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The Internet of Things will beckon companies to revise business models, integrate evolving technology, use analytics to create insight, manage security and privacy, and design new organizations.
The Internet of Things concept involves connecting machines, facilities, fleets, networks, and even people to sensors and controls; feeding sensor data into advanced analytics applications and predictive algorithms; automating and improving the maintenance and operation of machines and entire systems; and even enhancing human health. Cisco believes the “Internet of Everything” will have an economic impact of over $14 trillion by 2022.1 GE says the “Industrial Internet” could add $15 trillion to the world economy over the next 20 years.2 Companies are already spending billions to create new business models powered by the Internet of Things in sectors ranging from automotive (for example, in-vehicle information and entertainment) to health care (for example, remote patient monitoring).
The term Internet of Things (IoT) has been in use at least since 1999 when it was employed to promote RFID, the technology that uses low-cost radio tags to identify objects such as individual products, cases, or shipping pallets.3 Today, though it is widely deployed in warehousing, distribution, and retail, RFID accounts for a relatively narrow set of applications of the Internet of Things.
In recent years, diverse applications of sensors and wireless communications, forerunners of today’s IoT, have been implemented in a wide range of industries. Examples include tracking the location and condition of valuable equipment such as construction and mining machinery, managing the deployment and maintenance of commercial trucking fleets,4 coordinating the maintenance of vending machines and ATMs, supporting roadside assistance programs such as GM’s OnStar, controlling and monitoring manufacturing and processing operations, and managing electric power distribution networks to accelerate outage detection and response.5
As sensors and communications electronics continue to decline in size and cost and improve in performance, the economics of sensor-based applications improve. Today’s applications include the use of sensors so small they can be worn or even ingested, and others so rugged that they can monitor the performance of high-speed rotating machinery such as jet engines and generator turbines. At the same time, big data tools for managing and analyzing the vast data sets generated by swarms of sensors are rapidly maturing. We are seeing new applications across a wide range of sectors:
These are just a few examples of the many emerging applications of the Internet of Things. IoT has the potential to revolutionize the way we lead our lives and run our businesses. Across many industries we are likely to see new ventures formed, some incumbents disrupted, and others attempting to disrupt or adapt to the new environment.
As companies seek to build new businesses based on the Internet of Things, they face an array of challenges:
The market for IT services in support of the Internet of Things is significant. Gartner projects that companies will spend nearly $3 billion this year on consulting and implementation services related to cellular machine-to-machine (M2M) communications; this figure is expected to rise to nearly $5 billion by 2016, with mobile network operators dominating the market. The industries spending the most on such services are manufacturing, transportation, utilities, health care, retail, banking, and government.11
Comprehensive investment trends related to Internet of Things are hard to come by because the category is broad, spanning semiconductors, telecommunications, software, analytics and consumer, and industrial products and services. One investment data firm estimates venture capital investment of over $750 million in more than 100 Internet of Things companies last year.12
Buzz is building around the Internet of Things: The volume of Google searches for the term has quadrupled since 2009.13 However, search activity does not equal revenue opportunity—except for Google itself. And the evocative term Internet of Things obscures the reality that this is not a single market; applications must be tailored to the needs of specific sectors and business functions. Despite these caveats, the signals we have identified suggest significant opportunities to build important new businesses with the Internet of Things.