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The Internet of Things – Hype or Business Opportunity?

Nearly the entire community of analysts is prognosticating a massive growth for the Internet of Things (IoT), and it seems that everyone wants to be part of it. Hardware and software manufacturers make elaborate plans; startups come up with new and disruptive business ideas, some of which are sold to established companies for vast amounts of money; and sometimes these ideas turn out to be no more than toys without a real application scenario.

Where does this development lead to, and are there sustainable business models able to prove that the Internet of Things is not just a concept but an economically feasible trend? What use cases are there and what are the real-world benefits? Last but not least, what approach should companies take to face the challenge?

The Internet of Things Today

The Internet of Things is a combination of technologies; sensor technology, cloud computing and big data. Always-on sensors collect data which is then stored in the cloud, analyzed and used to fire events.

Isn’t the Internet of Things mainly about connected cars and sensor technology? many people ask. Around 200 million units installed is an impressive figure; on the other hand there are approximately 3.7 billion things currently online: smart homes, wearables, sensing as a service or numerous units in the ever-growing Industry 4.0. And there is more to come; kitchen appliances care for our well-being and cars are already outperforming us in terms of reaction times. There are Smart Metering initiatives helping the sector of public utilities to optimize energy consumption as well as energy production.

Use cases are needed badly, as are profitable business concepts for companies. Still, analysts are agreed that the Internet of Things does create possibilities or business models that in turn create new digital experiences.

Embedded Systems: Smart Endpoints of the Internet of Things

We are surrounded by so-called embedded systems which form the sensor-related core of the Internet of Things. There are a number of typical application scenarios:

  • avionics
  • medical devices, e.g. cardiac pacemakers
  • automotive (ABS, break-by-wire, etc.)
  • steerage of local traffic
  • smartphones
  • netbooks
  • e-readers
  • digital TV
  • home gateways
  • servers and networking

These embedded systems are subject to real-time requirements; they are distributed systems used in security-sensitive applications. No wonder that these application scenarios require highly-specialized components that are refined to be extremely powerful and intelligent stand-alone devices. For example, there are microcontrollers that are mapped as digital hardware circuits by applying a specific hardware-related language. These virtual components add up to the actual microcontrollers and their interfaces.

Most business models follow the edison principle: Problems are identified and analyzed; the solution is then provided by combining existing components. Microcontroller construction kits meet the necessary requirements for this, and the required sensors and actors are available; they must only be combined adequately.

Internet of Things and Big Data

The growing number of always-on devices that constantly provide data of some sort creates a vast amount of data waiting to be fed to new analyzing technologies. „Internet of Things will comprise billions of devices that can sense, communicate, compute and potentially actuate. Data streams coming from these devices will challenge the traditional approaches to data management and contribute to the emerging paradigm of big data. “¹

An example: Each commercial aircraft engine produces 30 terabytes of data in only 30 minutes.² This amounts to pentabytes of data each day, only counting commercial aircrafts.

Cisco predicts 50 billion connected things in 2020, based on the current 14.8 billion (February 2015), which still only is about 3% of things total. This rather conservative prognosis shows what kinds of challenges IoT and Big Data effects.

Predictions for the year 2020

Big Data can be characterized by the four Vs, Volume, Variety, Velocity and Veracity. In other words, Big Data means vast amounts of data (volume), a mixture of structured and unstructured data (variety), instant and continuous provision (velocity) and ambiguous origin of this data (veracity). IoT produces Big Data, and the means of analysis are getting more powerful. Business models based on selling the acquired information are welling up everywhere.

Who Owns All the Data?

This question is left stranded by analysts over and over again. Each and every device connected to the internet produces data. But who owns this data? Demarcation proves to be difficult, just take the following example of the digital transformation of automobiles:

By way of the onboard unit a constant stream of data leaves the car. The black box continuously gathers information generated by controllers, sensors and internet applications. This information includes details on the position, temperature, speed, fuel consumption of the vehicle etc. and allows for conclusions on the driver. The information is received by a server of some kind in a data processing center of some sort. Thousands of data streams are collected, processed and analyzed at a time. Big Data applications are put to use to do all this; but who owns the data – the manufacturer, the driver or the provider?4

Some people say that “according to civil law there is no ownership of data.” Others, like the European data protection officers have underlined that data protection laws also apply to the area of intelligent and connected devices.

Clearly, there is need for action. Legal certainty, a prerequisite for sustainable business models, is lacking.

Internet of Things For All

Why is the Internet of Things more than hype? Well, because everybody can not only partake in it but also contribute to it and become the nucleus of startups. Everyone can be actively involved; it is not even necessary to buy expensive equipment. Computers such as the Raspberry Pi or Arduino are available everywhere. Users become developers, implementing their own specifications. One example for this is the growig number of smart home applications.

How would you begin your consumerization project? Maybe the ThinkBox with its simple graphical programming interface would make a good starting point. Another option is SmartLiving, albeit it is aimed more at developers. Both are based on the Raspberry Pi and include the required software which can be downloaded.

So here it is competition for large-scale companies. The basis for disruptive startups; is there anything holding you back?

Conclusion

Many companies regard the Internet of Things as something that happens somewhere “out there”, as something that is monitored. That is not enough; Internet of Things will make new business models as well as diversify competition by additional as-a-service products. It is these use cases that new technologies (IoT, Cloud Computing, Big Data and others) and cross-company processes must be developed for and implemented.

At the moment, end users of mobile devices are pushing innovation just by using them. Users, be it employees or customers, exert growing influence on the design of communication systems. Experiences made in the private sector lead to changing expectations for commercial and professional products, especially regarding graphical user interfaces.

Services offered that are based on Internet of Things are regarded by end users of mobile devides as a helpful tool and payed for based on availability and performance. Business models of the past simply do not work anymore; Bring Your Own Device, Machine-to-Machine Communication and Self Service result in new challenges for company-internal IT, particularly in terms of flexibility, innovative power and ability to adapt to changes.

In addition, customers and employees are becoming more and more autonomous when selecting and using hardware and software. They want to join the conversation and co-design. “This consumerization, i.e. the reversal of the traditional top-down approach to IT innovation, is one major result of this development.”5

The potential of consumerization is massive. IT organizations can contribute to this by not restraining this innovative potential and by developing methods of attaining this valuable user feedback. One important building block is to identify strategical shortages and possible challenges in switching from the old IT world to the embedded world, and to face these challenges with adequate means.

The Internet of Things is much more than hype. It will transform companies; it will transform the way new business ideas and digital products are created. Users become developers, and companies can make use of this new innovative power by providing supporting platforms and organizational boundary conditions. Or by integrating ideas  and business models created by startups.

 

Notes

[1] Zaslavsky, A. et Al.: Sensing as a Service and Big Data. ICT Centre, The Australian National University, Canberra, 2014.

[2] Higginbotham, S.: Sensor Networks Top Social Networks for Big Data. https://gigaom.com/2010/09/13/sensor-networks-top-social-networks-for-big-data-2/ (11.10.2015)

[3] http://newsroom.cisco.com/de/feature-content?articleId=1208342

[4] Car IT, Mobilität 3.0, Media-Manufaktur GmbH: http://www.car-it.com/heikle-datenstroeme-wem-gehoeren-die-daten-aus-dem-fahrzeug/id-0038906

[5] Samulat, P.: Vom Verschwinden der IT-Organisation im Unternehmen. Business Value of IT – mehr als der nächste Hype? Peter Samulat, Hemme, 2014, S. 32

Dr. Peter Samulat studied Electrical Engineering at the Bundeswehr Hamburg University and has a completed doctorate from the TU Berlin. He currently works as an Executive Consultant IT Strategy & Transformation at Elleta München GmbH where he focuses on the fields of Hybrid Cloud, IT Transformation and the Business Value of IT.

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