (or data centres). These “edge gateways” could take a number of different forms including IoT sensors (internet of things), a security camera or even a personal desktop computer. There are many different edge use cases which means that the set-up varies from case to case. However, certain industries have been at the forefront of edge computing – such as manufacturers and heavy industry, since these require automated coordination of heavy machinery on the factory floor. Edge computing is also making more appearance in agriculture as users utilise drones and sensors to improve yields.
Market capitalisation
The edge computing sector is projected to experience exponential growth in the coming years. In 2021, the estimated global market size is about $6.29bn, yet by 2028 this is projected to rise to $61.14bn – representing a compound annual growth rate (CAGR) of 38.4% over this period. In the short term, investment in edge computing is broadly expected to ease off as companies seek to save money and recover from the COVID-19 pandemic (with the notable exception of healthcare and telecoms sectors). However, in the longer term demand for edge computing is projected to escalate as western countries develop their infrastructure. More people are likely to work from home, requiring more low-latency connectivity and high security. Also, healthcare providers are reaching critical capacity – leading to increased demand for online consultations.
Established players
Given that edge computing is about the processing and transmission of data, established edge computing players comprise large IT and telecoms businesses (e.g. 5G network providers). Examples of the former include Dell, Intel and IBM whilst an example of the latter is Verizon’s Mobile Edge Compute Platform (through its relationship with Microsoft Azure). Such businesses are, of course, traded on public exchanges and so can be carefully considered by investors for possible inclusion within a portfolio. However, it is worth noting that, for investors looking for “high-growth potential” opportunities, these large companies may be limited in their capacity to radically increase market share and free cash flows (especially since many need to invest in their infrastructure). Rather, startups and other early-stage companies in the edge computing space could offer the potential for higher growth and returns – albeit at greater risk.
New entrants
Large data providers and computing companies have the advantage of well-known branding, huge revenues and existing customer bases. However, their sheer size can also make them resistant to change and sluggish to pivot to new entrants with a competitive edge. An example to consider is EdgeMicro, launched in 2017 in Denver, Colorado. This growing business raised $11m in 2020 alone, over three funding rounds, and has filed a patent for its technology called METX (Mobile Edge Traffic Exchange). The company grows by deploying hundreds of micro data centres across the USA in underserved markets – making use of empty space in parking lots and on rooftops.
Another interesting case study is Vapor IO, which offers edge-driven applications to consumers via its Kinetic Edge™ platform – which the company has described as the “first edge-to-edge platform” in the world. This allows users to plan their data usage more effectively by providing a visual dashboard of network routes. In 2020, the company received $90m from investors over four funding rounds – which included investors Goldman Sachs and AVX Partners, in Series A and B. The business also has a patented edge-based computing solution which is based on blockchain, and it has run multiple collaborations with the likes of AlefEdge, CloudFlare and Crown Castle to expand its applications, networks and customer base. To date, Vapor IO has moved into a diverse set of areas including immersive gaming, factory robotics, 5G wireless networks and autonomous vehicles.
Conclusion
If you are interested in expanding your portfolio into these kinds of exciting spheres of investing, then we invite you to get in touch with us here at Bure Valley and to consider joining our exclusive investor network:
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