Profiting from the Internet of Things

The term ‘the Internet of Things’ was conceived when the Massachusetts Institute of Technology set up the Auto ID Center in 1998. It focused on applying an electronic tag (RFID) to all items, effectively connecting them to a wider network - the internet. Automated monitoring en masse throughout the value chain could make logistics faster and more cost effective, reduce theft and counterfeiting, and provide other benefits such as no stock-outs in shops. However, this ambitious project took time to take off - developing the technology and standards, and then finding the first financially successfully applications.

The UHF RFID industry moved through the hype cycle of visionary dreaming; huge investment; disappointment in early sales, performance and user pull, to a pragmatic and now increasingly profitable approach today. This involved focusing mainly on ‘closed loop’ systems - applications where the technology gives a strong payback. This is then expanded to other locations and eventually these locations may connect up, such as in retail apparel, where many of the world’s largest apparel retailers are tagging clothing to reduce stock-outs. The term the Internet of Things (IoT) is barely mentioned in RFID circles nowadays - companies are focused on the pragmatic rollout of the technology and revenue generation.

The Internet of Things v2

A catchy title like the Internet of Things is too good to waste, so it has been resurrected again by a different set of companies - not those focused on low-cost, passive RFID tags, but more those making powered sensors and consumer electronics, such as mobile phones and their communication links and back-end data management. This is driven by the rise of mobile computing - mainly smartphones - which has unwittingly created a huge global, connected infrastructure of high computing capability. Smartphones can be connected RFID readers and positioning devices, offer many connectivity options (Wi-Fi, low power Bluetooth etc) and much more. What’s more, consumers want smartphones. Privacy implications have yet to be aired in this new Internet of Things because consumers are likely to want most of the benefits of it. Businesses from consumer goods companies to pharmaceuticals are jittery with excitement as smartphones and the enabling edge technologies such as wireless sensors, RFID tags and others enable new ways for them to engage with and add value to their customers. Look at the success of the Nike+ band in the USA, for example.

Is it at the beginning of the hype cycle again?

This time round, many of the organisations involved are different. It is not companies pursuing low-cost passive tags but telecoms providers that want to handle as much data as possible over the expensive wireless communication networks they have deployed. It involves network companies that seek to sell more switches and storage. It is big data companies that want to add value by exploiting the huge amounts of data that will be generated.

However, IDTechEx, which has tracked the RFID and wireless sensor industry since 1999, has some concerns. The brilliant and worst thing about the Internet of Things is that it is so broad. Does it include passive RFID, wireless sensors, machine to machine (M2M), big data, cloud computing and storage? Others believe the Internet of Things is not enough and the true term is the Internet of Everything because people are part of the network. This all begins to distract from what is important - providing a useful service. If the industry cannot clearly understand what it is then what hope is there for adopters to implement it? As we saw the first time round, the global open systems envisaged take time to commercialise - with heavy losses along the way. Meanwhile, the successful companies were quietly deploying tangible RFID systems solving problems with great return. Those avoiding the ‘glamour’ usually did well.

With this in mind, the IDTechEx event ‘Internet of Things & WSN 2013’, held in Santa Clara, CA, on 20-21 November, does not debate the terminology nor endlessly talk of future possibilities. It addresses the most important part - exploring the needs and thus how to add value and create profitable enterprises. This time round some things are different. They are:

• Smartphones are enabling a global network of readers, sensors, location and input devices connected to people.
• While the focus now is on business efficiencies, such as building management and supply chain management, the bigger opportunity is providing better and new consumer services and propositions - things they want and are prepared to pay for.
• Large companies are involved, particularly from a software and hardware point of view but also social media companies.

IDTechEx believe that those likely to succeed from this new Internet of Things in the short term will:

• Focus on closed system implementations in the main, proving strong payback and then rolling out to more locations. This includes building and process automation, logistics monitoring and stock control.
• Leverage existing hardware such as smartphones to do more useful things, based on new applications, such as indoor positioning systems connected to other hardware forms such as real-time locating systems.
• Develop the platforms to start connecting existing disparate systems in one location together.
• Offer new services to consumers that they want but which they do not yet know they want - the biggest opportunity but challenging to do and involves creative new business models, probably where the service is ‘free’ but paid for in kind by consumer data.

Will this result in huge back-end hardware orders and huge new amounts of data traffic to handle in the very short term? IDTechEx does not think so in the short term. Indeed, there are difficult questions to pose. Telecoms companies, with expensive infrastructure installed and large licence fees are very interested in the IoT as they can carry the data and make money from doing so. However, they make far more money selling bandwidth for voice and mobile data. Will the smaller amount of data and lower price needed for IoT be of interest to them? Can the big data companies make money with the little data now? What are the business cases today where companies are making money? Additionally, IDTechEx question some of the numbers mentioned. The number most people talk of are 50 billion connected devices in 2020. Whoever estimated that clearly does not see passive RFID as part of the picture - which will be 38 billion tags alone by 2020.