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LONDON—By now, we have seen all the big numbers. Market research estimates claim 50 to 75 billion—or more—devices will be connected to the Internet by the year 2025, generating $11 trillion in potential value to the global economy.
But what do these numbers really mean? Ten years is a long time. Even if we consider that the iPhone is only 8 years old, along with the number of changes it has brought about, it’s hard to predict with any accuracy what the so-called Internet of things will be like in a decade. To be fair, the McKinsey report that predicts its $11 trillion estimate is in a range starting at $4 trillion. That’s still a large number.
The cynical view is that the IoT movement is a scheme among vendors as well as consulting and research firms to drum up business. I’m not quite there yet. But pressed for use cases, executives here at the IoT World Forum repeat the same generalized visions around home automation, smart meters and sensors, and health care.
There has to be more than that. And I believe there is more, but there’s still a lot of work to be done before the visions come into focus.
The practical view is, yes, more and more devices will be connected to the Internet. That much is certain. What also is certain is those devices will generate a lot of data. Beyond that, nothing is certain.
You could say that the data will create value for businesses and customers, and it probably will. You could also say that IoT introduces 50 to 75 billion new ways for malicious hackers to steal that data or to invade private lives.
So, for now, it might be best to put the big numbers aside and take a look at what is real, what is happening now and what is actually possible in the future. Here are a few substantive conclusions that were reached at the conference this week.
IoT Needs a Business Plan
IoT devices on their own will not create a business plan. A trash bin connected to the Internet, mentioned here this week, is not a business plan. It’s cool, but merely connecting something to the Internet does not generate revenue.
An important point is to consider where the revenue will be coming from. One speaker here, Sukamal Banerjee, executive vice president, engineering with IT services company HCL, said that two-thirds of the value from IoT will come from savings or efficiencies generated.
That means, for the most part, jobs lost, which creates other problems that must be solved or all that value will be for naught. He also noted that 60 to 80 percent of supplier revenues will come from software and services.
Internet of Things Needs a Reality Check on Benefits, Privacy
That’s an important point. Companies should consider what part of their existing business can be turned into a service from the use of connected devices and build from there.
A Business Plan That Brings Benefits for Everyone
In typical Silicon Valley wishful thinking, anything that makes a tech executive’s life easier must naturally be something that everyone will want. Uber is terrific but it is not for everyone, nor are sensors in your athletic shirt or AI services that manage your calendar for you. These are conveniences for a minority of the world and they do not create value on the scale that is being predicted.
Application Platforms Trump Devices
Considering that there are already a lot of devices and sensors installed on machinery around the world, the best place to be is at the software layer between those devices and the cloud. CloudOne, a fast-growing startup based in Indianapolis, has found a niche developing those layers for companies, such as diesel engine maker Cummins.
Like a lot of manufactured goods, sensors exist to collect data but cannot be accessed until they are brought in for service. CloudOne built interfaces and message-queuing software that routes data into analytics platforms at Cummins, and the devices themselves don’t have to be replaced to produce useful data.
Privacy, Connectivity Standards Should Be a Top Priority
“IoT is all about connectivity,” said James King of IT security company Oberthur Technologies. “But connectivity is also the biggest vulnerability that could bring it all to its knees.” Truer words were never spoken. We have seen what is capable from hackers who can access devices like cars and door locks, even if it’s just to show what they are capable of.
The privacy and security solution, however, starts at the standards level and there are plenty of groups out there working on standards. But these standards shouldn’t be used merely for marketing the concept of IoT, but instead should be used to really lock down devices, data and personal privacy.
In 10 years, my prediction is that no one will need to discuss the “Internet of things.” Everything will merely become part of the fabric of consumer and enterprise computing—if things are done right.
Scot Petersen is a technology analyst at Ziff Brothers Investments, a private investment firm. Prior to joining Ziff Brothers, Scot was the editorial director, Business Applications & Architecture, at TechTarget. Before that, he was the director, Editorial Operations, at Ziff Davis Enterprise. While at Ziff Davis Media, he was a writer and editor at eWEEK. No investment advice is offered in his blog. All duties are disclaimed. Scot works for a private investment firm, which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.