2015 – A Tipping Point for the Internet of Things

2015 will be remembered as the year of the Internet of things.  The tipping point when IoT went from the back rooms of the technology world to become mainstream.  

 

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. 

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. 

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. 

Now that the Internet of Things has gone mainstream these challenges will be resolved and IoT will become a fact of life for businesses and society alike.  In fact, one day IoT will cease to exist.  In the future, 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.

I welcome the Internet of Things to 2016 and beyond.  I can’t wait to see how this new technology revolution continues to transform our lives.