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June 4th, 2014 at 10:08 am

Is the Internet of Things critical to the survival and growth of the enterprise?

internetofthingsfortheenterprise

Should we to add the Internet of Things to the top strategic technology priorities for the decade? That’s the question increasingly in front of IT decision makers these days as tech vendors add the buzz phrase to their marketing and practitioners evaluate the rapidly growing array of related tools and technologies.

 

 

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That’s not to say there’s much doubt about the phenomenon itself. There’s essentially no question that the Internet of Things (IoT) is fast becoming entrenched both in consumer and enterprise IT. It already seems like just about other new digital device that emerges these days comes with an app to monitor or control it, remote home automation devices are exploding, and everything electric and digital seems to be heading for 24/7 connection to the Internet.

The data is familiar to anyone tracking the story: By 2020, IoT will be a $8.9 trillion market in 2020, with over 212 billion connected things. To put that in perspective, that’s about half the size of the entire U.S. economy, meaning that the connectedness of everything will soon be one of the world’s largest industries, even though one might say it’s nothing more than a convergence of the top pre-existing trends of smart mobility, cloud, and big data.

But the real question is if IoT is strategic to our businesses? By this I mean whether or not playing early enough and deeply enough in “IoT-ifying” the enterprise will result in competitive ruin (or not.) Certainly some are rather skeptical of the strategic nature of the trend. Just this week, The Economist noted, in the Internet of nothings:

The vast majority of the billions of things connected to the internet on Cisco’s website, for instance, are not the toasters, refrigerators, thermostats, smoke detectors, pace-makers and insulin pumps that the IoT’s true believers enthuse about. Almost exclusively, they are existing smartphones, tablets, computers and routers, plus a surprising number of industrial components used to beam performance statistics back to corporate headquarters. Without any hoopla, operators of power stations, passenger jets, railways, refineries, chemical plants, oil platforms and other industrial equipment have been doing this for ages.

The two worlds of IoT

By this argument there are really two Internets of Things. One is the enterprise-grade version that has long been in place and is already helping us run our companies. It is largely realized wherever it is needed. The other IoT is the emerging consumer-based cloud of connected products and services which has only been happening in a significant way in the last 2-3 years. The second IoT is more consumer focused and perhaps less impactful to the enterprise. Consequently, so the reasoning goes, we’ve already received the results of the low-hanging fruit of IoT in the industrial/enterprise space.

Other are more sanguine: The famed consulting firm McKinsey has included the IoT as one of the ten truly disruptive technologies for the next decade that will be adding several tens of trillions of dollars to the global economy by 2025. By just this estimate, for revenue opportunities alone it’s probably vital that organizations consider embracing IoT early and broadly in any untapped spaces.

But steady, meaningful adoption is still something that can be done tactically. There have been numerous important enterprise technologies that didn’t require the rethinking of how business is done or constant competitive one-upping, but still generated plenty of rewards: payroll systems, relational databases, e-mail, SaaS, CRM software, the list goes on. In this light, it’s somewhat unlikely that IoT will ever crack the top 50 greatest technology breakthroughs (the Internet has, but will the Internet of Everything?)

Unfortunately, all of this thinking leaves out a few important concepts. Most importantly, is the idea of network effect. The more connected something is, especially if by being connected it provides additional value to those on the network, the more valuable it becomes. The value grows expontentially according to connectedness. That’s the basic truism of Internet business, and the reason why growth is always the primary and first order of business for Internet startups. You can do anything, create any business model, find new and better ways to monetize, if only you are deeply connected. If you aren’t, the most innovative digital business models just have no meaning.

Key Point: Network effects don’t just mean being connected, but by being connected and contributing value of some kind to those on the network in some way. Traditional enterprises don’t usually manage to network effects, which is why they typically have low impact in the digital world.

Via ZDNet

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