The numbers associated with the impact of the Internet of Things (IoT) are always big. So big that they make the dollar signs from the US government’s Troubled Asset Relief Program (TARP ) and the bankruptcies and buyouts of the Great Recession seem paltry in comparison.
The doozy IoT number had been from Cisco, which prognosticated that the global economic value generated by IoT could be $19 trillion.
Now McKinsey has taken the clichéd cake. In a June In Brief, "The Internet of Things: Mapping the Value Beyond the Hype," the global consultancy estimates that the IoT's economic impact could reach as high as $11.1 trillion per year by 2025. The key words: per year.
Wait. How Much?
The McKinsey report authors are aware that by getting "beyond the hype," they are adding to the millions of words already written about the tech phenomenon, defined by them as "sensors and actuators connected by networks to computing systems."
So then why write more?
The value, they say, is that they take a deep dive into how IoT will impact specific on-the-ground environments. They include the even-more-hyped driverless cars and FitBit and Apple Watch personal health monitoring devices. But they include real-world business settings like:
- Logistics and navigations, which could see upward of $850 billion in economic impact per year through real-time routing and tracking
- Worksites, where sensors and data could prevent work accidents, predict equipment maintenance and optimize operations to the tune of as much as $930 billion in benefit per year
- Retail, where checkout automation and inventory monitoring could reap as much as $1.2 trillion in annual impact
- Factories, which could benefit from IoT optimization by as much as $3.7 trillion per year
Like the gold-standard consultants they are, the McKinsey authors also left themselves a backdoor. All these benefits should happen if all goes according to plan, but may not if such and such gets in the way. And "such and such" in this case are:
- Interoperability: For maximum potential, IoT devices and systems must be able to communicate with each other, no matter the manufacturer or platform
- Privacy, confidentiality and intellectual property: Whom does collected data belong to, how will they be used and how will they be protected?
- Security: It's one thing to protect vast stores of data. It's another to make sure that devices controlling cars, railroads, urban public transit systems, nuclear power plants, etc., are secure
- Organization and talent: Within organizations, who will be tasked with managing IoT? IT? Operational divisions responsible for physical environments like factories, retail stores and warehouses?
- Public policy: Lawmakers need to establish rules about liability (say, for driverless cars) and to incentivize IoT adoption, not to mention for data privacy, confidentiality and IP
Out of these "enablers and barriers," as the McKinsey authors call them, perhaps the biggest is the last one. The consensus, as portrayed in this Fortune article, is that policymakers in Washington, D.C. know little about IoT and what they do know has "freaked" them out.
Scott R. Peppet, a University of Colorado Law School professor who wrote one of the first academic papers about IoT regulation, shares a bit more nuanced picture of Washington's perspective. As he told Politico in a recent interview when asked about his research paper:
"The other response has been from regulators, both in the US and internationally, who are starting to really look at the Internet of Things and say what are the issues and how do we regulate those issues, if at all."
Yet this is Washington we're talking about, so politics and partisanship must be in play too, right? It appears so. One of the few regulatory statements put out by the federal government about IoT has come from the FTC, which released a staff report on the IoT in January calling for companies to focus on security.
Apparently, the FTC has some teeth to enforce its guidelines and publicly announced last week at an event at Georgetown University that it has brought more than 50 data security actions against companies.
Still, many in Washington — notably Republicans and the FTC's own Commissioner, Joshua D. Wright — believe the federal government, FTC included, is taking too active an approach to regulating security and privacy at risk of free market competition and innovation.
So the question becomes: Will the IoT bring $11.1 trillion in economic value per year by 2025 with or without lawmakers?
Title image by Hernan PiÃ±era.
Learn how you can join our contributor community.