The Internet plays an increasingly important role in the modern world, not only at the level of infrastructure but also in culture, society and business. The Internet of Things extends that role to an increasingly diverse range of devices and communications streams, many of which will be essentially machine-to-machine communications, rather than involving a person at either endpoint.
Gartner defines the Internet of Things as the network of physical objects that contain embedded technology to communicate and sense or interact with their internal states or the external environment. It encompasses hardware (the “things” themselves), embedded software, communications services and information services associated with the things.
The growth of such things is predicted to be rapid, such that the Internet of Things’ growth will far exceed that of other connected devices. Gartner forecasts that, in 2020, the number of smartphones, personal tablets and PCs in use will be 7.3 billion. But the Internet of Things will expand much faster, to a whopping 26 billion units in the same year.
Due to the low cost of adding Internet of Things capability to consumer products, Gartner expects that “ghost” devices with unused connectivity will be common. They will include products that have the capability built-in but require software to “activate” it, and products with Internet of Things functionality that customers do not actively use.
By 2020, component costs will have declined to the point that connectivity will become a standard feature, even for processors that cost less than one dollar. This will raise the possibility of connecting just about anything, from the very simple to the very complex, to offer remote control, monitoring and sensing.
The Internet of Things Will Bring New Supplier Opportunities and Add Economic Value
Gartner estimates that the Internet of Things will add an astronomical $309 billion to the combined revenue of hardware, software and services suppliers in 2020. For example, LED light bulbs are only just now coming to market, and the early models are not networked.
By adding Internet of Things capability, LED lighting suppliers can charge higher prices for their products, and associated services will arise. About 15 per cent of LED lamps will contain connectivity technology by 2020 and will therefore be part of the Internet of Things. This amounts to more than 1 billion connected lamps.
The use of LEDs results in considerable energy savings, combined with electronic controllability. About 90 per cent of the energy savings will be in consumer markets, with commercial, street and area lighting accounting for the rest. The energy savings are so great that governments will encourage the use of LED lamps through subsidies and forced use.
Economic “value-add”—the aggregate benefit that businesses derive from the sale and use of Internet of Things technology—has been forecasted to hit $1.9 trillion across all sectors in 2020, according to Gartner. The industries that are currently leading its adoption are manufacturing at 15 percent, healthcare at 15 percent, and insurance and banking and securities at 11 percent. The banking industry, for example, has widely employed connected automatic teller machines and Point of Sale technology to deliver operational savings and enhance revenue opportunities. The banking and securities industry will continue to innovate around mobile and micropayment technology using convenient Point of Sale terminals, and will invest in improved physical security systems and smart-building technology.
The healthcare sector is slated to see a wide range of innovations, from personal medical devices such as wearable wireless monitors and sensors to smart pills, connected medical instruments and diagnostic equipment, as well as implantable technology. Medical technology, however, will take longer than areas such as lighting to move into the mainstream because of regulation. Nevertheless, the new Internet of Things technologies will add $285 billion of healthcare provider value to the global economy by 2020, with the main benefits felt after this date.
As hardware costs fall and solutions proliferate, the bulk of the revenue opportunity falls to service providers. Although the industry will benefit tremendously from Internet of Things technology, consumer end users will drive almost two-thirds of Internet of Things supplier revenue.