The Internet of Things is moving to the mainstream

by Kristian Steenstrup, Gartner, February 7, 2014

The potential impact of the IoT is vast, reaching to every corner of technology, business and the consumer experience. Gartner expects to see a shift from niche implementations to a more coherent, widespread and integrated Internet of Things

You’ve probably heard about the Internet connected fridge. It’s probably the most commonly used example of the Internet of Things, but it’s not a particularly good one. What’s much more interesting is how organisations can and are starting to use Internet connected devices for real business benefits.

Gartner defines the Internet of Things as the network of physical objects accessed through the Internet that contain embedded technology to sense or interact with their internal states or the external environment.

The Internet of Things is evolving from a niche area into a mainstream activity, especially in the next three years. Gartner believe organisations should seriously investigate and initiate pilot projects now to position themselves to exploit the coming opportunities.

Conceptually, the Internet of Things describes how the Internet is being used to link smart devices, such as consumer items, automobiles, city infrastructure, enterprise assets and a myriad of other physical assets, so that they can be controlled and/or can create and receive a data stream from one another or from conventional computing environments.

When these devices ("things") directly (or indirectly) connect to the Internet, they become an extension of the enterprise and mobile computing environments. New experiences, operating efficiencies and business models can be created and deliver greater value through improved utilisation of these physical assets.

The potential impact of the IoT is vast, reaching to every corner of technology, business and the consumer experience. The IoT has been emerging for decades, with origins in factory automation, machine to machine (M2M) interaction and embedded systems. Its impact will increase in the coming years as the costs of technology and connectivity continue to fall, and it becomes even more pervasive.

In 2009, there were 2.5 billion connected devices with unique IP addresses to the Internet. Most of these were devices people carry such as cell phones and PCs. In 2020, there will be up to 30 billion devices connected with unique IP addresses, most of which will be products. This creates a new economy. In fact, Gartner predicts that the total economic value add for the Internet of Things will be US$1.9 trillion dollars in 2020, benefiting a wide range of industries, such as healthcare, retail, utilities and transportation.

In the midterm (over the next 12 to 36 months), Gartner expects to see a shift from niche implementations to a more coherent, widespread and integrated Internet of Things. For many enterprises, this will elevate the Internet of Things from a theoretical exercise to a mainstream activity. As such, it is critical for IT to work with the rest of the business to understand the impacts and potential opportunities arising from this evolution.

The Internet of Things helps enterprises better utilise remote assets

The Internet of Things connects remote assets and provides a data stream (and the option of a control stream) between the asset and centralised management systems, offering the ability to integrate those assets into existing organisational processes to provide information on status, location, functionality and so on. Real-time information enables more-accurate understanding of status and, hence, enhances utilisation and productivity through optimised usage and more-accurate decision support.

This is not to underestimate the critical importance of connectivity; the ability to collect, interpret and analyse the data streams; the ability to manage both the individual asset and the associated assets (where appropriate), which collectively reflect the remote situation; and any automated decision-making systems that act on the information received. All of these capabilities are important, indeed essential, to manage the asset effectively, but they create only latent potential value. Tangible value is value that can be reflected in the bottom line of a business balance sheet in terms of increased revenues, efficiency, profitability, or whatever crystallizes out at the point a decision is actually made regarding the remote asset (or another asset or even the remote environment in which the asset is located and is monitoring). Then and only then does the value of the Internet of Things become tangible.

There are numerous challenges. Some assets (an aircraft engine or industrial machine, for example) might produce 1 terabyte or more of data per day — hence, the technologies and approaches will need to be different. At the opposite end of the spectrum, large arrays of sensors might each produce only a few bytes of data per day, but the need to manage thousands of them will necessitate the development and integration of efficient system management platforms into existing organisational infrastructure and processes. These may be especially complex where the remote assets form or monitor a large and complex environment, as in the case of smart utility grids.

It’s best to approach the Internet of Things not as a single activity but broadly, as you evaluate the impacts of an increasingly intelligent set of real-world assets combined with traditional Internet and IT systems. Take an integrative and holistic view when examining opportunities and building potential business cases. Consider connectivity, data collection, data analytical requirements, system management and the challenges of integrating new assets into existing processes and infrastructure, or building entirely new infrastructure in support of new revenue streams. Focus on the measurable and material improvements in revenue, efficiency or profitability that might arise from the ability to better monitor, manage and control remote assets.

Gartner believes IoT creates business cases in three key areas: in operational technology, the digital supply chain and customer interactions. Some of the early and most compelling business value scenarios emerge from three large areas. Enterprises should examine their environments in each area. The relative importance of each area and the enterprise's specific needs will vary significantly by industry, so an industry perspective is needed as well.

Operational technology — This refers to enterprise assets such as manufacturing equipment. We have long made use of computer technology to embed intelligence into operational technology (OT). As the cost and size of adding intelligence have fallen, the pace of "computerisation" has accelerated and expanded. The intersection between these intelligent operational technologies, the Internet and IT is expanding, making OT a major part of the IoT. Any company with significant physical assets used to build, deliver, or support products or services should start with examining OT opportunities. Not only manufacturing and industrial equipment, but also facilities (for example, office buildings and conference centres) hold potential value for OT to optimise facility utilisation and energy use.

Digital supply chain — A traditional supply chain typically stops once the goods are shipped. However, smart goods allow the extension of the supply chain so that monitoring services, updates, content and other digital services extend beyond the shipment of the good and into the customer's environment. This can transform a logistics operation into a smart supply chain. Companies selling new Internet-connected smart goods and devices will see their supply chains evolve even further, creating new opportunities for selling additional products and services.

While this trend has centred so far on the delivery of high-cost and complex products, lower costs for embedded intelligence and standardised IoT approaches will bring lower-cost and less-complex products. Enterprises should look at the products delivered to customers, as well as the technologies that surround those customers, to explore digital supply chain scenarios. One example is where one company's product (for example, earth-moving equipment) becomes another company's intelligent asset, with the potential for remote monitoring to optimise service and to improve the design of the product, based on field observations. This, in turn, will lead to an awareness of the value of information coming from the customer's environment, which may need to be paid for one day or, at least, accounted for.

Customer interactions — There has been an explosion in individuals' use of technology in everyday life via Web-based services (for example, social networking), mobile devices (smartphones and tablets) and intelligent products (for example, smart TV and telematics). Over the next five years, this use will skyrocket, with consumers expecting the environment around them to act in a more intelligent way, with integration into their emerging "personal clouds" where they store information. It is within this context that every company should define "personas" for its target customer set that include not only how customers would use the product but also what other technologies (traditional or IoT) they are likely to use. Companies should consider marketing, purchase, use and support interactions. They should identify real-world scenarios in which adding a new technology-enabled, real-time interaction would add value to one of these interactions.

Enterprise OT (industrial automation, sensors and controls) is starting to look like IT

Because enterprise and industrial applications of the Internet of Things will be a focus, it is important for enterprises to anticipate how operational technologies will converge with IT. OT is the industrial subset of the Internet of Things and will impact asset-intensive enterprises. OT systems will coexist with traditional IT systems, creating potential overlaps, opportunities to share, security issues and the need for governance.

Since the Industrial Age, OT has been an inseparable part of the machines on which the technologies were installed (for example, a speed governor on a steam engine). With the advent of electronics, then automation and now the Internet of Things, the complexity and capability of OT have blossomed. In the past 10 years, this has resulted in increased capacity of monitoring and remote control, but also has increased complexity — a complexity that is nearing IT-like architectures.

As OT becomes more like IT (and vice versa), opportunities and challenges arise. For example, there will be commonality in areas such as software product management, infrastructure and platforms. Thus, integration, interoperability and data exchange challenges will need to be addressed, and even staffing could be jointly shared in certain areas.

Enterprises must establish plans to, first, align the governance of OT with IT. Then, they must make plans detailing how OT systems and support processes will integrate with the existing IT environment to fully leverage the new opportunities in modern OT.

The Internet of Things is becoming the Internet of Everything

Although much of the hype has been around things becoming part of the Internet, the additive power of the Internet comes into play when things, people, places and systems work together. For example, in a manufacturing shop floor, machines are connected, and employee operators share their IM presence of where they are and what they are doing. Meanwhile, bin locations and specialized manufacturing rooms can display their statuses (for example, whether they are available, reserved or half-capacity). The ability to do a complete manufacturing capacity check that accounts for machines' throughput, number of people actually working rather than the number scheduled to work, location availability and inventory availability is possible if everything is connected and providing status or activity streams. Similarly, finding bottlenecks — whether from missing people, insufficient bin locations or underproductive machines — can be made much more effective if everything is providing information.

This describes a concept Gartner calls the "Internet of Everything." The Internet of Things is just one piece of this concept — alongside the Internet of People (such as social networks or IM presence), the Internet of Places (such as Foursquare or any location that can broadcast information about itself), and the Internet of Information (for example, the World Wide Web, or systems that can share information through APIs or Web services).

For some, the Internet of Things might sound far-fetched, but think beyond it and create a longer-term strategy for the Internet of Everything. For example, consider how optimizing a process requires a coordinated improvement in people, systems, things and places — not just things. Strategize how this process could be improved if each one of these entities could inform or provide a service to any other entity. For example, could a machine call for an operator if it suspects that it will need human intervention (for calibration adjustment or a complicated setup)? Could this machine even book some bin locations, knowing that it will need them for doing a work-in-progress inventory? Innovative thinking is required to capture maximum value that is made possible by evolving an Internet of Things concept to an Internet of Everything.

* Kristian Steenstrup is vice president and Gartner Fellow at global technology research and advisory firm Gartner, focusing on the energy and utilities sector. As a Gartner Fellow, he has led Gartner’s research on the convergence of operational technology and information technology. Prior to joining Gartner in 2000, Steenstrup worked in enterprise resource planning system design and delivery for more than 15 years in a number of global markets.

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