The Internet of Things (IoT) describes a cluster of new and emerging technologies that extends Internet connectivity beyond traditional devices (personal computers, laptops, tablets, mobile phones) to physical objects (appliances, machines, motor vehicles, etc.). IoT connects these objects to the Internet via embedded sensors, permitting the transmission of huge volumes of data in a wide range of industries including agriculture, consumer products, energy, health care, manufacturing, and transportation.

The recent surge of publicity regarding the Internet of Things has prompted charges that IoT is an overhyped technology. Skeptics of IoT cite examples of other, highly touted technological innovations that failed to realise their commercial potential. For example, nanotechnology (launched in the 1970s for applications in engineering, materials, medicine, and other areas) has encountered an array of environmental and regulatory hurdles to global commercialisation. 3D printing (which enables the production of three dimensional objects through computer-controlled additive manufacturing) appears better suited for niche market applications (e.g., rapid prototyping) than for mass commercialisation.

The Internet of Things offers greater promise as a truly disruptive technology with strong international commercial potential. This article examines the global landscape of IoT, focusing on technology applications in key industries.

Enabling Technologies

Three enabling technologies are driving the global expansion of the Internet of Things:

Sensors
Advances in MEMS (Micro-Electromechanical Systems) and related technologies enable the mass production of miniaturised, low power, high performance sensors at a fraction of the cost of early generation sensors. 3 axis accelerometers that sold for $3.00 in 2007 are now available for $0.65. By embedding these sensors in physical objects, engineers can capture real time data on temperature, pressure, voltage, motion, vibration, and other metrics.

Cloud Computing
Leading e-commerce companies such as Alibaba and Amazon are investing in cloud computing capacity, permitting the transmission and storage of large amounts of data from physical objects now connected to the Internet via embedded sensors.

Wireless Broadband 
Major ICT companies (ATT, Huawei, Verizon, Samsung) have announced large investments in 5G, a next-generation broadband technology that offers much higher data speed and greater user capacity than present 3G and 4G systems. With an anticipated rollout in 2020, 5G wireless broadband will greatly expand the IoT frontier in both fixed and mobile applications.

Global Market Potential
According to Gartner, global adoption of the Internet of Things will reach 6.4 billion installed units in 2016 (“Why the Internet of Things Will Dwarf Social Data”, February 2016).  This surpasses the volume of human-centric devices such as laptops and mobile phones. Gartner projects that installed IoT devices will approach 21 billion by 2020.

The rapid expansion of Internet-connected devices creates major commercial opportunities for hardware manufacturers, software developers, data analysts, and technology consultants. McKinsey Global Institute estimates that the global market for IoT will reach $3.9–$11.1 trillion in 2025 (“The Internet of Things: Mapping the Value Beyond the Hype”, June 2015). While IoT applications in B2C markets (home appliances, health care, driverless cars) have garnered the most attention by the international business press, McKinsey anticipates that B2B applications (manufacturing, power utilities, mining and extraction, etc.) will generate 70 percent of the economic value of the Internet of Things.

IoT Applications 

Powered by miniature embedded devices linked to high speed data networks, the Internet of Things offers value-creating opportunities in a variety of global industries.

Manufacturing

IoT devices permit the capture of real time data to improve the operational performance of manufacturing companies:

• Process optimisation
• Preventive maintenance
• Reduced down time
• Enhanced asset utilisation
• Improved inventory management
• Decreased energy and water consumption
• Increased worker safety

In addition to leveraging the Internet of Things to boost efficiency in their own factories, leading manufacturers are installing IoT technologies in products for the global market. For example, General Electric embeds IoT-enabled sensors in its Evolution Series locomotives that capture 150,000 data points per minute. ThyssenKrupp installs sensors in elevators that permit fast responses to equipment failures.

Agriculture

Augmented by UAVs (Unmanned Aerial Vehicles) equipped with infrared and optical devices,  agricultural producers employ ground sensors and IoT-enabled machinery to boost farm productivity. These systems capture key data points (soil ingredients, moisture levels, terrain mapping, etc.) to optimise the application of water, seeds, and fertilizer. These technologies also facilitate maintenance of agricultural equipment and surveillance of farm assets.

Major agribusiness companies are seizing the commercial opportunities presented by the Internet of Things to bolster their positions in the expanding global market for precision agriculture. In 2013, Monsanto purchased Climate Corporation, a provider of weather data analytics. Deere & Company acquired two precision agriculture companies (Monosem and Precision Planting) and formed a joint venture (SageInsights) dedicated to cloud computing software applications for farms.

Energy and Utilities

In May 2016, the software giant Oracle acquired Opower, a leading provider of cloud-based energy efficiency services. By capturing meter readings from utility end customers, the Opower cloud platform lowers energy consumption during peak hours and thereby reduces utility bills. Major utility companies (C3 Energy, Enel, PG & E) as well as ICT companies like Cisco are developing smart grid and advanced metering systems to permit better matching of demand load and generation capacity.

Mining and Extraction

Oil and gas companies like Schlumberger are deploying IoT-enabled underground sensors to capture and analyse data on the location, structure, dimensions, and composition of hydrocarbon reserves. These companies are also using IoT systems for remote monitoring of offshore rigs and deep water facilities. In the metals industry, Australian-based Rio Tinto is an early adopter of IoT technologies to support remote operation of drill, excavators, earth movers, and trucks across multiple locations.

Moreover, IoT technologies are proving useful for worker safety in the mining and extraction industry, which boosts labour productivity, raises employee retention, and lowers health and insurance costs. For example, Marathon Oil employs multi-gas detectors to protect operators from hazardous fumes. Other mining/extraction companies deploy IoT-enabled robots to replace human operators in physically dangerous locales.

Transportation

The recent initiatives of California-based Google and Tesla in autonomous and semi-autonomous cars illustrate the commercial potential of IoT-enabled motor vehicles. BMW and SAP are partnering to develop a platform providing drivers with real time information on available parking slots. Meanwhile, Michelin is developing a line of sensor-enabled tires to improve the fuel efficiency of motor vehicles.

Applications of IoT technologies are proceeding in other segments of the global transportation industry, including shipping and aviation. For instance, Accenture and GE formed a joint venture (Taleris) that integrates onboard sensors and software data analytics to support preventive and proactive maintenance of aircraft and boost fleet efficiency.

Private Homes

Several major companies have already launched IoT-enabled products for private homes: Google’s Nest (smart thermostat), Amazon’s Echo (voice-activated entertainment), and Alarm.com (home security).

Beyond these residential applications, the private home market presents opportunities for providers of the following IoT products and services:

• Smart appliances
• Chore automation
• Energy management
• Access control

Health Care and Personal Fitness

The possibilities for applying the Internet of Things to health care are manifest:

• Remote monitoring of patients, especially individuals with chronic diseases
• Patient adherence to prescribed medicines and therapies
• Distributed care, including enlistment of non-traditional health care providers in remote areas
• Ambulance telemetry
• Robotic surgery

In the personal fitness market, branded apparel companies are exploiting growth opportunities in IoT-enabled wearables. For instance, Ralph Lauren has introduced a PoloTech shirt that collects and transmits biometric data. Hugo Boss, Marks & Spencer, and Nike are also introducing IoT connected apparel products.

Smart Cities

The Internet of Things is a key component of smart cities projects underway world wide, which seek to integrate information and communication technologies in urban communities.  McKinsey estimates the value of this global commercial opportunity at $930 billion–$1.7 trillion per year. About 40 percent of this market value comes from emerging markets, which are poised for technology “leap frogging” by deploying IoT systems in new urban development.
 

Applications of the Internet of Things to smart cities include:

•   Adaptive traffic

•   Air quality

•   Emergency response

•   Energy and water management

•   Infrastructure monitoring

•   Law enforcement

•   Public safety

•   Urban services

Conclusion: Fulfillment of IoT’s Global Potential

Fulfillment of the global commercial potential of the Internet of Things depends on the following:

Improvements in IoT Technology

The May 2016 death of an American driver of an autonomous Tesla Model S equipped with an Autopilot crash avoidance system underscores the need for refinements of IoT technologies whose failure can have disastrous consequences.

Big Data Analytics

Presently, the sheer volume of data generated by IoT systems exceeds the analytical capacity of technology users. This demonstrates the importance of investments in analytics technologies and human capital to make effective use of the mass of data emanating from IoT-enabled devices.

Interoperability

Realisation of the economic value of the Internet of Things hinges on advances on technological and semantic interoperability to enable users on different IoT platforms to communicate with each other.

Cybersecurity and Privacy

The extension of Internet connectivity to physical objects enlarges the domain of cybersecurity targets. It also raises important privacy issues, particularly in the health care arena where the therapeutic benefits of digital medicine and other IoT-enabled systems must be balanced against patient privacy.

This article was written by David Bartlett
Executive in Residence
Director of Global and Strategic Projects
Kogod School of Business
American University
Washington, D.C.

The publication is not intended to provide specific business or investment advice. No responsibility for any errors or omissions nor loss occasioned to any person or organisation acting or refraining from acting as a result of any material in this publication can, however, be accepted by the author(s) or RSM International. You should take specific independent advice before making any business or investment decision.RSM International is the brand used by a network of independent accounting and consulting firms. Each member of the network is a legally separate and independent firm. The brand is owned by RSM International Association. The network is managed by RSM International Limited. Neither RSM International Limited nor RSM International Association provide accounting or consulting services. The network using the brand RSM International is not itself a separate legal entity of any description in any jurisdiction. RSM International Limited is a company registered in England and Wales (company number 4040598) whose registered office is at 50 Cannon Street, London EC4N 6JJ. Intellectual property rights used by members of the network including the trademark RSM International are owned by RSM International Association, an association governed by articles 60 et seq of the Civil Code of Switzerland whose seat is in Zug. © RSM International Association, 2022