Skip to main content
Mar 15 2015

The IoT: The next step in internet evolution

The “Internet of Things” (IoT) has become the next step in internet evolution. It harnesses the intelligence of billions of sensors and connected devices that collect big data to make decisions.

FROM THE WWW TO THE IOT

Over the past decades, the internet has evolved from a static repository of interlinked hypertext documents to a dynamic universe of networked humans, machines, and applications.

The internet of content In a sense we could say that the real internet, as we all use it today, started in the early 90’s with the definition of HTTP and the creation of the World Wide Web. Throughout this 1st phase, the web was static and mainly used to publish and share content.

The internet of services Then, user created content, XML, web services, and a broad range of commerce, productivity, and collaboration tools led us forever away from the static pages of the early web sites. This is when we started talking about the Web 2.0.

The internet of people With the availability of affordable mobile broadband access, the proliferation of smartphones and tablets, and the booming popularity of social network apps came a 3rd phase in internet evolution. That’s where we are today.

The internet of things And now, we are at the beginning of the next revolution in the way we’re using the internet. A revolution that is enabled by machine-to-machine (M2M) communications.

Daily life changes when everyday objects connect and become part of information systems and end-user applications, and create an unlimited, ubiquitous, and connected universe in which machines and humans interact to make our society safer, greener, and healthier.

So, it’s not really a big surprise that the Internet of Things was on top of the latest edition of Gartner’s Hype Cycle for Emerging Technologies, with an anticipated 5 to10 year period to reach full maturity.

AN UNPRECEDENTED OPPORTUNITY

The Internet of Things is emerging as an unprecedented opportunity for many players in the communications, information technology (IT), and consumer electronics industries. Most analysts acknowledge this is the right time to create and commercialize new devices and applications. And to change the way we live and work through new and innovative services.

  • IDC expects the global IOT market to triple from US$1.9 trillion US dollar in 2013 to 7.1 trillion in 2020, with 28.1 billion ‘things’ connected[1].
  • Gartner forecasts that 4.9 billion connected things will be in use in 2015, up 30 percent from 2014, and will reach 25 billion by 2020. They observe that “the Internet of Things has become a powerful force for business transformation, and its disruptive impact will be felt across all industries and all areas of society”
  • Gartner also says that a typical family home could contain more than 500 smart devices by 2022, while BI Intelligence foresees over 100 million connected cars on the road in 2020[2].

Although futurists have been talking about intelligent refrigerators and smart cars for the past decades, today market and technology have converged, and are making the IOT a concrete business opportunity:

  • Lower hardware costs and ubiquitous mobile access are enabling more intelligence and seamless connectivity. Adding a few sensor chips or a wireless connectivity module to a new product or device is not going to raise its price dramatically.
  • The proliferation of mobile devices and M2M endpoints is creating a customer base for deploying new applications. A high-end smartphone contains about a dozen sensors, and a modern car may well have a hundreds on board.
  • Short range wireless technologies like RFID, Wi-Fi, Zigbee, Bluetooth, etc., enable payment or remote control of daily life objects at home, in the city, in your car, at the office, etc.
  • Abundance of generated data, combined with algorithms and tools to analyze this information, and a growing understanding of how collective data can be used, adds greater efficiency to our lives.
  • In most developed countries, the market for person-to-person communication devices and services is getting saturated. Machine-to-machine communications provides a foundation for marketing new devices and providing new services.
  • Smart citizens, consumers, and enterprise users are looking for new services and applications to enrich the way they live, work, commute, shop and care for their community, health, and environment.
  • Network operators, enterprises, utility providers and public administrations are looking to transforming the way they interact with their customers, suppliers, and partners.

A LONG TAIL OF APPLICATIONS

For those who remember, the “long tail” model was introduced many years ago to describe the creation and distribution of video content. With a few Hollywood blockbusters on the left end, and a massive amount of user generated YouTube style movies in the long tail…

The same model is also valid for characterizing the apps that all of us have installed on our iOS or Android tablets and smartphones today, and it looks like a good model to segment machine-to-machine applications, too.

In search of the killer app It’s very likely that over time a few “killer” apps will emerge, potentially with hundreds of millions devices connected. We could call them the Facebooks of the Internet of Things. Though it is maybe still too early to predict which ones will be successful and which ones won’t.

Addressing the long tail There will also be a very long tail of IoT devices and applications. Consumer gadgets such as the smart toothbrush or the connected dog collar, or ‘hobbyist’ developments on Arduino boards and the like.

Providing value to verticals From a business perspective, however, the most interesting segment is the middle one. In the short term, the most lucrative opportunities will be in vertical industry segments, where M2M applications will contribute to productivity, cost savings and/or customer experience transformation.

A 2013 global survey carried out by TechRepublic and ZDnet[3] identified energy, ICT monitoring, and transportation as the most popular M2M domains. To be successful in M2M business today, a good segmentation and a clear understanding of an industry sector’s specific requirements, as well as a compelling value proposition are important.

The same report also revealed that developing new business opportunities is a key decision driver for M2M implementation. Enhancing existing products/services and faster response times are also top priority. Cost savings only came in a distant 4th, with less than half of respondents rating it important or very important.

MONETIZING THE IOT

Overall, M2M business is characterized by very small revenues per connection, and even smaller margins. According to ABI Research, about 20% of the IOT value chain is in “connectivity”, while 77% of revenues are characterized as “Value Added Services”, including platform revenues, device management, device connectivity, cloud services, application development, system integration, analytics, and professional services.

One of the often underestimated challenges of building a sustainable M2M business is dealing with a complex and highly fragmented ecosystem, in which sensor, SIM card, module and device vendors, network and platform suppliers, application developers, system integrators, connectivity and service providers are contributing to the value chain.

Communications service providers (CSP) may play different roles in this chain, complemented by partners. Their M2M offering may range from connectivity and SIM card wholesale, over device and application onboarding, to solution integration and customization for specific segments or customers.

In this developing business environment, M2M services and solutions are sold directly by service providers as well as indirectly through (or with) partners, such as application developers, vertical solution providers, or system integrators[4][5].

To be successful, service providers will need to conduct a thorough analysis of their strategic priorities and capabilities before determining their best route-to-market for every aspect of the supply chain. As well as look for innovative business models and partnerships to make the business case flow.

DON’T FORGET THE NETWORK

As discussed in this article, the Internet of Things is emerging as an unprecedented business opportunity for many players in the communications, information technology and consumer electronics industries. Although today’s media focus is mainly on devices and applications, it has to be well understood that the network can “make or break” this next step in the evolution of the Internet.

A next article in this series will explore the challenges and opportunities the IoT in relation to tomorrow’s network.

Footnotes

  1. [1] "Worldwide and Regional Internet of Things (IoT) 2014–2020 Forecast: A Virtuous Circle of Proven Value and Demand”, IDC, 2014
  2. [2] "The Internet of Everything: 2015”, BI Intelligence, December 2014
  3. [3] "71 percent say M2M is about developing new business opportunities”, Global Survey by ZDnet and TechRepublic, 2013
  4. [4] “Operators’ Strengths in M2M and IoT may Lie Beyond Ownership of Network or Spectrum Assets”, Analysys-Mason article, November 2014
  5. [5] “Telecoms Operators need to Maintain Relevance in M2M/IoT by Building on their Strengths”, Analysys-Mason article, January 2015

To contact the author or request additional information, please send an email to networks.nokia_news@nokia.com.

About Marc Jadoul

Marc Jadoul leads IoT Market Development at Nokia. In this role he is evangelizing IoT technologies and applications, and promoting Nokia’s credentials as a key player in this rapidly growing market.

Marc is a passionate B2B storyteller, blogger and public speaker, and an ardent advocate of Albert Einstein’s dictum “if you can't explain it to a six year old, you don't understand it yourself.”

Tweet me at @mjadoul

Article Tags