Business Insider IoT Report

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Business Insider report on Internet of Things. Contains lots of summary information from other research.

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Business Insider IoT Report

  1. 1. Here Comes The Internet Of Things Ross Rubin | October 23, 2013
  2. 2. Here Comes The Internet Of Things Ross Rubin | October 23, 2013  The Internet Of Things, or IoT, represents a major departure in the history of the Internet. The Internet is moving beyond the rectangular confines of smartphones and tablets and helping to power billions of everyday devices, from parking meters to home thermostats.  The numbers being forecast for the IoT are truly mind-boggling. Since it will come to encompass a layer of devices and apps across industries, it will account for an increasingly huge number of connections, 1.9 billion devices today, and 9 billion by 2018, according to BII estimates.  But the really valuable applications may be enterprise uses such as the auto insurance industry’s early use of monitors to charge motorists only for the amount of time they actually drive. Market research and tech firms agree that the IoT, especially enterprise uses, will come to drive trillions in economic value as it permeates consumer and business life.  On the consumer side, the IoT has already given rise to an ecosystem of startups marketing home automation, lighting, heating, and home security systems connected to the Internet.  The main obstacles to the quick rollout of the IoT are still-immature and fast-changing technologies and standards, as well as the massive scale and uncertain ROI of investment in IoT-type projects. 2 Copyright © 2013, Business Insider, Inc. All rights reserved.
  3. 3. Executive Summary The past five years have seen the rise of the smartphone as the main connected device we rely on for everyday tasks. The tablet followed as a kind of second act, sharing mobile operating systems and a touch interface with the smartphone. The next generation of devices will innovate further and take the Internet beyond the rectangular confines of handsets and tablets. The Internet of Things, or IoT, refers to a class of devices that — according to a definition by the McKinsey Global Institute — “can monitor their environment, report their status, receive instructions, and even take action based on the information they receive.” Unlike smartphones and tablets, IoT objects often have a limited user interface and often exist solely to collect data and feed it to other devices. 3 Copyright © 2013, Business Insider, Inc. All rights reserved.
  4. 4. The idea is that IoT devices are ubiquitous and offer an additional layer of functionality, efficiency, and convenience to everyday experiences. The IoT transforms once-inert objects, tools, and appliances into a category of sensor-laden intelligent devices that can communicate with the other gadgets in our lives, particularly our PCs, smartphones, and tablets. Once the IoT is grasped, it’s easy to imagine whole categories of consumer and business applications that would fit within the IoT, which might also be described as “connected life,” including building and home automation, heating and air conditioning, traffic management (e.g., smart traffic lights), senior care, security systems, Internet-connected cars, and Internet-connected billboards. What devices will be used to manage the IoT? There will be some dispersal of user interfaces. For example, our refrigerators and thermostats might come to include a touch screen. But it’s very likely that smartphones and minitablets will become de facto remote 4 Copyright © 2013, Business Insider, Inc. All rights reserved.
  5. 5. controls for the IoT devices in consumers’ lives and serve as the hub for managing their settings and the data they produce. Estimates for total devices connected to the Internet by 2020 range from 22 billion to 75 billion. That’s up from around 10 billion today. Much of the growth will be driven by IoT-type devices and applications. The estimates for IoT market value are massive, though they should be taken with a grain of salt. It’s a question how useful these estimates are, since by definition the IoT will be a diffuse layer of devices, sensors, and computing power that overlays entire industries. But, according to estimates from McKinsey and Cisco, specific IoT categories such as connected marketing and advertising could drive somewhere in the vicinity of $1 to $2 trillion in total economic value by 2020. Click here to download the charts and data for this report in Excel » Gauging The Present And Future Size Of The IoT The IoT trend will drive the number of Internet-connected devices going forward. In fact, the IoT will soon come to account for a plurality of Internetconnected devices, and by 2018 it will be roughly equal to the number of smartphones, smart TVs, tablets, wearable computers, and PCs combined. The Internet of Things will account for an increasingly huge number of connections, 1.9 billion devices by year-end, and 9 billion by 2018, according to BII estimates. Value in the IoT will follow a “trickle-up” progression. Ericsson has depicted this happening in three waves: It has begun by connecting 5 Copyright © 2013, Business Insider, Inc. All rights reserved.
  6. 6. devices that serve consumers, it will expand into connecting devices for enterprises, and finally come into widespread use throughout government and society. Forrester has found that most IT executives have a positive perception of IoT and plan to deploy in the coming years. How big will the IoT become? In terms of total economic value, outfits like the McKinsey Global Institute and Cisco project numbers in the trillions. That’s because as its name implies, the IoT will be a kind of layer of devices and technology, rather than a stand-alone industry or category. To lend some perspective to the numbers, consider that global GDP is somewhere in the neighborhood of $70 trillion. Cisco believes the IoT will create over $14 trillion in value over the next ten years, as it helps global corporations and organizations become more efficient and provide better services and products to their customers. This isn’t a revenue number. Rather, it’s a calculation 6 Copyright © 2013, Business Insider, Inc. All rights reserved.
  7. 7. of the overall possible economic benefits to be gained from the growth of the IoT. Machina defines “Connected Life Market Revenue” as the sum of all of the revenue accruing from the sale of connected devices and services as well as the related services that are provided over those devices, such as pay-as-you-drive car insurance. They see this revenue ballooning to $2.5 trillion by 2020. According to Markets and Markets, the Internet of Things or machine-to-machine market was worth $44 billion in 2011, and is expected to grow to $290 billion by 2017. There’s evidence that excitement for the IoT is starting to build. For one, there has been some serious merger and acquisition activity in this space. Some relevant IoT-related deals have included Sierra Wireless’s acquisition of Wavecom, Cinterion’s purchase of Gemalto, and Telit acquiring Motorola’s M2M business. Examples Of IoT Devices And Applications In the consumer space alone, many product categories have already crossed over into the IoT, including:  Consumer electronics products spanning alarm clocks, digital video cameras, home audio systems, and speakers.  Kitchen and home appliances such as refrigerators. washers and dryers, and coffee makers.  Lighting and heating products, including bulbs, thermostats, and air conditioners.  Safety and security monitoring devices such as baby and assisted living monitoring systems, smoke detectors, fire hydrants, cameras, sensor-equipped drawers and safes, and home alarm systems. Machina and the GSM Association believe that there will be $270 billion in savings by 2020 7 Copyright © 2013, Business Insider, Inc. All rights reserved.
  8. 8. thanks to sensors and devices that enable the elderly to live independently as opposed to care homes.  Musical instruments.  Robots.  Toys ranging from desk-friendly remote-controlled mini-cars to hovering quadricopters.  Health and fitness products that measure exercise, steps, sleep, weight, blood pressure, and other statistics. In the world of business-to-business and government, IoT use cases begin to proliferate even more. Again, while many of these applications do not directly relate to mobile computing, it’s likely that many will have some facet of their management integrated with mobile devices and applications:  Connected advertising and marketing: Cisco believes that this category (think Internet-connected billboards) will be 8 Copyright © 2013, Business Insider, Inc. All rights reserved.
  9. 9. one of the top three IoT categories, along with smart factories, and telecommuting support systems.  Intelligent traffic management systems. Machina research, in a paper prepared for the GSM Association, sees $100 billion in revenue by 2020 for applications such as tolltaking and congestion penalties. A related revenue source will be smart parking-space management, expected to drive $30 billion in revenue  Waste management systems. One innovation has been equipping garbage cans and recycle bins with RFID tags that allow sanitation staff to see when garbage has been put out. By doing this, the city of Cleveland was able to eliminate 10 pickup routes and cut operating costs by 13 percent. In Cincinnati, residential waste volume fell 17 percent and recycling volume grew by 49 percent through use of a “pay as you throw” program that penalizes those who exceed waste limits.  Smart electricity grids that adjust rates for peak energy usage. These will represent savings of $200 billion to $500 billion per year by 2025, according to the McKinsey Global Institute.  Smart water systems and meters. The cities of Doha, São Paulo, and Beijing have reduced leaks by 40 to 50% by putting sensors on pumps and other water infrastructure.  Industrial uses including Internet-managed assembly lines, connected factories, and warehouses, etc. Machina Research, in a paper prepared for the GSM Association, sees 10 categories of applications driving 60 percent of “connected life” revenue by 2020 driven by IoT. These include the connected car, traffic management, and building automation. 9 Copyright © 2013, Business Insider, Inc. All rights reserved.
  10. 10. Related Markets For some, the IoT includes several fast-emerging categories of Internet-connected devices. However, in our own estimates for the IoT, we consider these markets to be separate.  Cars and other vehicles. Connected cars are expected to account for 90 percent of passenger cars, up from 10 percent today.  Connected TVs.  Watches and other wearable computers.  While wearables might be broken out as a separate category as we do, it is also useful to think of them as a continuous category with IoT, since activity trackers might integrate with hardware such as smart scales, and child or senior citizenmonitoring gadgets might be wearables. 10 Copyright © 2013, Business Insider, Inc. All rights reserved.
  11. 11. IoT does overlap with many other technology fields, including telemetry, telematics, machine-to-machine (M2M) communication, smart grids, intelligent transportation systems, and wearables. Here are a few definitions that might help:  M2M is simply communications between machines, although the term is usually applied to systems of machines connected together to share data and improve overall operational efficiency, as might be the case with factory machines or utility meters. In the context of IoT, one can imagine a system of sensors in a home that communicate with smart windows and other appliances to guarantee energy efficiency.  Telemetry is simply the measurement at remote points for transmission to a central processing station. In the context of IoT it might apply to measurement of a refrigerator’s different drawers so that a homeowner might know if their perishables — ice cream, wine, etc. — are being chilled at the right temperature.  Telematics is the remote tracking and control of a moving device coupled with control of that same device. The term usually refers to cars or other road vehicles that transmit information wirelessly, allowing for settings or movement itself to be controlled remotely in real-time. Telematics would likely be used in any self-driving car, in addition to in-vehicle sensors. Just as the smartphone took lessons from the PC in terms of user interface and functionality, so will the next generation of IoT devices take lessons from the smartphone in terms of connectivity standards and applications. The Relationship Between The IoT And Other Device Types Much of our early experience with IoT will come from transforming products that never communicated digitally into ones that do. 11 Copyright © 2013, Business Insider, Inc. All rights reserved.
  12. 12. From a consumer perspective, examples include adding Internet connectivity and some intelligence to such ordinary items as Fitbit’s pedometers, Nest’s thermostats and smoke alarms, and Pebble’s smart watches. And it’s not just startups. Major appliance vendors have folded Internet connections and consumer-friendly software interfaces to traditional home appliances. There’s LG, with its smartThinQ refrigerator, washer/dryer, and oven. Then there’s Friedrich, with its Kühl air conditioner. SmartThings has built its entire business model around easily deployable sensors, monitors, and apps that allow consumers to run everything in their home through their smartphone. It raised a $3 million seed round late last year. Other IoT applications and devices stem from taking things that were already controlled by proprietary systems, and creating the software and hardware hooks that allow them to communicate, via the Internet or Bluetooth, with smartphones and tablets. One example would be remote unlocking and starting capabilities for cars, such as Directed Electronics’ Viper SmartStart offering. Indeed, much of the domain that is considered the “smart home” or “connected car” are more usefully seen as subsets of IoT. It’s also helpful to think about IoT devices as a new device category layer that exists as the connective tissue between the static nonconnected world, and the Internet-driven world of PCs, tablets, and smartphones. One open question is just how directly connected to the Internet IoT devices or tags need to be, in order to be considered part of the category. For example, some consider the use of RFID tags and even bar codes to be components of the IoT, since they can be scanned into 12 Copyright © 2013, Business Insider, Inc. All rights reserved.
  13. 13. Internet-driven systems to track merchandise in a showroom, or products in a warehouse. But they don’t have connectivity embedded into them, so many analyses would leave them out. Understanding The Things In The Internet Of Things There are three basic building blocks to the “things” in the IoT. Each “thing,” whether a smart refrigerator or Internet-connected smart meter, would have three basic features that would define it as part of the IoT:  Sensors: IoT devices and systems include sensors that track and measure activity in the world. An example is the system of Smartthings’ open-and-close sensors that detect whether or not a drawer, window, or door in your home is open or closed.  Connectivity: Internet connectivity is either contained in the item itself, or a connected hub, smartphone, or base station, while the IoT system is usually connected to the Internet and the cloud.  Processors: Just like any computing device, IoT devices will contain some computing power “under the hood,” if only to be able to parse incoming data and transmit it. These characteristics all apply to today’s smartphones, of course, but there are several characteristics that differentiate many IoT devices — particularly remote ones — from today’s smartphones.  Energy-efficiency: Many devices in the IoT may be difficult, costly, or dangerous to access for charging or battery replacement. One may even think of the Mars Curiosity Rover as an example of such a device. Therefore, they may need to be able to operate for a year or more unattended or be able to wake up only periodically to relay data.  Cost-effectiveness: Objects that contain sensors may need to be distributed broadly, as in the case of sensors in food 13 Copyright © 2013, Business Insider, Inc. All rights reserved.
  14. 14. products in supermarkets that would indicate if the item has spoiled. They need to be relatively inexpensive to purchase and deploy.  Quality and reliability: IoT devices may need to operate in harsh environments outdoors and for extended periods of time.  Security: IoT devices may need to relay sensitive or regulated information such as health-related data. The Internet of Things raises the stakes on cost and durability. It’s not inconceivable that innovation pushed along by the need for resistant IoT systems makes its way back into the smartphone and tablet ecosystem. Weaving The Internet Of Things Together It’s one thing for a standalone device to communicate directly with an app on a smartphone or even a cloud service. But a diffuse network of devices ups the challenge of collecting data, maintaining it, and transmitting it. 14 Copyright © 2013, Business Insider, Inc. All rights reserved.
  15. 15. Service providers will play a critical role in the Internet of Things. One of the great IoT opportunities is in functioning as a service provider, serving as the conduit between the device and the consumer. In other words, who will be the ISPs of the IoT? Will it be telecom companies, or will there be a range of different specialists supporting their more focused IoT efforts?  One example in the latter category includes Progressive Auto Insurance, which offers usage-specific insurance rates based on behavioral data gleaned from its Snapshot module. The device lives on the car, and allows Progressive to track how much its customers actually use their cars. Machina Research and the GSM Association believe that $210 billion is expected to be spent on connected car insurance policies by 2020, with another $35 billion in savings generated by increased efficiency and customer service.  Security companies such as ADT and Vivint are also stepping up their service provision across a range of products. 15 Copyright © 2013, Business Insider, Inc. All rights reserved.
  16. 16.  The telecommunications companies are also getting in the game. AT&T is seeking to provide a more all-encompassing IoT service, with its Digital Life offering now rolling out nationally, which collects data from, and can often control, security cameras, locks, a host of sensors on doors and windows, thermostats, and lighting. It’s early days yet, with the opportunity for an IoT-focused service provider to carve out a space for itself across IoT categories. Barriers To The IoT — Emerging Standards As noted earlier, there are a wide range of current technologies that can go into bridging the Internet of Things, including bar codes, NFC, Bluetooth, Wi-Fi and 4G, and a number of more obscure standards from the home automation and industrial markets. But others are being developed. The truth is that standards have not matured to the point that there’s a widely accepted framework standard in place, and so future development of the IoT will hinge on the standards question coming together. A particularly interesting challenge lies in devices that may need to transmit data infrequently or remotely. Here are some of the newer standards:  Bluetooth Smart: This standard is already here and has been supported by Apple for some time. However, it is just starting to be adopted by Android proper and Windows Phone. Bluetooth Smart is a very low-power version of Bluetooth, originally called WiBree, that enables devices to communicate with each other without advance planning. Many fitness devices such as the latest Fitbit One use Bluetooth Smart. o The technology is particularly noteworthy because it is the foundation of a new feature being supported by 16 Copyright © 2013, Business Insider, Inc. All rights reserved.
  17. 17. Apple called iBeacon, which are able to send messages to iOS devices about where they are. Using iBeacons, a retailer could send an iPhone information about products in a particular part of the store as customers pass by, and perhaps even enable the user to purchase them without having to go through the cloud. Companies that are already offering iBeacons include Estimote and Roximity.  802.11ah: This proposed extension to the Wi-Fi standard would be focused on low-power devices and operate in the crowded 900 MHz spectrum used by older cordless phones.  802.11p: This standard is being promoted for use within vehicles allowing them to communicate with road sensors and other vehicles at high speeds, as shown in this video.  Weightless: Weightless proponents see the need for a new protocol for long-range power. It aims to be a global standard designed to operate in the much-discussed but tricky-to-use “white space” between TV broadcast signals.  AllJoyn: Developed by Qualcomm, AllJoyn is not tied to a particular kind of network. Rather, it is something of a universal language to enable devices to query and control each other. At its annual developer forum, Intel announced Quark, a low-power processor intended to be included in wearables and other objects. Other Barriers To The IoT In addition to the standards question, there are other potential inhibitors to the IoT. These include the scale involved in creating the infrastructure and “big data” arrays needed for the collection and analysis of IoT devices. There’s also a mixed bag of government policies and regulations that may impinge on the development of the IoT, including the increasing emphasis on data privacy in the European Union. 17 Copyright © 2013, Business Insider, Inc. All rights reserved.
  18. 18. Finally, the ROI of specific IoT initiatives isn’t always easy to discern, and investment might be stymied until a few IoT categories begin establishing a clear track record of creating value for companies and society. THE BOTTOM LINE  The Internet of Things, or IoT, represents a major departure in the history of the Internet.  The numbers being forecast for the IoT are truly staggering.  Market research and tech firms agree that the IoT, especially enterprise uses, will come to drive trillions in economic value as it permeates consumer and business life.  On the consumer side, the IoT has already given rise to an ecosystem of startups marketing home automation, lighting, heating, and home security systems connected to the Internet.  The main obstacles to the quick rollout of the IoT are stillimmature and fast-changing technologies and standards, as well as the massive scale and uncertain ROI of investment in IoT-type projects. 18 Copyright © 2013, Business Insider, Inc. All rights reserved.
  19. 19. About BI Intelligence BI Intelligence is a new subscription research service from Business Insider that provides in-depth insight, data, and analysis of the mobile industry. We publish notes and in-depth reports about the business of the mobile industry as well as an exhaustive library of charts and data that will help you stay on top of the key trends in the mobile ecosystem. We help our subscribers make smarter strategy decisions. To learn more or to sign up for a free trial of the service, please visit intelligence.businessinsider.com. Analysts BI Intelligence has an experienced team of analysts led by Henry Blodget, CEO & Editor-in-Chief of Business Insider. BI Intelligence’s team of dedicated analysts have deep analytical and industry experience, and work with the Business Insider’s 50+ journalists covering specific verticals, such as technology, advertising, and strategy, to produce unique insight and analysis on the mobile ecosystem. Copyright © 2013 Business Insider, Inc. All Rights Reserved. Proprietary and Confidential Property of Business Insider, Inc. Licensed for Use By BI Intelligence Subscribers Only. Access to and use of this proprietary and confidential information is limited by the terms of conditions. 19 Copyright © 2013, Business Insider, Inc. All rights reserved.

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