Why the Internet of Things (IoT) is about Data Driven Ecosystems (& not really about the Devices)..

“The Internet of Things (IoT) will have a great impact on the economy by transforming many enterprises into digital business and facilitating new business models, improving efficiency, and generating new forms of revenue.However, the ways in which enterprises can actualize any benefits will be diverse and, in some cases, painful” – Jim Tully, vice president and distinguished analyst at Gartner – 2015.

The IoT is one of the most hyped paradigms floating around at the moment. However the hype is not all unjustified. Analyst projections have about 25 billion devices connected to the internet by 2020 delivering cumulative business value of $2 trillion[1] across many industry verticals. Enterprise IT need to now begin developing capabilities to harness this information to serve their end customers. This blogpost discusses foundational IoT business elements that are common across industries.

The Immense Market Opportunity around IoT 

The IoT has rapidly become one of the most familiar — and perhaps, most hyped — expressions across business and technology. That hype, however, is entirely justified and is backed up by the numbers as one can glean from the below graphic. The estimated business value of this still nascent market is expected to be around $10 trillion plus by 2022.

Thinking around IoT has long been dominated by passive devices such as Industrial Sensors, RFID tags and Actuators. As pointed out in my “Gartner’s Trends for 2017” article, these devices are beginning to form a smart mesh. Field devices now have increased ‘smart’ capabilities to communicate with each other and with the internet – typically using an IP protocol -resulting in the combined intelligence of groups of such ‘things’.  The IoT now enables not just machine to machine communication but also the human to machine and human to IoT ecosystems. While the media plays up stories of IoT aware devices such as Google Nest or Amazon Echo etc – it is also shaking up vertical industries.

Virtually every industry out there has a significant amount of connected devices that have been deployed. This includes Retail, Energy & Utilities, Manufacturing, Healthcare, Transportation and Financial services etc.  Having said that, let us consider the five key industrial uses for the IoT space that will yield tremendous business value over the short to medium term – the next 2-5 years.

The Six Key Industry Applications of IoT 

Consider the above graphic (courtesy the BCG), the real business value in IoT lies in Analytics and Applications built on these analytics. In fact, BCG expects that by 2020 these higher order layers will have captured 60% of the growth from the [3]. In such a scenario, the rest of the technology elements – connected things, cloud platforms & data architectures merely enable the upper two layers in delivering business value.

1. Retailers implementing IoT are working to ensure that their customers gain a seamless experience while browsing products in the store.For example the industry has begun adopting smart shelves that restock themselves, installed beacons in stores that communicate with shopping apps on consumers smartphones and NFC (Near Field Communications) that enable customers to make contact-less payments.  Internal operations such as Supply Chains are benefiting in a big way in their ability to gain realtime insight into the
2. In the area of Commercial real estate, facilities management is an area where companies spend massive amounts of money on energy consumption. According to Deon Newman, at IBM Watson[3], global conglomerates like Siemens own hundreds of thousands of building which produce tens of thousands of millions of emissions. In this case, IoT analytics is being leveraged to reduce such huge carbon footprint.
3. In the Utilities Industry – as Smart Meters have proliferated in the industry, IoT is driving use-cases ranging from Predictive Maintenance of equipment to optimizing Grid usage. For instance, in water utilities, smart sensors track everything from quality to pressure to usage patterns. Utilities are creating software platforms that provide analytics on usage patterns and forecast demand spikes in the grid .
4. The Manufacturing industry is moving to an entirely virtual world across its lifecycle, ranging from product development, customer demand monitoring to production to inventory management. This trend is being termed as Industry 4.0 or Connected Manufacturing. As devices & systems become more interactive and intelligent, the data they send out can be used to optimize the lifecycle across the value chain thus driving higher utilization of plant capacity and improved operational efficiencies.
5. The biggest trend in the Transportation industry is undoubtedly self driving connected cars & buses. The Connected Vehicle concept enables a car or a truck to behave as a giant smart app – sending out data and receiving inputs to optimize it’s functions. With the passing of every year, car makers are adding more and more smart features. Thus, vehicles have more automatic features builtin – ranging from navigation, requesting roadside assistance, self parking etc etc. Applications are being built which will enable these devices to be tracked on the digital mesh thus enabling easy inter vehicle communication to enable traffic management, pollution reduction and public safety.
6. With Smart Cities governments across the globe are increasingly focused on traffic management, pollution management, public services etc – all with a view to improving quality of life for their citizens.  All of these ecosystems will be adopting IoT technology in the days and years to come.

Conclusion..

It can be seen from the above that the applications are myriad. Thus, while one cannot recommend a generic IT approach to IoT thats applicable to every industry – familiar themes do emerge that apply from a core IT capability standpoint.

The next post will consider the five key & common technology capabilities that Enterprise CIOs need to ensure that their organizations begin to develop to win in the IoT era.