The Internet of Things (IoT) is transforming the way we work, play, and live. Harnessing IoT will be key to transforming the way businesses operate, differentiate themselves, and make money in the years ahead. With enhanced situational awareness and ability to perceive and respond to the surrounding environment, IoT adds incredibly valuable intelligence for complex decision making in a broad range of industries, including energy, automotive, aviation, oil and gas, healthcare, and more. However there are these opportunities as well as the challenges they entail, and presents ways to overcome those challenges.
THE PROMISE OF IOT: WHAT IOT HOLDS FOR US
With billions of units generating more than $1 trillion in revenue today, the IoT market is already big—and it’s growing fast. Analysts predict the market will grow with a double-digit compound annual growth rate (CAGR), and IDC forecasts that revenues will double by 2015.The challenge is to translate the intelligence in connected embedded devices into new products and services that solve customer problems, drive customer engagement and loyalty, and deliver even higher value to the economy.
Analysts are unanimous about one aspect of IoT: the opportunity is huge. Experts predict that there will be anywhere from 20 billion to 50 billion connected devices by 2020.IDC forecasts that the volume for embedded systems will outpace any other mainstream system type, reaching 8.9 billion unit shipments by 2015 with 75 percent of revenue opportunity. Machine-to-Machine (M2M) technology adoption is also spiraling upward: There are already more than a billion M2M devices at work in sensors, smart meters, industrial control systems, mobile healthcare assets, video surveillance systems, automotive and telematics solutions, smart buildings, and more. Wireless M2M connections alone increased by 37 percent last year to reach 108 million, according to a report from market analyst firm Berg Insight.
The seemingly sudden arrival of IoT and its network of intelligent systems has actually been emerging for years. Innovations in network connectivity, mobile and wireless technologies, multi-core processing, M2M communication, sensor technologies, cloud computing, and data analytics have converged to create an entirely new form of intelligence—and astonishing new capabilities to optimize the productivity of processes and efficiency of decision making. For example, “smart” metering hubs can automatically report on usage via networks, saving the time and money of sending a human being to manually check meters, and allowing companies to optimize consumption in response to supply conditions.
Intelligent devices can provide heartbeat monitoring that gives doctors the data they need to determine diagnosis and treatment. They can send real-time traffic data to a consumer’s GPS, helping optimize traffic flow and reduce consumption and emissions. And on the factory floor, they can help match fast-changing consumer tastes to production systems so that a broader mix of highly differentiated products can be manufactured around the globe and just in time.
These few examples show the potential of IoT for specific industry applications, but the companies that are actually building the market—particularly operators, device manufacturers, and system integrators—still looking to answer questions like:
- What is the best way to connect the wealth of new applications, systems, and devices to complex and often fragile networks?
- How can Big Data inform and guide the design of systems and devices for a better connectivity experience?
- How can the operational efficiencies of IoT be scaled to create higher profit potential?
- How can successes and lessons learned be leveraged more broadly across multiple vertical markets to compound the benefits?
To answer these questions, it is critical to understand the factors driving the adoption of IoT, the challenges impeding scalability across verticals, and the differing requirements of operators and device manufacturers. These key factors include:
- High labor costs: It typically costs at least three times more for a human to perform a task than a machine.
Huge real-time demand for Big Data: Data has become the new currency of business, and intelligent systems can supply both the raw material and sophisticated, real-time analytics. - The cloud: Through IoT, businesses can develop new services and offer them through software-as-a-service (SaaS) models, creating new efficiencies and economies.
- Ecological considerations: Finer precision and faster response times than manual, human-dependent systems—saving energy, prioritizing usage, setting policies for response to outages, and so on.
- The “instant gratification” culture: IoT can accelerate many services, and in the process accelerate revenue generation, higher profitability, and new ways of monetization enabling instant gratification.
OVERCOMING THE BARRIERS
Once you have understood the factors behind driving IoT, then comes the barriers we need to overcome. Two of the key groups of solution providers for IoT today are operators and device or system manufacturers. Both are looking to develop solutions that will scale efficiently, increase average revenue per device, and create competitive differentiation, while responding to the needs of specific vertical industries. Specifically, they are struggling with the following:
- Market fragmentation
- Complexity and customization requirements
- Lack of specialized skills and expertise
- Slowly evolving standards in technology or application deployment
- New ecosystem to manage
Consequently, in dealing with these challenges, operators and device manufacturers sometimes take a do-it-yourself (DIY) approach and try to build internal competence rather than outsource key aspects of creating new devices and services for the IoT market. However, there are a number of smarter approach to IoT development. Building a service-centric selling model rather than technical competence in an area that delivers little competitive advantage. The move to a service-centric model is an evolutionary process. Many operators have already taken the first step by offering connectivity services for M2M (machine to machine) and intelligent systems applications.
NEXT STEP
Forward-looking operators and device manufacturers are now searching for opportunities to provide service revenue enablement—delivering innovation platforms and developer environments that smooth the integration of enterprise apps with networked remote devices—in order to capture enterprise customers and application developers.Therefore, the solution providers are expediting and facilitating these efforts by reducing complexity, aggregating supply chains through higher integrated software solutions, and enabling rapid innovation and time-to-market for intelligent systems at lowered cost. They focus is on delivering unparalleled capabilities in three core categories:
- Connectivity: Simplifying device connectivity for wireless and wired networks, speeding time-to-market, and reducing expense for device manufacturers
- Manageability: Delivering pre-integrated and supported management software—and collaborating with best-in-class hardware, software, and system integration partners.
- Security: Providing tightly integrated, state-of-the-art security capabilities for protecting devices and their data.
The potential of the IoT market is huge, but actual benefits achieved by businesses have been constrained by the complexity of producing real-world applications. This will change—rapidly— once operators and device manufacturers are free to focus on their true value add: innovative new services and applications. Players in this space need to create a path to revenue by eliminating the need to develop internal competency in areas that don’t help differentiate service providers.
