eMagiz iPaaS

What is Internet of Things?

Harmen Denekamp
Harmen Denekamp

A lot has been written about Internet of Things (IoT). It would be the future, radically changing how we live and do business. You might wonder if and when this will become reality, because adoption of IoT is often in early stages. Was IoT just a hype or does it add real value? How can companies create value with IoT? These questions are answered in our series of articles on the Internet of Things. This first article aims to show the increasing impact of IoT and explain why it is increasing, by discussing developments and definitions of IoT.

Despite being past the hype cycle peak, investments in IoT technology continue to grow. IDC forecasts spending on IoT to grow at 13.6% per year over the 2017-2022 period, reaching $1.2 trillion worldwide in 2022.1 Bain found that adoption of IoT is also increasing amongst IoT customers, for both extensive implementation and proof of concept stages, as shown in Figure 1.2

Stages of IoT adaption

Beyond investing and adopting IoT, it is the impact of IoT initiatives that matters. McKinsey did a survey amongst 300 IoT practitioners in large companies, which are implementing IoT on large scale. They found that the leaders realized over 15% aggregate cost saving and revenue gain from IoT initiatives, while laggards realized <5%.3

Level of financial impact

It can be concluded that IoT is increasing in investments, adoption and financial impact worldwide. To understand why, it is necessary to first know what IoT is.
IoT is all about everyday objects that can collect and communicate data.4 Most physical objects are dead, in the sense that they cannot see and communicate what’s going on. IoT makes objects, things, come alive by enabling them to collect data about themselves, and communicate this data to the internet.

Take for example a soap dispenser. It cannot see how much soap it has left by itself, let alone communicate this. With IoT, the soap dispenser is able to tell how much soap it has left and communicate this to an app in the cloud.
On a technical level, IoT consists of several technologies that have existed for a while now. Combining these technologies creates IoT, see Figure 3.5

Underlying technologies
  • The object’s (or thing), usually physical, is what we want to know about.
  • The sensor collects the data by detecting the physical state of the object, of which a wide variety exist. For example, vibration (piezo) and distance (infrared).
    • An alternative is an actuator, which performs an action on the physical object.
  • The controller is a minicomputer that transforms the signal from the sensor into a useful digital signal. It consists of a processor, memory and a network chip (e.g. Wi-Fi). A commonly used controller for prototyping is a Raspberry Pi.
  • A network is used to communicate the data to the internet. Wi-Fi is well known, but there are many alternatives, such as Bluetooth and LoRaWAN.

Having a number of things connected to the internet is not the finish line. To add value, integration is critical.6 For example, integration in business processes or existing software applications. In the soap dispenser example, having some data on how full a soap dispenser is does not help in any way. So we created an app to inform personnel on when to replenish the soap dispensers. Integration is where adding value starts.

Soap

The soap dispenser example learns us two things:

    1. Things are made alive by collecting their data and connecting them to the internet.
    2. Things have to be made useful, through integration in processes and apps. That is the Internet of Things in its purest form.

The underlying technologies for IoT are becoming cheaper, more advanced, and more widely available. Especially technology platforms that enable integration in IT and business processes are making a growth spurt.7 That is why IoT investment, adoption, and impact is increasing.

The future is looking bright for IoT

This is the first episode of our IoT-series. The next article will detail in which ways IoT can add value for companies. The final article will present a roadmap to identify potential and implement IoT in your organization.

1IDC forecasts worldwide technology spending on the Internet of Things to reach $1.2 trillion in 2022, IDC, June 2018
2Unlocking opportunities in the internet of things, Bain & Company, August 2018
3Best practices separating IoT leaders from laggards, McKinsey Global Institute, January 2019
4Cambridge online dictionary
5Designing the Internet of Things, McEwen and Cassimally, 2014, p.11
6The Internet of Things: mapping the value beyond the hype, McKinsey Global Institute, June 2015
7Growing opportunities in the internet of things, McKinsey Global Institute, July 2019