The Internet of Things Will Change Everything, Including the Economy

5 minute read
David Roe avatar

Sure the development of the Internet of Things has a way to go before it becomes a  reality. But IT research firm Gartner already estimates it will be worth $1.9 trillion by 2020. Gartner also predicts the Internet of Things will create an entire new economy based on interconnectivity of devices.

Searching for a Definition

The predictions were made yesterday by Gartner's Peter Sondergaard, senior vice president and global head of research, at the Gartner Symposium ITXPO 2013. The event kicked off on Sunday in Barcelona, Spain but only really got down to business yesterday.

The problem with Sondergaard’s prediction is that the world has yet to define the Internet of Things. In a recent paper from Forrester, Sarah Epps described it as an Internet that promises to connect all ordinary objects to Internet services using sensors and actuators embedded in physical objects — from roadways to pacemakers.

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…”

For the sake of this Symposium, Gartner noted that the Internet of Things encompasses:

  • Hardware (the ‘things’ themselves)
  • Embedded software (software running on, and enabling the connected capabilities of the things), connectivity/communications services
  • Information services associated with the things (including services based on analysis of usage patterns and sensor data).

Whatever way you look at it, then, there does appear to be an emerging consensus that the Internet of Things will take the shape of an Internet that will connect all devices and products using sensors from which vast amounts of information will be taken to provide personalized services and products.

Assessing its Potential Value

Even if this definition still needs some clarification, which will undoubtedly come once it gets closer to becoming a reality, the concept is developed enough to enable Gartner make predictions about its future value.

In 2009, there were 2.5 billion connected devices. By 2020, there will be more than 30 billion in a variety of shapes and forms — many of which don't even exist today, Gartner predicts. Growth around the Internet of Things will start outstripping growth in traditional IT sectors by 2017. Sondergaard said:

While in 2015 the combined IT and telecom market will hit nearly $4 trillion, the incremental revenue generated by the Internet of Things’ suppliers is estimated to reach $309 billion per year by 2020. Half of this activity will be new start-ups and 80 percent will be in services rather than in products. The Internet of Things is a strategically important market. It will accelerate fast and drive both revenue and cost efficiencies.” 

Looking back at last month’s Forrester report, Epps agreed it will take time for the Internet of Things to mature.

She argued that the Internet of Things is still in its infancy and that the technology to morph the concept to reality is not yet available. She also says that many of the devices that will eventually make up the Internet of Things are only emergingand that it will take up to five years to unify all the informationsilos that these devices fall in — a key element of the Internet of Things.

Again, like Epps, Sondergaard says there are a number of verticals where development is more advanced than others:

Learning Opportunities

  • Manufacturing (15 percent)
  • Healthcare (15 percent)
  • Insurance (11 percent)

The Internet of Things enables solutions that are optimized for the customer and enables new innovative business models. This will allow companies to move away from blanket pricing to more tailored solutions which benefit both company and customers,” said Sondergaard.

Disrupting The Way Enterprises Work

The result of all this will be a shift in the way enterprises go about their business, Hung Le Hong, research VP atGartner said at the symposium. This will happen at three levels: business process, business model and business moment.

At the first level, digital technology is improving our products, services and processes, our customer and constituent experiences, and the way we work in our organizations and within our partnerships…We do what we normally do, but digitalization allows us to do it better or develop better products within our industry." 

As digitalization continues, at the second level, new ways of doing work with new processes will emerge. That will result in a re-invention of business models across all verticals who have connected to the Internet of Things.

The third level of digital re-invention will be arise from the need of enterprises to compete with each other in this increasingly innovative and agile business world.

There is still some way to go before all of this becomes a reality, but Gartner noted that compared with two years ago, most Chief intelligence Officers have made significant progress dealing with this new digital challenge.

However, once again, as we saw with big data and analytics last week, to meet the challenges that digitalization poses requires leadership from the C-Suite.

This leadership should not only be able to identify and recognize the opportunities that digitalization provides, but also shape the business ecosystem that can exploit the new business opportunities of the new Internet of Things.

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