How Augmented Reality Fits into IoT Enterprise Solutions
Last year, we decided to add the German IoT company TeamViewer (TMV.F) to our Disruptive Tech Portfolio. It scratched all of the right itches – highly profitable with a 100% subscription model, crazy growth across different metrics, strong regional diversification, and foreign currency exposure. (It also doesn’t suffer from the ARK effect.) Its connectivity platform offers a suite of solutions that enable customers to remotely access, control, manage, monitor, and repair devices of any kind, from laptops and mobile phones to industrial machines and robots. We also like the fact that the company is integrating augmented reality into its IoT enterprise platform, adding a German AR applications startup to its portfolio in 2020.
TeamViewer continued to build that part of the business in 2021, acquiring a U.S.-based AR startup, Upskill, this month. As investors, we want to understand the value that this new acquisition brings to the table.
Augmented Reality for Enterprise
Founded in 2010, Upskill is headquartered in the greater Washington D.C. area. It has raised about $53.4 million from a pretty impressive list of investors, particularly among the corporate set, including Boeing (BA), GE (GE), Cisco (CSCO), and Salesforce (CRM). Unsurprisingly, many of these investors are also customers for Upskill’s Skylight platform that enables users to customize enterprise apps for smart glasses, smartphones, tablets, and other AR devices. In other words, the software is hardware agnostic:
It’s becoming pretty clear by now that AR games like Pokémon Go are just distractions from the real value behind the technology – as a tool to help train and assist employees to do their jobs across a range of different industries. The basic concept is that frontline employees like mechanics, technicians, and even retail store clerks can access schematics, product inventory, or other relevant task data through an AR interface. The ability to check references or follow instructions on the go means workers can complete jobs faster and still have a hand free for a cigarette break.
As shown above, about 35% of enterprises had adopted some form of AR/VR as recently as 2018. Industry-backed surveys and reports, shockingly, find that enterprises are eager for more. One rose-colored glasses survey, for example, said “56% of businesses have implemented some form of mobile AR/VR technology, and another 35% are considering doing so.” Nearly a third reported at least a 25% boost to productivity, while more than 60% of respondents claimed AR/VR solutions resulted in 20% cost savings. A report sponsored by AR startup Mojo Vision claims commercial sectors will account for 80% of worldwide spending on AR/VR products and services by 2022.
Use Cases for Skylight
While we don’t put too much faith in most of these statistics, there is solid evidence that companies are recognizing the value of AR technology, ranging from the production floor to remote fieldwork.
For instance, Boeing is a big fan of Upskill’s low-code Skylight platform. The aerospace company has developed an AR application to assist technicians who assemble the miles and miles of wires that snake through an airplane frame. The app supports things like voice commands and video streaming. The company says the technology has reduced production time by 25%, while virtually eliminating errors. We all know Boeing needs as much help as possible in that department, where mistakes end up in the bottom of the ocean, along with 250 lives.
In another use case, European telecom company KPN adopted the Skylight platform for its field technicians to better serve its 30 million-plus customers. The customized smart glasses could access work orders directly; guide technicians to the equipment needing repair using Bluetooth beacons; pull up instructions, schematics, and videos during repairs; stream diagnostics in real-time for techs to see equipment status; and enable remote experts to help troubleshoot problems through a real-time video feed. The smart glasses cut operating costs by 11% while reducing errors by 17%.
Value of Upskill to TeamViewer
A ready roster of happy blue-chip customers, particularly in North America, is certainly part of the deal that attracted TeamViewer to purchase Upskill for an undisclosed amount. About a third of TeamViewer’s $545 million in 2020 billings were in the Americas, so the Upskill acquisition clearly bolsters the company’s position in that region. In fact, TeamViewer will keep Upskill’s D.C. area and Austin, Texas offices open, with plans to expand. It’s been difficult to find hard numbers into Upskill’s current revenue, but in 2019 it was reportedly only about $4 million after nearly a decade in business.
And while we also don’t have a great view into the size of TeamViewer’s existing AR business, a list of the company’s recent contracts show that some of its biggest wins are in that sector:
TeamViewer Pilot is a standalone product with 3D object tracking that allows remote experts to place spatial markers that “stick” to real-world objects, highlight things, and add text annotations in a live video stream from someone working in the field. TeamViewer Frontline, meanwhile, represents last year’s acquisition of German AR startup Ubimax, which has also developed a platform for AR enterprise apps similar to Upskill. And that’s obviously where TeamViewer is seeing a lot of traction. Some of the customers gained in that transaction include DHL, Siemens, and Coca-Cola Hellenic Bottling Company, so TeamViewer is really positioning itself as the market leader in AR enterprise applications.
There seems to be plenty of market share still up for grabs in the AR enterprise sector, so it will be interesting to see if TeamViewer will continue to bolt on acquisitions in this area. It had more than $260 million on hand at the end of 2020, though it’s not clear how much of that money was spent on the Upskill acquisition. It cost about $162 million to buy Ubimax, a company that had only raised $6 million in funding, with 200 enterprise customers and an estimated $10.8 million in revenues for the year prior to the acquisition.
TeamViewer certainly has momentum on its side. The company grew its enterprise base to 1,885 customers. Overall, billings to customers jumped by 44% in 2020. The company also estimates it will more than double total billings to more than $1 billion by the end of 2023. Those are great numbers whatever reality you live in.
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