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From flowerpots to containers: a subtle anatomy of Internet of Things

The Internet of Things (IoT) is essentially a network of physical objects connected via the Internet, a buzzword for a new technology landscape that is reshaping the way we live and work. But is its potential understood and are we prepared for a new wave of industrial revolution?

September 2015
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Executive Summary

Imagine a flowerpot telling a thermostat in your home or office to turn off the heat because the plants are drying out. Now scale it up to a commercial greenhouse or a fresh-produce shipping container and the technology involved becomes a very serious proposition.

Everyday items such as thermostats and flowerpots can now be networked to deliver new types of service. This connected world is enabling and in some cases transforming healthcare, manufacturing, automobiles and transportation, supply chain, retail, utilities, environment, agriculture and so on. Its presence is growing rapidly worldwide and will ultimately impact everyone everywhere.

But for some context, let’s step back for a moment.

We’re now in the era of Industrie 4.0, a term that symbolizes the increasing rapidity of change in the production process. It took about 130 years to go from Industrie 1.0 (machinery, around 1780) to Industrie 2.0 (electricity, early 1900s) and then about 70 years to reach Industrie 3.0 (computers, 1970s). The most recent step forward to 4.0 took about 35 years, and now refers to the hyper-connected world which is not only transforming manufacturing and trade, but our lives overall.

Perhaps more relevant than the broader concept of Industrie 4.0 is the view that we’re now in the third wave of the Internet: in the 1990s, the fixed broadband Internet wave connected one billion users, while, in the 2000s, the mobile wave connected another two billion. The Internet of Things (IoT) has the potential to connect 10 times as many “things” (about 28 billion) to the Internet by 2020, ranging from bracelets to cars.

Anatomy of the Internet of Things

The Internet of Things (IoT) is essentially a network of physical objects connected via the Internet, a buzzword for a new technology landscape that is reshaping the way we live and work. But is its potential understood and are we prepared for a new wave of industrial revolution?

The “things” are physical entities whose state or identity is capable of being relayed to a connected infrastructure. Almost anything to which a sensor can be attached – a plant, a cow in a field, the refrigerator in your home, a lamppost in the street or shipping container – can become a node or an endpoint in the IoT.

Sensors are components of “things’ that both collate and disseminate critical data on such things as temperature, altitude, velocity, illumination, motion, power, humidity, blood sugar, air quality, soil moisture or location… you name it. Mankind and technology are revolutionizing products and services, that were once analog and mechanical, to complex systems that combine hardware, sensors, data storage, microprocessors, software and connectivity in multitude of ways.

These so-called smart or connected products have been made possible thanks to vast improvements and declining costs in data-processing power and device miniaturization, along with very sophisticated layered security. The products use sensors that can communicate either directly with the internet or with internet-connected devices, and by tapping ubiquitous wireless connectivity. Further, the software needed to analyze this data has improved dramatically, opening to the door to a new hyper-connected era of competition and growth.

Case Study: The IoT Ecosystem – Four Layered Portfolio

All this brings us to a fork in the road where industries can sit back and ride into the sunset or opt to embrace the disruptive force of this new technology to create new business models, opportunities, markets and industries. And if you think this is only relevant for high tech companies or Silicon Valley, you are wrong.

To illustrate, as an industry example, let’s look at cargo theft.

Cargo theft is now a multibillion-dollar criminal industry, and its impact eventually trickles down to the prices consumers pay for goods at the checkout. Imagine the possibilities if such activity could become visible in near real time in the supply chain.

Also, large quantities of pharmaceuticals, as well as 25% of all perishable food products transported in the cold chain, are wasted each year due to fluctuations in temperature and product degradation.  The market potential for technologies that can detect and prevent such loses is huge, especially in the Asia Pacific markets which grow or manufacture goods that  are shipped to every corner of the world and are routinely exposed to such risks.

In a situation like this, IoT is a huge problem solver, one that greatly benefits the supply chain, logistics and shipping companies – those which transport medical supplies, grain, artwork, machines or other goods in the knowledge that their location and condition is critical for end-users. An example of IoT in action would be AT&T Cargo View with Flight Safe™. The solution uses a small device with sensors that communicate the location, temperature, impact of shocks, pressure etc. for cargoes in transit from virtually anywhere in the world (land, air or sea) to a device agnostic command center. This helps companies remotely monitor and track high-value assets and in turn provides supply chain visibility. All this reduces cost, creates operational efficiencies and opens up new revenue streams.

An easy way to grasp this IoT scenario from both a technological and an industrial perspective is to visualize it in four-layered portfolio. The first layer is the device or “thing” being connected. The second is the foundational layer of connectivity to relay data to the world. This includes local network, short range wireless technologies, such as Near Field Communication, Wi-FiBluetooth Zigbee or even the trusted wired Ethernet for non-mobile “things”. It also includes state-of-the-art long-range cellular networks. The connectivity modules are going from 1G (AMPS), 2G (TDMA/CDMA and GSM/GPRS/E-GPRS), 3G (UMTS/HSDPA/HSPA+), 4G (LTE/LTE-Advanced) and 5G at present to satellite connections and emerging networks within the ultra-narrowband or the next generation of mobile networks.

The third layer is the platform: where the command center sits and where the intelligent aggregation of the cloud-based IoT-based data takes place. In the example of a shipping company, this is where the company is able to remotely monitor and manage the logistics though different end-devices.

The fourth layer is the solution and/or application layer. This layer covers solutions for different verticals and horizontals, such as industrial automation, telemedicine, wearables, intermodal, smart city and connected cars.

It’s crucial to understand that companies in these different verticals want applications that will help them to quickly and efficiently interpret the information transmitted via the connections – rather than simply receiving raw data from machines.

Data analysis plays a key role. Its capability to leverage the power and global scale of IoT are transforming business performance through cloud-based data insights and advanced analytics. Typically, the insights and analytics include descriptive analysis – what happened – and diagnostic analysis – why did it happen. With that information in hand, these systems can also provide predictive analysis – what will happen next – and prescriptive analysis – how can we make it happen. At AT&T, we refer to these capabilities as information optimization.

The IoT portfolio is broadly being classified into two groups: IoT, which is more consumer or human-centric; and the Industrial Internet of Things, or IIoT, which covers enterprise and mission-critical assets in business. The efficacy of IoT isn’t dependent on one or two companies or organizations. What ties all the layers and elements within them together are the ecosystems in which they exist and function – in industry parlance, professional services or the integrated solution. New business models will only emerge when different ecosystems truly trust each other on how to leverage this new wave of connectivity and intelligent data. Realistically, an ability to co-exist in a controlled secure way is essential to operate in this environment. Even within the IT industry, it is wiser to apply a “frenemy” strategy rather than focus purely on competing.

Strategies for industrial IoT adoption

IoT opportunities exist in virtually all industries, but it’s more in the traditional sectors, such as logistics, transport, heavy equipment and city infrastructure, that the greatest potential is found. Such is the volume of these industries that just a small change in efficiency – say 1 percent – in any one of them can save tens of billions of dollars. In a parallel context, one need only look at how new local taxi and accommodation-booking services are reshaping the taxi and hospitality industries. Companies existing in their comfort zone will need to look out.

A lot of customers cite IoT as one of their top business and IT priorities. However, companies that want to adopt IoT to upgrade or remodel their business should proceed with caution. Clearly, working with a suitable partner is important, but they need to prepare carefully.

To gain tangible value from the Industrial IoT in the near term, I recommend that companies consider the following actions:

1. Walk before you run – While businesses must have an end-to-end solution mapped out prior to deployment, getting a time-bound trial with a solution provider is probably the smartest option to execute and learn quickly.

For would-be IoT customers looking to really benefit from this service, it’s important to simultaneously think through their entire business model. Engagement in IoT involves the whole product, sales, service management and IT organization. From the point where the chief marketing /information officer brings an idea to when you design your product, and set strategy and financing, the IoT will impact every part of the business. To maximize the value of IoT, it needs to be built into the business model from end to end. That takes time.

2. Show me the Money – Develop and implement a business plan with a clear definition of success criteria in order to quantify the expected return on investment. Stakeholders need to see the real benefits before investing in emerging technologies – either by saving money or by giving new offerings. This is necessary in order to persuade the board and senior management to support it.

3. Everyone / Every Project Needs a Champion – Assign a senior executive to the IoT project and work out the complexity that IoT will bring. The executive needs to help drive the installation and reshaping of the process. It’s not as easy as introducing new software to your team – it involves data collection and analysis, the value of which takes time to become apparent. That’s why we see small businesses moving much faster to adopt IoT. They are also very active in developing new applications based on IoT technologies.

4. Patience is a virtue – IoT implementation takes time and often demands new ways of working. Companies need to overcome the technical and business challenges to unlock this potential. Leveraging a software-defined scalable infrastructure is one way of getting to market faster. And once there, sustaining a competitive advantage can be achieved by tapping the intelligence and insights derived from responding to market conditions via IoT connectivity and data analytics.

The word innovation has almost become a cliché in the world of business. Yet, while on a superficial level everyone is “for” innovation, it is the rare business that embraces innovation. In today’s world business innovation is not just a catalyst to growth, but mission critical for survival. Everyone wants it – the bigger issue is what precisely it is and how to achieve it.

Sandy Verma
Senior Director of Asia Pacific for Internet of Things Solutions, AT & T