Internet of Things Needs a Reality Check on Benefits, Privacy

NEWS ANALYSIS: The IT industry throws around amazing numbers about the Internet of Things' growth and revenue potential. But there is less talk about real applications or their benefits to industry and society as a whole.

IoT Reality Check 2

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.

Scot Petersen

Scot Petersen

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,...