Insights

Changing World: Edge Computing

January 3, 2021

I first experienced latency when I moved to the US and called my family back in Europe. The one to two seconds between when I spoke and they heard my voice seemed like an eternity. It led to some awkward silences and to having both sides speaking at the same time. Luckily, love and goodwill appreciated the fun in all of that. For most applications though, latency is no laughing matter. A delay of one second can send drones, robots or autonomous vehicles off-track. As more and more of the data is generated and inputted outside of central databases, latency will become a larger bottleneck on what operations can and cannot be digitized. For illustration, Gartner predicts that data generated ouside of data centers will grow from 10% of total data in 2018 to about 75% by 2025. To address this data explosion on the edge, networks are being built with storage and compute capacity in the geographic vicinity of terminal endpoints, be they computers, sensors, mobile phones or equipment. The market for this type of network is expected to grow by about 10 times in the next 7 to 8 years (see figure).

Sources: Grand View Rsearch, GAMCO, Somar Analysis

Edge computing brings significant benefits to its users:

  • Lower latency – data is processed and retrieved much faster enabling compute heavy time-sensitive applications such as voice recognition, autonomous driving, industrial robots, drone management, game streaming, Virtual Reality and Augmented Reality, among many others;
  • Compliance – Increasingly sovereign states are ramping up legislation and regulation requiring online services to keep data from national customers inside their borders. Edge compute networks enable compliance with the rules;
  • Lower cost – significant reductions in the distance that data needs to travel leads to substantial reduction in bandwidth and energy costs.

The first level opportunity on Edge Computing lies with edge network compute providers themselves. They are experiencing strong growth, and this is expected to accelerate with the deployment of 5G networks. In addition, entrepreneurs will launch additional products and services that improve the value offered to customers by an order of magnitude leveraging the increased capabilities of edge computing. This will lead to generation defining companies, just like Uber and AirBnB who leveraged the transition to mobile over the past decade. Somar is following all these opportunities closely and acting when opportunities present themselves.

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