2013: The year of the IoT inflection point?

The year 2013 is a turning point for the Internet of Things (IoT). I would like to quote John Chambers, Chairman and CEO of Cisco: “The inflection point of IoT”. He bases this statement on the following: Since 2010, the number of devices connected to the Internet has overtaken the number of people connected to the Internet.

For me, it is even more. For me, 2013 is the year when the business world has taken over the thought leadership in Internet of Things from research and technology evangelists.

The term Internet of Things was suggested by Kevin Ashton in 1999. Nearly 15 years later, it arrived in the business world with terms like the “Internet of Everything” or the “Industrial Internet”.

Cisco Chairman and CEO John Chambers keynoted at inaugural #IoTWF in October 2013.

Why am I so optimistic? Just have a look at the following list of events which took place over the past months:

• General Electric’s Minds + Machines in California
• HANNOVER MESSE in Germany with a focus on the topic Industry 4.0
• Cisco’s Internet of Things World Forum in Barcelona, Spain
• Start up accelerators for IoT: Springboard IoT, Startup Bootcamp Berlin

Looking backwards, I feel that this year is a turning point in IoT. Real business is taking over and we are expecting a lot:

• John Chambers: “Our analysis indicates that there is as much as $14.4 trillion of potential economic “value at stake” for global private-sector businesses over the next decade, as a result of the emergence of the Internet of Everything.”

• According to General Electric’s analysis: “…the Industrial Internet could add a sizable $10- 15 trillion to global GDP – the size of today’s U.S. economy – over the same horizon”, professing faith by Jeffrey Immelt, CEO of General Electric Co., the merging of advanced machinery with networked sensors and software that allow large components to manage themselves.

• “In fact, Gartner predicts that the total economic value add for the Internet of Things will be $1.9 trillion dollars in 2020, benefiting a wide range of industries, such as, healthcare, retail, and transportation.”

• An IDC report called “Internet of Things (IoT) 2013 to 2020 Market Analysis: Billions of Things, Trillions of Dollars”

This is extremely good news, but on the other hand I am disturbed that “evangelists” (people or companies), are overestimating the short-term business impact. 2013 was also clearly the year of overestimations:

• 30bn things bet by Gartner: “In 2020, there will be up to 30 billion devices connected with unique IP addresses, most of which will be products.”

• 50bn things bet by Cisco: “More things are connecting to the Internet than people — over 12.5 billion devices in 2010 alone. Cisco’s Internet Business Solutions Group (IBSG) predicts some 25 billion devices will be connected by 2015, and 50 billion by 2020.”

• 75bn things bet by Morgan Stanley: “Cisco estimates that only 200 million things were connected in 2000. Extrapolating the same growth rate up until 2020, this could mean that 75 billion things could be connected by then.”

“@marissa: The Lord was able to create the world in 7 days because there was no install base – Wim Elfrink @cisco_iot #iotwf

I feel that they are expecting too much too fast. Changing the business in the physical world takes longer than in the Internet world, because there is a huge installed base and a lot investment in real hardware which requires a solid business case. This is not paid with advertisement like in today’s social media Internet business.

Download our IoT infographics

I have done an analysis about the connected devices by myself for our IoT infographics. You might know the Goal-Question-Metric approach for measurement and statistics, which I applied in my analysis during summer 2012:

• Goal: Understand the growth of the Internet of Things.
• Question: How many things (servers, desktops, laptops, mobile phones, tablets,  TVs, home appliances, HVAC, cars) are connected to the Internet?
• Metric: The number of devices connected on one day to the Internet over the time frame from 1990-2015.

It is important to understand that we talk about the installed base of things, which are produced with built-in TCP/IP connectivity and connected to the Internet.

As you can see in the chart, the biggest growth from 2012-2015 lies in laptops, smart phones, and tablets connected to the Internet. I used the following data:

*Strategy Analytics: Webinar Tablet Market World Wide 18.07.2012: Tablets Set to Disrupt TV & Home

One reason for the remarkable differences in data is the different definition of “connected things”. For example, in my statistic ONE online car is ONE connected thing. However, you can count 100 electronic control units in each car as connected devices. You could also assume that each control unit has a dozen sensors and actors which would lead to 1,000 connected things in one car. Hence, I see that the business interest in a connected world is the car as a complete entity and not a single temperature sensor in the exhaust pipeline. In order to overcome this overestimation, I would ask everybody to reveal their data sources and definitions of connected things.

But so the question is: Why do we need this overestimation? I think there are three reasons for this:

1. Getting attention of media and investors.
2. Companies offering IoT technology are pushing strong and fast.
3. Hoping to grow as fast as the Internet or app economy.

Despite all the hype, this year is clearly an inflection point for the Internet of Things because real business is taking over from researchers and technologists. But please be aware, that it is really hard day-to-day work to generate value worth the investment. 

And we all want to be part of it, don’t we?