The Internet of Things (IoT) is difficult to analyze and discuss because it is so broad and diffuse. However, it is important to grapple with the parameters of the category:
- How big is it?
- How much will companies invest?
- How will these investments pay off?
Fortune reported on a large study of the IoT from Tata Consultancy Services. It found that 26 companies, 14 of which are in the United States, plan to spend at least $1 billion annually on IoT projects. The sample companies, which come from seven industries, are extreme examples of IoT investment. The norm, however, is just as impressive: Tata found that companies will invest an average of $86 million, or 0.4 percent of revenue, on the IoT during 2015.
The survey shows that apparently the IoT will not be restricted to one department:
First off, spending 0.4% of revenue is a significant number, and by 2020 those same firms expect their investments of $86 million per year to rise by 20% to $103 million. The more complicated news is that Tata believes not all of that spending will come from the information technology budget. For example, it counts tracking a customer via mobile applications as the internet of things in action, and those apps are usually a marketing expense. Supply chain automation is usually a manufacturing expense as opposed to IT, but is clearly another popular use case for the internet of things.
Companies don’t make those types of investments unless they are pretty sure that they will pay off. Bob O’Donnell, the founder and chief analyst of Technalysis Research, argues that it is a trickier question than it seems. According to his post on re/code, significant costs are involved in creating the IoT and analyzing the huge mountain of data it produces. This will lead to conflicts about who will benefit and who will pay.
If individuals’ personal data is being used in aggregate to generate increased profits for a company, why should they in some way not be compensated? There are many such fundamental questions with which the entire ecosystem must deal. Overall, the IoT indeed can provide huge value, but it won’t be possible without solving the same basic business questions as any other initiative involving data and privacy.
Even today, though, the IoT is gaining traction. Yossi Abraham, the CMO of Excelacom, outlines the business, technology and operational challenges of the IoT. The core of his piece at IOT Evolution, however, is two real-world examples of the IoT being used to create efficiencies and otherwise buttress the bottom line. In the first example, Coca Cola Company is using an IoT-based machine-to-machine (M2M) system to radically increase the efficiency of its vending machines. The other example is of utilities replacing manual meter readers with M2M-enabled smart readers.
Seeing such examples become successful ventures makes us realize that it is a virtual certainty that the IoT will be big. But again, with a category so vast and different, just how big and exactly how it will attain those heights still is unclear.
Carl Weinschenk covers telecom for IT Business Edge. He writes about wireless technology, disaster recovery/business continuity, cellular services, the Internet of Things, machine-to-machine communications and other emerging technologies and platforms. He also covers net neutrality and related regulatory issues. Weinschenk has written about the phone companies, cable operators and related companies for decades and is senior editor of Broadband Technology Report. He can be reached at [email protected] and via twitter at @DailyMusicBrk.