The concept of machines talking to machines was once the domain of science fiction fantasy. No more. Firms need to grapple with how it will transform business models.
In 2007, there were 500 million devices connected to the Internet. By 2020, that could reach 50 billion, according to networking giant Cisco. This is the so-called “Internet of things”. A web where machines dominate. Strictly speaking, the Internet of things is a subset of a much bigger phenomenon: A machine-to-machine (M2M) net of sensors, actuators and processors.
M2M communications uses a device, such as a sensor or meter, to capture information – like temperatures, inventory levels or location status. This is then relayed through a network to an application, which translates the captured event into meaningful information. For example: a security breach, or when items need to be restocked or an accident has occurred.
CapGemini estimates that the world M2M market will be worth €27.4 billion ($39.3 billion) by 2013. According to Vodafone, just the wireless traffic alone will be worth €8.9 billion. Many of these nets of sensors and processors already exist in closed loops, such as in cars. Connecting these nets to the broader internet using conventional internet protocol inspires new business models.Take, for example, San Francisco-based company, Streetline, which uses sensors in parking bays to allow citizens to find inexpensive parking, fast. This technology helps cities manage their parking resources more efficiently, while simultaneously helping to reduce carbon emissions.
Barcelona-based WorldSensing, uses a similar technology. The firm developed the technology to form a vast network of tens of thousands of geophones to allow cheap and continuous monitoring of carbon capture fields or conduct oil exploration.
Another example of the way in which the Internet of things is being put to use by business is through attaching radio frequency identification tags to products. This allows continuous and real-time monitoring of goods moving through the supply chain. It improves inventory management and reduces logistics cost, while also giving early warning of supply interruptions. Not only will new businesses grow up extracting previously untapped value, but almost all existing enterprises will be able to maximize data by incorporating more and more sensors and real-time data flows. According to McKinsey, in the pulp and paper industry, one company raised production by 5% by using embedded temperature sensors whose data was used to automatically adjust a kiln’s flame, reducing temperature variance to near zero and improving quality.
But how will all of this deluge of data be carried when existing mobile networks are already choked with data? Part of the solution is putting intelligence into the edges and away from the center. Connecting sensors to semi-autonomous nodes, which can make decisions, precludes the need for all sensors to be connected.
Even so, the amount of data that will need to be carried is going to increase dramatically. The problem for network operators is that their conventional business models do not work. One solution, already being deployed by Portuguese operator Zapp.pt, is to build a separate network using a different part of the radio spectrum outside the congested regular cellular frequencies, to offer a data-only service.An alternative is to use the data in the network itself to construct a dynamic pricing model. “All networks have been designed for peak capacity engineering and the reality is there’s a lot of excess capacity,” says Kenneth Frank, an executive vice president of Alcatel-Lucent. “You might want to price according to how much available capacity you still have on your network, a sort of spot market.” He highlights the predicted growth of networked devices for monitoring utility consumption. These sensors can be designed so they store and push out information at times when network demand is low. The time is not important.
Intelligent Sensing
Tim Watkins, vice president of Western Europe for Huawei, suggests that standards are going to be needed to really capitalize on the potential. “Internet of things systems will make intelligent sensing widely available through information sharing and collaboration. Then, we will begin to move into a ubiquitous network era.”
The key to extracting business value from the Internet of things will be the ability to capture, process and extract information from the torrent of data that will be available. This requires enterprises to re-orientate their existing IT structures to handle, what is now being called, ‘big data’.
The Expert’s View: Warren East, ARM Holdings
By thinking too small, the technology industry is in danger of throwing away the huge opportunities offered by the Internet of things. “Businesses need to buy into the philosophy that a slice of a massive pie is better than having a whole pie if it is a lot smaller,” says Warren East, chief executive of ARM Holdings.
The Internet of things is the concept of billions of devices, such as sensors, being connected and communicating through the Internet. Mr. East makes the analogy with the global population who, “all have a voice as a means of communicating but speak thousands of different languages“. The alternative to creating a new version of this latter day Tower of Babel is to adopt standards.”It isn’t that these standards are particularly difficult to dream up. It’s all the different vested commercial interests,” Mr East says.
“You’ve seen a smaller example of this over the last 20 years or so with digital mobile phones. We’ve been rolling out different phones with different operators in different regions. The technology hasn’t been the barrier so much as getting companies to sign agreements with each other to make their various operations work together. In the context of the Internet of things, mobiles are merely the prologue,” he says.
It is not surprising, he admits, to hear a call for open standards from an executive of ARM, a company whose technology is used in an estimated 98% of the world’s mobile phones and with similar ambitions for processors running in the Internet of things. There is, however, a real risk in adopting a protectionist mindset where, he says, “one company’s kit can only speak to other pieces of kit from the same company“. “It would be a classic case of: ‘The tech industry’s done it again – all promise and no delivery.‘”
