We are in the early days of another transformative technology revolution. The consultancy McKinsey estimates that the Internet of Things – a world where up to 50 billion things (or devices) will be connected to the Internet – could create up to $11 trillion per year of new economic value to business and society. The term Internet of Things traces its origins to 1999, but it is only over the last year or so that the realization of its transformational potential has reached the business community and the general population. The number of research reports, conferences and media articles devoted to the topic has exploded. With the media making the connection between the smart home and the connected automobile IoT has begun to become part of the popular parlance. In fact, a Google search for Internet of Things reveals 725 billion results. Google Trends also reveals that 2014 and 2015 were pivotal years in the dawn of the IoT revolution, as evidenced by the explosion in the number of IoT related searches. Over the past two years there have been big announcements from all of the major car manufacturers of their connected car initiatives, lots of M&A activity in the technology industry as they race to supply the revolution, and major global alliances of telecom providers being formed, to provide the underlying connectivity and infrastructure. But, most of all, we are actually starting to see some of the promised transformational benefits of the Internet of Things becoming a reality.
Companies like GE have connected sensors to their jet engines to provide near real-time monitoring of the health of their engines, reducing airline spending by 10-40%. In shifting from rules-based maintenance to more predictive driven intervention, GE has fundamentally shifted its business from one of selling jet engines to airlines to providing a comprehensive, engine-as-a-service offering. Using GPS and vehicle monitoring sensors many utility companies are now able to more accurately monitor the performance of installation and repair personnel. General Motors uses sensors to monitor humidity to optimize painting; if the conditions are unfavorable, the work is routed to another part of the factory, thereby reducing repainting and maximizing plant uptime. The oil and gas industry is probably one of the most advanced users of IoT technology with new production platforms containing more than 30,000 sensors, connected through a sophisticated central control and data management systems. IoT is also creeping into our everyday lives, with home security, thermostats and monitoring connected to data analytics and all controlled through our smart phones. With an estimated 130 million consumers worldwide using fitness trackers today, the reality of more efficient, and personal effective health care is starting to become a reality.
It is not just businesses that are reaping the benefits of the IoT revolution. Cities around the globe are beginning to build out new digital services such as smart lighting, traffic, waste management and data analytics to reduce costs, tap new sources of revenue, create new innovation business districts and improve the overall quality of urban life. Real-time bus information is now available in New York City, Chicago, Singapore, and many other cities, significantly improving, not only the wait times for riders, but the operations of the transit authority. Similarly, by using real-time data to adjust the timing of traffic lights to improve traffic flow Abu Dhabi has been able to speed traffic flow in the city by up to 25 percent.
Telecom companies have realized that the IoT revolution holds for them the promise of new found revenues in connecting the projected 50 billion things. The number of cellular machine-to-machine connections grew 28 percent in 2014 and is estimated to reach to 1 billion connections annually by 2020. AT&T reported that it has more than 22 million IoT devices connected to its network. Recognizing the huge opportunity afforded by the IoT revolution, the large French telecom operator Orange recently announced that €600 million ($670 million) of its revenues will come from the Internet of Things related businesses by 2018. Leading technology companies like Cisco, IBM and Ericsson have all realized the opportunities of the next technology revolution by creating IoT business units, new product lines and extensive marketing campaigns. Industry analysts, consultants and other technology services companies have similarly organized to benefit from the Internet of Things.
The dawn of the IoT revolution may have begun but it will still be some time before its transformational powers will be fully felt. There are a number of technical, business, regulatory and perception obstacles that must first be overcome. We are still very much in the early days of the IoE revolution with many companies knowing that they need to do something but not sure, what or how. A study by Harvard Business Review and Verizon found that less than ten percent of enterprises had deployed IoT initiatives. And, of that small minority only 56 percent of those had an IoT strategy. What does that say for the 90 percent of companies who have yet to implement IoT initiatives?
Recent Cisco research of enterprise IT and business decision makers revealed that their top 3 challenges with implementing IoT initiatives in their businesses were: 1) security of business data; 2) standardization of IoT infrastructure and compatibility with business systems; and, 3) cost of implementation. The critical issues of security and data privacy are critical elements that are being addresses, but we still have a long way to go to allay these justified fears around IoT implementations. Equally, there are organizations and committees that are working hard on establishing IoT standards to ensure compatibility between all of the different IoT components. However, the current IoT technology and solutions environment is very much a Tower of Babel when it comes to interoperability and compatibility. Government regulation will no doubt play an important part in shaping security and privacy, driving standards and forming the legal framework for such leading-edge innovations as self-driving cars and autonomous machinery.
The IoT supplier market is currently very fragmented with a multitude of big and small companies providing single pieces of the IoT implementation – devices, application, point solutions, different platforms, etc. The same Cisco end user research found that customers are not only looking to suppliers to provide them with end-to-end solutions but are looking for a broader array of services to help them successfully navigate this new technology revolution. Specifically, the top things that businesses are looking for from an IoT provider include: 1) full solutions; 2) services (strategic planning, install, design, technical support); 3) solutions that leverage existing infrastructure; and, 4) the ability to scale with organization’s needs. It could be some time before a number of key IoT suppliers emerge from the current fragmented market to successfully address all of the businesses needs and help them to fully realize the promised benefits of the IoT revolution.
What does the future have in store for IoT and how will this revolution unfold? The following are my ten predictions of what we have to look forward to:
- The platform is the key to success – The “things” will get increasingly cheaper, applications will multiply and connectivity will cost pennies. The real value will be created in the horizontal platform that ties it all together – the new OS. This platform will be composed of 3 different layers: management, infrastructure, and data analytics and insights.
- The industry will look completely different than it does today – Like in the early days of the Internet, IoT is a greenfield market. New players, with new business models, approaches, and solutions can appear out of nowhere and overtake incumbents.
- Business is the key market – While there is lots of talk about wearables and connected homes, the real value and immediate market for IoT is with businesses and enterprises. The adoption of IoT will be much more like the traditional IT diffusion model (businesses to consumers) than the Consumer-led adoption of social media and personal mobility.
- It will be about much more than the “things” – The currency of IoT will be “data”. But, this new currency only has value if the masses of data can be translated into insights and information which can be converted into concrete actions that will transform businesses, change people’s lives and effect social change.
- The “Connected Car” will be all about the car – There is currently a lot of hype about turning your car into a mobile entertainment center – music, video, social media and all of the apps that we currently enjoy on our smartphones. However, the real value and transformation is in connecting the car operations (e.g., service updates, advanced notifications of failures) and drastically improving safety (e.g., inter-car communications, semi-autonomous driving). These services will most likely be paid for by the manufacturer or through new, alternative business models, rather than directly by the driver.
- IoT will force business transformation – Businesses which connected to the Internet saw the real value when they re-designed their businesses models and processes for a connected world, and found new online products and services to offer. Some companies immediately embraced the Dot-Com world, many had false starts and many others took a long time to jump on, or the revolution passed them by completely. The same will be true of IoT. Businesses need to develop strategies and plans for how they can leverage IoT to transform all aspects of their businesses and capture the real value of this revolutionary technology.
- Trading mobile dollars for IoT pennies – Mobile operators are salivating at the new revenues to be earned from connecting all of these things to the Internet. However, it is not that straight forward. While some of the traffic will flow over mobile networks, the majority of the connections will be made over wireline or unlicensed wireless networks, and much of it will be very low bandwidth traffic. Mobile operators will need to do more than just sell mobile connectivity to inanimate objects to reap the full rewards of IoT.
- There will be a battle for IoT application mindshare – With billions of devices projected to be spewing out petabytes of data, application developers will have a field day launching thousands, or even millions, of new and cool apps. But, like the smartphone world, all of these apps will be fighting for mindshare and only a few will rise to the top to be valued by businesses and consumers.
- All cities will be smart – With more than one-half of the world’s population living in cities with innovative new IoT solutions, such as smart parking, connected waste, and traffic management, there will be a great opportunity to combat the major challenges of rapid urbanization. We are unlikely to see many Jetson-like smart cities of the future appearing overnight. However, like in the past with the adoption of revolutionary technologies such as sewers, electricity, traffic lights, and the Internet, mayors will slowly implement IoT solutions to save money, shape the future and make their cities better places to live.
- IoT will cease to exist – Terms like “eCommerce”, “the Net” and “WWW” are all quaint reminders of how the Internet has ceased to be an exciting and mysterious new thing, and, like electricity, is now just part of our daily lives. The Internet of Things will go the same way. One day soon, it will be hard to imagine that all things weren’t connected and that the extraordinary benefits of IoT hadn’t always been with us.