While the exact form of the Internet of Things (IoT) is still nebulous, its size is not. According to new research from Gartner, it will include 26 billion units — excluding PCs, tablets and smartphones — by 2020. It will also have a global economic value of $1.9 trillion. 

Embedded Systems

The conclusions are contained in a new Gartner report, Forecast: The Internet of Things, Worldwide, 2013. It predicts that by 2020, the IoT will include 26 billion units — a 30-fold increase since 2009 when it represented only 0.9 billion units.

To put this in some kind of context, its growth between now and the end of the decade will far outstrip that of smartphones, tablets, and PCs combined, which will have reached a level of 7.3 billion units over the same period, according to Gartner.

In simple terms, Gartner defines the IoT as the network of physical objects that contain embedded technology to communicate and sense or interact with their internal states or the external environment.

This does not really explain the phenomenal growth Gartner is expecting. Earlier in the year, Sanjay Poonen, head of the mobile division at SAP, —  which, along with IBM, is championing the concept  — summarized it as follows:

The Internet of Things concept goes one step further by not only integrating machines, people, ERP and CRM systems and other information sources like social media, but also analyzing and making use of all the data. Soon, people will interact with devices that in turn interact with data to deliver personalized products and services directly to the consumer in real time…”

In other words, the IoT will connect not just machines, but also commonly used enterprise applications that are rich in customer data and have, consequently, the potential to offer deep insights behaviors and purchasing habits.

Making IoT Possible

To enable this, economies of scale are a core prerequisite. Without cheap chips that can be installed into — well into everything — the IoT will not be possible for economic reasons. However, Peter Middleton, who authored this report, says that by 2020 the price of connectivity will have dropped to such a point that it will indeed be possible to connect everything:

By 2020, component costs will have come down to the point that connectivity will become a standard feature, even for processors costing less than $1. This opens up the possibility of connecting just about anything, from the very simple to the very complex, to offer remote control, monitoring and sensing."

There is an interesting caveat that he introduces in this report that could limit the practical scope of the IoT. Middleton suggests that there will be a large number of “ghosts”, or unconnected devices.

This means that there will be a large number of products that have the capability to connect to the IoT, but will require activation by the users using specific software. There is no guarantee, Middleton says, that users will activate these devices

It is clearly impossible to estimate how many devices this will affect. Nor is it possible to work out exactly how widespread IoT is going to be:

The fact is, that today, many categories of connected things in 2020 don't yet exist. As product designers dream up ways to exploit the inherent connectivity that will be offered in intelligent products, we expect the variety of devices offered to explode."

IoT suppliers or those that provide the hardware, software and services to IoT enterprises, will also benefit significantly from this explosion. Gartner estimates that revenues in this space will be $309 billion of the $1.9 trillion total IoT value.