Magic Leap and Microsoft Back in Augmented Reality Headlines, Targeting Markets Hungry for Collaboration Opportunities

As smart glasses continue to take hold in the enterprise and consumer opportunity materializes, some big hardware names are continuing to see wins and growth potential. Companies like Facebook, Niantic, Apple, Google, and Snap are all at varying stages of Augmented Reality (AR) investment and product. Two other heavy hitters in AR, Microsoft and Magic Leap, have made the news as their plans highlight both current market opportunity and how that market may look over the next decade.

Microsoft won a contract with the United States’ Army to build out a multi-use AR system called Integrated Visual Augmented System (IVAS). This follows after a contract for the prototype AR product in 2018. The new contract will span 10 years, with reported value up to $22 billion over that time. This will be less refitting the existing HoloLens platform, and more developing the prototype from the 2018 contract into a more comprehensive production product.

Magic Leap was in the running for that contract as well. Either way, it will be launching their second generation product in limited availability at the end of 2021, with wider availability in 2022. The company’s first product, a consumer oriented headset, failed to see traction mostly due to the consumer AR market not really existing at the time (at least in regards to smart glasses). The new product is enterprise targeted as a result, with promised improvements in field of view and form factor.

Enterprise augmented reality has had a common byline over the past few years—worker enablement. This was exacerbated with COVID-19 and restrictions on in-person work. For both Microsoft and Magic Leap, worker enablement will also be the focus. While a government contract may not be traditionally seen as a worker enablement or collaboration opportunity, the applications are similar to any other enterprise AR implementation, just in a very different environment. Keeping a team connected while providing visual data in real time is universally valuable.

Military contracts present a unique situation for these companies; budget is available and cutting edge is required, which is ideal for AR. However, reliability, safety, and usability requirements are significant. Outside of just delivering on a contract, the brand and employee impact from military contracts can be challenging. Response is mixed among the public and employees for this latest U.S. Army and Microsoft contract, with similar hesitance seen with the company’s earlier 2018 AR contract, as well as a 2019 deal, with the Defense Department to provide cloud services. Depending on how sentiment starts and shifts around these contracts, it can be an important factor to consider with impact on morale and available knowledge (e.g., if product experts/engineers/etc., opt out given the choice).

For both Microsoft and Magic Leap, the broader enterprise market is rich with opportunity for an easily integrated AR solution; the company’s shift of focus away from content creation towards easing integration is smart since companies mostly know what they want in their AR ecosystem, and often already have content available to leverage. Microsoft has advantages with a wider installed base of HoloLens and backend solutions that integrate with AR easily (e.g., Teams, Azure), but Magic Leap at the least is focused on the right areas in order to compete. It will come down less to hardware specifications, and more to platform support and ease of integration and usage.

While Magic Leap’s switch to enterprise is entirely expected and sensible, there’s an interesting question around timing and the consumer AR market. Without question, enterprise has been the right market to target for the past decade, but this is changing quickly. There will still be ample opportunity in enterprise, but a longer-term vision of AR smart glasses would see consumer with equal, if not more, opportunity. Most likely, enterprise success will be used as a sustaining element for the company to again pursue consumer in the future—a go-to market that can be shared by any smart glasses vendor.

For other companies investing in AR—like the companies mentioned earlier, Facebook, Niantic, Apple, Google, and Snap—consumer is the first play, but not necessarily the only play. Retail, education, and healthcare are all examples of markets where consumer product and services can be leveraged on the corporate side as well. Even more industrial-minded markets, like manufacturing, have use cases where the lower costs necessary on the consumer side are equally advantageous for their implementations. Going forward, the market will split more between intended content than market type—consumption is most common for consumers, but training and education content also fall here. Collaboration is a leading enterprise demand, but social media is immense and already leveraging AR (Snapchat and Instagram filters, and AR advertising), so collaborative experiences will fill a role here as well.

Ultimately, consumer will be the majority market for AR by all accounts: smart glasses, mobile device usage, content creation and consumption, and overall revenue flow. ABI Research sees that happening after our standard 5 year forecast window (2026), but it will happen. In the interim, worker enablement is the most understood and in-demand area to serve, and rightly will see growth even as the consumer market expands. It’s also easy to see cross-market synergy, where AR as a ubiquitous display platform is market agnostic, similar to how smartphones are leveraged today.