The Internet of Things (IoT) is undoubtedly one of the hottest areas in the technology sector at the moment.
Defined as the network of physical objects or 'things' that are connected to the internet, the IoT is taking the technology industry by storm.
Cisco estimates that the IoT will generate $19tn of economic value from higher revenues, or lower costs, and many are crediting the IoT as the start of the next industrial revolution: Industry 4.0.
As a growing variety of machines and devices continue to be connected to the internet and become intelligent, businesses are predicting over 50 billion devices to be connected by 2020.
But where do the real IoT opportunities lie for businesses and consumers?
The main IoT market areas are wearables, connected homes and vehicles, and industry. Each of these has a large number of segments with different suppliers, products and services, channels and buyers.
In that sense, IoT is a deceptively simple label for an enormously diverse set of product markets, ranging from fitness bands to security cameras and domestic thermostats, to cattle feeding machines and nuclear power station controllers.
So it's easy to see why the accompanying hype and huge numbers show no sign of letting up.
However, making things intelligent and/or networked is not new. Many industries have done this for a long time, and self-tuning engines in cars, city traffic light systems and casino slot machines are good examples.
In the same way, the hype surrounding the IoT is not new either. Electrolux famously announced an internet connected fridge as far back as 2000.
So what is new? The economics have changed significantly, opening the IoT more widely and making it more accessible to businesses of all sizes.
For example, it is now feasible to build connectivity and intelligence into a wider array of products thanks to Moore's Law, falling hardware development costs, a wider set of connectivity options and cheap cloud services.
The supply side of IoT is also expanding very fast thanks to a large pool of investment funding. As a result, the IoT is no longer something that only big companies can afford and is presenting real opportunities for companies of all sizes.
Areas of opportunity
Although the IoT opportunity is expanding quickly we see four main areas for adoption in the short term.
First, in systems with high operating costs such as heating, cooling and maintenance, machines with a high level of consumables and at remote sites.
Second, in the protection of high value assets such as plants, crops, livestock and inventory.
Third, in monitoring where there is a small risk of something really bad happening such as a riot, flood or earthquake.
Fourth, in large-scale data collection, for example in weather, other environmental issues and traffic.
The key IoT enablers for suppliers also fall into four categories. First is to change cost structures. By adding some capital cost for the connection and intelligence, it may be possible to radically reduce a system's operating costs.
Second is to add new features and try to keep prices up, as we are seeing with TVs, washing machines and fridges. At present this area is less successful, and many of the internet enabled products struggle to gain traction in the market at higher prices.
Third is to change the business model based on the data that is collected by adding layers of service or using the data to run a two-sided business model.
Printers can be offered as a service, not a product, if they tell the supplier when they're running low on ink and automatically order new ink. Houseplant monitors enable a two-sided business model by feeding back details of which plants grow well in which locations.
The fourth is to enable completely new things. Connected parking meters can make a big difference to city traffic by enabling people to drive straight into an empty bay.
Machinery faults can be identified before they cause a failure by studying their pattern of electricity consumption and enabling predictive maintenance to be carried out. Connected cars with enough intelligence can become self-driving.
Taking into consideration the new economics and game-changing opportunities to change cost structures and business models, not forgetting the ability to create completely new things, we would strongly recommend that players in all sectors start experimenting with the IoT as a matter of urgency.
The IoT has the potential to be disruptive in a great many areas, so a 'wait and see' approach carries high risks. It's much better to be causing the disruption than having it done to you.
Martin Garner is a senior vice president at analyst firm CCS Insight.
Fabes has held senior IT positions for over 30 years
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