“How the world will change as computers spread into everyday objects,” is the title of the lead article in a comprehensive review of the Internet of Things (IoT) in a recent issue of The Economist. Like many technological advances, IoT has been long in coming. Ubiquitous or Pervasive Computing dates back to the 1990s, when neither the necessary low-cost devices and wireless networks were anywhere near ready. “But the transformation is about to go into overdrive, notes The Economist. “One forecast is that by 2035 the world will have a trillion connected computers, built into everything from food packaging to bridges and clothes.”
IoT promises to bring many benefits, including a whole new generation of innovative products. We’ve long thought of products as physical entities built with a combination of mechanical and electrical components, - e.g., appliances, cars, agricultural machines, industrial equipment, - some quite simple and some highly complex. IoT has been ushering a whole new class of smart connected products. In addition to mechanical and electrical components, these new products use digital components like microprocessors, sensors, data storage, software, and connectivity in a wide variety of ways.
As the world’s digital and physical infrastructures converge, digital technologies are being designed right into all kinds of consumer and industrial products. Internet-connected smart doorbells, for example, include motion sensors and video cameras that notify a home owner when someone arrives at the door. Using a smartphone app, the home owner can watch and talk to the visitor, while a video of their interaction is saved for an added level of security.
“The magic of computers is that they provide in a machine an ability - to calculate, to process information, to decide - that used to be the sole preserve of biological brains,” writes The Economist. “The IoT foresees a world in which this magic becomes ubiquitous. Countless tiny chips will be woven into buildings, cities, clothes and human bodies, all linked by the internet… Over the past century electricity has allowed consumers and businesses at least in the rich world, access to a fundamental, universally useful good - energy - when and where they needed it. The IoT aims to do for information what electricity did for energy.”
Not surprisingly for aspirational ambitions on a par with electricity, estimates of the potential economic value of IoT are equally ambitious. A 2018 report by Bain & Company predicted that the overall market for IoT would grow to over $500 billion by 2021, more than double the $235 billion in 2017. A 2017 white paper by the chip design firm Arm predicted that one trillion IoT devices will be built between 2017 and 2035, boosting global GDP by $5 trillion per year by 2035. But, it will take a lot more than one trillion IoT devices to achieve these ambitious projections.
A recent report by GSMA Intelligence said that smart homes are rapidly evolving from niche to mainstream by 2025. Smart home devices already account for two of every five consumer IoT connections, and are expected to grow at 14% CGR between now and 2025, representing almost 50% of the overall consumer IoT market, ahead of consumer electronics, smart vehicles, and wearables. Security, - e.g., smart doorbells, surveillance cameras - and energy management, - e.g., smart thermostats and light bulbs, - are the two key smart home applications.
Many different companies have been involved in the smart home market, leading to considerable fragmentation, as products from different companies don’t work well, or at all, with products from other companies. As the smart home ecosystems grows and evolves, the battle to become the dominant home platform is only increasing.
Amazon and Google are the companies best placed to address this fragmentation problem, based on their Alexa and Google Home smart speaker dominance which have become de-facto platforms for IoT devices from many vendors. Almost 80 million smart speakers were sold in 2018, double the number in 2017. Amazon and Google each has roughly a third of the market, with the Chinese tech giants Alibaba, Xiaomi and Baidu making up most of the rest. It’s expected that the leaders in the smart-speaker market will achieve the kind of dominant position that Google and Apple have in the smartphone market with Android and iOS respectively.
According to a second GSMA Intelligence report, industrial IoT connections will overtake consumer ones by 2023, reaching almost 14 billion by 2025. The industrial IoT will then account for just over half of all IoT connections, as IoT-based solutions are deployed across a number of industries. Smart manufacturing is expected to grow at over 30% annual CGR between 2018 and 2023, connecting a variety of machines and other assets to increase efficiency and reduce downtime. Smart office and corporate buildings are another important application area, to both reduce energy consumption and make more effective use of space. Boosting the productivity of industrial agriculture and cattle-farming is another highly promising IoT area.
With IoT, companies can gather, store and analyze massive amounts of data about their products’ actual performance. This real world feedback will not only help improve the overall performance of their products, but will enable them to offer valuable new services to their customers, such as anticipating potential breakdowns and scheduling preventing maintenance. Longer term, this new class of IoT-based offerings are radically reshaping companies, exposing them to new competitive opportunities and threats, altering industry boundaries and creating entirely new industries, as competition shifts from individual products to increasingly comprehensive systems that encompass a number of related products and services.
For better and for worse, notes The Economist, IoT can be viewed as the second phase of the Internet, bringing the Internet’s business model from the digital to the physical world. Along with its many benefits, this also includes “the business models that have come to dominate the first phase - all-conquering ‘platform’ monopolies, for instance, or the data-driven approach that critics call ‘surveillance capitalism’. Ever more companies will become tech companies; the internet will become all-pervasive. As a result, a series of unresolved arguments about ownership, data, surveillance, competition and security will spill over from the virtual world into the real one.”
“Predicting the consequences of any technology is hard - especially one as universal as computing. The advent of the consumer internet, 25 years ago, was met with starry-eyed optimism. These days it is the internet’s defects, from monopoly power to corporate snooping and online radicalisation, that dominate the headlines. The trick with the IoT, as with anything, will be to maximise the benefits while minimising the harms. That will not be easy. But the people thinking about how to do it have the advantage of having lived through the first internet revolution - which should give them some idea of what to expect.”
Comments