Businesses that embrace the Internet of Things (IoT) will be up to 10 percent more profitable by 2025, according to a new study from Verizon (registration required).
Before you rush to make new connections, consider the obvious. Verizon has a vested interest in promoting the IoT. In 2014, the company saw a 45 percent year-over-year revenue growth in its own IoT business — which translated to about $585 million of its $88 billion in revenue in 2014.
Still, the research is interesting.
Verizon, using proprietary data and results of commissioned studies from ABI Research, estimates there were 1.2 billion different devices connected to the Internet last year and that the number will rise to 5.4 billion by 2020 for an annual growth rate of 28 percent.
So how can you tap in to boost your bottom line?
Verizon VP Mark Bartolomeo, who oversees the company's adoption of IoT business solutions, thinks the world is ready for an IoT-centric business model.
“We’ve seen the early adoptions, but now we’re getting to a new phase where we’re seeing fast followers,” he said. “They run the gamut from automotive companies working on connected cars to electrical utilities deploying smart meters as well as manufacturers."
The study notes a declining cost of sensors, connectivity and data processing power, all important IoT components in the enterprise, and an increase of machine-to-machine (M2M) connections. Verizon reported that business-centric IoT saw a 45 percent year-over-year revenue growth in 2014, while 4G and LTE device activations soared by 135 percent across all industries.
Some analysts believe that an IoT-centric business model is mandatory for success, especially as the business market grows more and more competitive with lower barriers to entry.
“The digital shift instigated by the nexus of forces (cloud, mobile, social and information), and boosted by the IoT threatens many existing businesses. They have no choice but to pursue IoT, like they’ve done with the consumerization of IT,” said Jim Tully, who leads the Internet of Things research agenda at Gartner, an IT research and advisory firm.
Verizon also reports that by 2020, 5.4 billion devices will be on the enterprise side of the IoT. Although many (if not all) industries can benefit from this, analytics will be extremely important going into the next decade.
According to the study, “Analytics is at the heart of IoT. The data gathered can feed near-real time business intelligence systems that help make more informed decisions more quickly.” The domino effect could mean more affordable products and services for consumers while allowing businesses to focus on innovation and research and development, areas which some analysts believe that businesses don't focus enough on today.
Verizon predicts "smart cities" could arise as a result of an IoT-centric business model. One of the applications of this model includes waste management. Sensors could be installed on garbage cans noting whether or not a garbage can has reached maximum capacity, allowing waste management companies to more effectively plan their routes, saving on transportation costs.
Security is the main issue going forward with an IoT-centric business model.
Although it might be logical to assume that there might be the need for a whole new security protocol due to the vast amount of data being exchanged over an IoT network, Tully said security might just need to be better enforced.
"This does not necessarily need a new type of security. It just brings into focus particular security issues because of the vast numbers involved in IoT. We believe that it needs the proper application of security principles that already exist," Tully said.
He also mentioned that the concept of identity is at the core of many security issues — and that it is not so well developed in the case of IoT. "Identity is very important because it defines the relationship between things, people, applications and services. This needs more development as the IoT evolves," he said.
In time, new laws might be needed to accommodate these devices as they become more and more mainstream. But Tully doesn't think that is imperative right now, when the main purpose of the IoT is to save businesses money.