Plug into business opportunities of a connected world

There are 1.4 billion smartphones and six billion other devices in the world today, all connected, all polling and publishing to the internet continuously, spawning huge new opportunities for insight and action from big data. That might sound significant, but compared with what is coming as engineering and vendors conflate their expertise, it is clear the Internet of Things (IoT) is barely out of its infancy.

Researchers and vendors were one-upping each other all last year in their predictions about the likely scale of the Internet of Things by 2020. Cisco’s initial pitch for its version – dubbed ‘the internet of everything’ – suggested 50 billion devices. This was quickly gazumped by French research outfit iDate, which weighed in with a prediction of 80 billion.

Not to be outdone, Intel recently puts its stake in the ground with an eye-popping suggestion of 200 billion connected devices by 2020.

By comparison, Gartner’s estimate of 26 billion units (excluding smartphones and tablets) seems positively parsimonious; yet this figure still represents a 30-fold increase from its 2009 estimate of fewer than a billion devices.

Gartner analyst Kristian Steenstrup says: “The Internet of Things is a ridiculously broad term. Everyone is latching on to it. The simplest way to talk about it is in the context that as you get automation of devices and the connectivity of devices, more things can happen.”

For its part, Gartner defines the Internet of Things as the network of physical objects that contain embedded technology to communicate and sense or interact with their internal states or the external environment.

All those devices are expected to generate incremental revenue exceeding US$300 billion, mostly in services in 2020 and will also result in US$1.9 trillion in global economic value-add through sales into diverse end markets. One of the groups best placed to reap this windfall are the resellers and system integrators who roll the technology out into the field. But more on that later.

The other barometer for a technology’s market position is awareness, and by this measure the Internet of Things is gaining traction. In January, Wired reported how Coca-Cola had connected its soda fountains – the type you find at the cinema or Hungry Jacks. The obvious reason is to process credit cards and mobile payments, but Wired writer Klint Finley suggests it could also “open a new frontier in collecting real-time data about customer behaviour”, such as pre-emptive stock management.

In another development with a particularly local twang, 320 great white sharks were electronically tagged in Western Australia so they would fire off a tweet whenever they swam within a certain distance of popular beaches.

While quirky applications and consumer smart devices attract all the headlines, the reality is that the growth of the industrial internet completely changes the game.

For instance, according to Steenstrup’s colleague Peter Middleton, research director at Gartner, by 2020, the number of smartphones, tablets and PCs in use will reach about 7.3 billion units. “In contrast, the IoT will have expanded at a much faster rate, resulting in a population of about 26 billion units at that time.”

The applicability of IoT technology is ubiquitous. It will revolutionise areas such as advanced medical devices; factory automation sensors and industrial robotics; sensor motes for increased agricultural yield; and automotive sensors and infrastructure integrity monitoring systems for diverse areas, such as road and railway transportation, water distribution and electrical transmission according to Gartner.

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Gartner is not alone in its assessment of the economic impact.

In its 2013 report identifying the most disruptive technologies for the next 12 years, management consultants McKinsey & Company suggested that by 2025, the IoT would unlock as much as $6.2 trillion in economic activity. McKinsey’s assumptions for scale match the conservative outlook of Gartner. It estimates 50 billion devices by 2025, which is consistent with the growth Gartner is assuming. However, McKinsey’s upper limit for the potential is absolutely staggering: one trillion devices.

The most recent survey in the Australian and New Zealand market was conducted by the Information Systems Audit and Control Association (ISACA) as part of its global Risk/Reward Barometer.

According to Jo Stewart-Rattray, director of information security and IT assurance at accountancy firm BRM Holdich and international director of ISACA, some 52 percent of Australian and New Zealand organisations already have plans to capitalise on the increase of connected devices. Almost as many – 47 percent – say they have already been impacted by such technology.

Roughly a third of IT managers say they have already experienced better access to information, leading to improved services, while one in five suggest they have already achieved greater efficiency, lower costs and increased customer satisfaction.

ISACA president Tony Hayes says: “Organisations need to develop proactive strategies to ensure they benefit from the increase in connected devices. However, increased connectivity also opens up a number of security risks, both externally and internally. Organisations need to determine how they will protect the data shared by their devices, while also measuring and communicating the benefits of increased connectivity.”

The findings are consistent with recent research by Telsyte into the adoption of machine-to-machine (M2M) technology in Australia, says managing director Foad Fadaghi.

According to Telsyte’s research, more than 60 percent of Australian business and government organisations are either using or looking at M2M solutions, and there is growing interest in applying the technology. However, Australian businesses are concerned about cost of solutions and security. This will have to be addressed before we see higher adoption.

Security remains an issue. Verizon, for instance, is spending increasing amounts of time dealing with the partnership with its giant industrial clients the world over, says Sean McGurk, global managing principal, Critical Industrial Control Systems Cybersecurity at Verizon.

During his time with the US Department of Homeland Security, McGurk managed the control system security program. Legacy systems were a particular concern then, says McGurk, and remain so today.

“We talk about putting defence and depth in place. These systems still need to connect and they need to be interoperable but there are technologies and procedures that we can use to add layers of defence to the existing infrastructure to better be able to protect them from intrusion and manipulation.”

Next: Impediments to growth

There are other impediments to adoption as well. McKinsey says these include a lack of standards, a price-technology curve that needs to accelerate to ensure mass adoption, and regulatory and privacy concerns.

On this last point, HDS chief technology officer Adrian De Luca suggests there is definitely a social element that needs to be addressed. “The possibilities are fantastic but the Internet of Things initially will be based on mechanical machines and social infrastructure where it doesn’t necessarily deal with people’s personal information.”

While the risks are well understood, the possibilities and the opportunity are simply too compelling for most. According to the ISACA study, “When asked about the risk and rewards of the Internet of Things for enterprises, the majority of respondents (45 percent) believe the benefits outweigh the risks. A further 31 percent believe the risks and benefits are equally balanced and one-quarter think the risks outweigh the benefits.”

Furthermore, 53 percent of those surveyed believe greater internet connectivity is of more benefit than risk to consumers, although respondents said they were aware of the risks.

GE is one of several mega vendors in the industrial space that Gartner defines as a leader in the field. While the rest of the world is still waking up the potential of the Internet of Things, this is already a matter of day-to-day practicality for GE and its clients.

A GE spokesperson tells CRN: “A great example of this is our work with the New Zealand government and aviation authorities, including Queenstown Airport to dramatically increase their overall efficiency.”

By reducing fuel costs, increasing the general efficiency of the airport and assessing, analysing and dealing with a range of different functions impacting the overall sustainability of the facility, the growing regional transport hub is reaping the benefits.

“Delays cost airports and airlines real money every day. When we began working with Queenstown Airport on performance-based navigation to address their navigation efficiency, the average delay in both aircraft departure and arrival times was six minutes and 15 seconds. Using a range of measures and GE performance-based navigation and remote monitoring technology, the monthly average delay now sits at just 32 seconds,” says the spokesperson.

In addition, the monthly average delay for arrivals has been cut by 531 minutes, while for departures, it has been a dramatic 2,173 minutes.

Resellers

For the reseller community, the industrial applications probably provide the most immediate opportunities, says Gartner’s Steenstrup.

“To an extent, the ubiquity of smartphones is a form of the IoT in that you are connected, you have access to information and companies can access you by your devices. If you go further down the consumer path, you will see lots of automation coming into consumer devices like cars and home appliances.”

For instance, Belkin has trumpeted its move into home automation in recent times. The vendor, more well-known for its peripherals, is making a big play for this lifestyle technology sector with light switches accessible from smartphones, webcams that can be viewed via apps and motion trackers that can automatically post to Twitter accounts. The company is using nationwide franchise Jim’s Electrical as its integration partner.

The industrial internet – what Gartner calls operating technology – has more commercial interest for vendors and channel, says Steenstrup. “That is where there is going to be more participation and more activity. And probably more money being spent on projects.”

Infoready, which came 11th in the 2013 CRN Fast 50, is already exposed to the Internet of Things due to its capabilities in the engineering and telco sectors. Managing director Tristan Sternson says: “We are seeing a lot more interest mostly in the data and analytics space. Companies are looking at getting the data generated across their organisations and then being able to utilise that in their general operations. He says the best examples he has seen are the utilities companies, some of which are able to use data coming out of the network in near real time to drive the KPIs of everybody from the CEO down to the employees on the shopfloor.

“That’s everything from being able to pull data into reporting formats, being able to manage performance and to get a minute-by-minute perspective on how they are performing. Then they drive that into devices for mobility so that when they are on the road they have access to all the information required to manage performance. There is a real trend for that,” says Sternson.

There is also a strong demand to implement for preventative maintenance, he adds. “By understanding why things fail and predicting when it is going to happen, we can make preventative changes on their fly.”

Often the percentage improvement from IoT technologies are small single-digit increments of efficiency, but as the companies implementing the solutions are operating at massive scale over long periods of time, the dollar benefits add up in the long run.

The IoT could be a matter of looking after the pennies so the pounds will look after themselves. Mining companies are a good example. According to HDS’ De Luca, some miners are looking to achieve small gains to their supply chain; due to their volume and scale, a two to five percent improvement over 30 years would represent millions of dollars of benefit.

“A lot of use cases are happening in highly competitive industries. It is about margin control, and it’s either about maintaining or growing customers. Also it is often volume dependent. Getting that extra two or three percent means a lot,” says De Luca.

Future benefits

The penetration of low-cost sensors on everything, everywhere and new technologies capable of monitoring, collecting and analysing this information are already disrupting industry and driving substantial economic and productivity benefits, according to GE.

The spokesperson tells CRN: “In the years to come, we see huge opportunities in connecting machines and the internet with industrial service technologies to continue to drive efficiencies across aviation, mining, manufacturing, healthcare and energy.”

GE is investing heavily in the industrial internet, says the spokesperson. “We established a $US1 billion global software centre in Silicon Valley that focuses on managing the interconnection, data management and automation of digital information through software to transition our huge services business from a ‘break-fix’ model to a ‘predict-and-prevent’ model. This will mean our customers will have no unplanned downtime and it will help them be more competitive and productive into the future.”

Cost drivers

De Luca says the falling costs of embedded sensor technology has plummeted compared with 10 years ago, as has the cost of traditional computing technologies like storage. But of course all that extra capability and infrastructure has created a set of new issues.

“We can collect of lot of information but it’s useless unless we can analyse it in real time or apply the best process to it. We [as an industry] still don’t have all the ingredients to make it successful. We still need very clever people who understand what to do with the information. The world is just not producing enough of those people today.”

This is an issue that McKinsey & Company covered extensively in its report into the Internet of Things.

“Companies that hope to reap the benefits of operational improvements and use the Internet of Things to deliver new kinds of customer service and higher-quality products will face an array of technological and organisational challenges… Every department within an organisation, from production to logistics to customer services and sales could potentially receive real-time data about how the company’s products are being built, distributed, sold and used. Few organisations are ready to deal with the sheer amount of data, and have personnel able to do so.”

Systems integration is another critical issue according to Martin Wildsmith, director of CRN Fast50 company Sable Systems.

“For the large industrial companies with massive resources, it’s not a problem,” says Wildsmith. But in order to really take off in the mid tier, many of these approaches need to be productised, he says. “Customers want us to come and drop in a black box and just have it work.”

Telsyte’s Fadaghi says the M2M ecosystem in Australia is still quite fragmented. Industry solutions are often driven by individual business requirements and there isn’t a one-for-all solution for any segments. “That being said, there are large, untapped opportunities for developers, carriers, service providers, integrators, resellers and hardware vendors as the industry grows. It is important to form partnerships and be part of a complete solution, as often businesses are looking for one-stop shops to cater to all requirements.”

The overseas experience suggests plenty of scope for systems integrators then, in the years ahead.

Christopher Rezendes, founder of Boston-based IoT experts Inex Advisors, says: “The vast majority of growth in IoT-like solutions have not and will not come from Big IT. Remember: wireless SCADA, fleet telematics, digital utility meters, RFID, and many other niche IT automation markets will be part of IoT. And those markets are and will be dominated by [system integrator] channels.“

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