Major Contracts and Investment Continue to Prove Value and Confidence in Augmented Reality

It was only a matter of time before a big military contract was seen in the Augmented Reality (AR) space. The U.S. Army proved to be first—at least the first on a notable, public scale—with a recent contract worth US$480 million to use Microsoft’s HoloLens headset for a program called the Integrated Visual Augmentation System (IVAS). Training is mentioned in the contract as a primary use case focus, and could result in 100,000 devices shipped.

While not a major military contract, DigiLens also recently completed a Series C funding round led by Mitsubishi Chemical Holdings and Niantic Inc. (developers behind Pokémon Go) to develop waveguide displays, a fundamental type of display technology for see-through display applications. Both of these announcements lend credence to the idea that AR is maturing, the knowledge base is growing, and realistic implementations are providing value and a Return on Investment (ROI). This fits well with ABI Research’s expectation of a positive market inflection in 2019, with a confluence of these factors, among others, propelling adoption.

Military applications have been at the forefront of technology research and adoption for decades. Heads-up display technology, now becoming more and more common in the automotive space, has been around in one form or another in the military for half a century. So, it comes as no surprise that a big-budget military contract was signed for AR technology. If there were significant doubt that AR could provide a reliable and valuable experience, the contract would not happen.

It also cements training as a core use case for AR technology, at least assuming success is seen. This is unique compared to other training implementations seen thus far, as the primary driver of success will be improved decision making and safety for soldiers. ROI is bullet point number one for nearly all AR conversations, and while greater user safety can be categorized as a positive return, it is outside of the traditional “X%” revenue increase metrics usually seen. Improved decision making and better content retention are difficult to quantify in terms of value returned, but it can be immediately clear in this type of situation.

DigiLens’ news shows that this idea permeates to the component level as well. Customers are seeing value in the current technology, but there is room for improvement and business to capitalize on: in this instance for displays, but this remains true for silicon, battery, processing, sensors, and more. The whole technology stack has room to grow and mature, and as manufacturing processes mature alongside this, prices will drop naturally and open up a wider audience.

Plenty still needs to be improved across the board. Specifically for HoloLens, expect to hear complaints about weight, form factory, battery life, and general ease of use. Interestingly, the contract highlights hardware specifications that are outside of the current generation of HoloLens hardware: field of view, weight, and sensor capabilities are mentioned explicitly, which brings into question how the current generation of HoloLens fits into this play, and how these hardware improvements will be implemented.

Despite these hardware issues, the U.S. Army obviously saw enough value in the current hardware on offer with HoloLens to invest now. This contract is the largest seen in the AR market in terms of scale, and will be a great showcase of system integration difficulties, usability concerns, use case possibilities, security concerns, and more. Many companies that were early investors have been hesitant to scale due to concerns around value scaling linearly along with it; while government/military contracts are unique and differ from a more traditional enterprise implementation, success for the U.S. Army can be extrapolated to other training use cases based on user feedback; if soldiers are unhappy with using HoloLens, or find it unnecessary, that will become known very quickly. If AR training integrates well, then that success serves as an example of AR training at scale, leaving specific Key Performance Indicators (KPIs) up to the customer or implementer to identify: the technology itself is capable.

Contracts at scale serve an important secondary function for the wider market by increasing knowledge, encouraging discussion, and creating data points, both qualitative and quantitative, for interested parties to leverage in their own conversations. Sometimes use cases do not fit nicely into direct ROI/KPI discussions, but extrapolation can highlight value. It is natural to let ROI drive the discussion, especially for a transformative technology like AR, but it is equally important to recognize value that falls outside of that. This idea permeates to other transformative technology conversations around Artificial Intelligence (AI), machine learning, 5G, and other areas, all of which have synergy with AR. Identifying hidden value alongside the more obvious ROI areas can flesh out budget conversations and make the difficult cross-group conversations—often necessary with larger companies—more substantial and applicable to every party.

It is obviously too early to predict the success of the U.S. Army’s HoloLens usage, but the fact that the contract was finalized at all points to a maturing AR market. Nascent technology requires time to mature and grow, for manufacturing processes to ramp up and streamline, for providers to educate customers, and for those customers to educate internally, and ultimately for budgets to be secured for investment and AR to be implemented. Countless factors to consider and ever-growing complexity slow things down, but the value of an AR implementation—and the number of use cases served by AR—will eventually outweigh these barriers. When that balance changes, an inflection point will begin to be seen. It is just a matter of time.