by John Reiners
I was talking to the Partner at a London PR firm the other day who mentioned that many CEOs he talks with are thirsty for more information about the Internet of Things (IoT). They hear the buzz but many are unclear what it will mean for them. This chimes with a frustration I’ve felt with many of the reports I’ve read on the subject. They quote huge figures for the potential market of billions of devices worth trillions of dollars, without really convincing on why as consumers or businesses we should be excited. Verizon’s State of the Market 2016: Internet of Things report takes a different angle, focusing on the commercial realities of IoT - how and why it is being implemented now. We carried out research for the report: a survey of 500 early adopters of the technology from different sectors and around the world as well as a number of in depth interviews with those closely involved in IoT strategy and implementation.
The report claims that “2015 was the year that the IoT gained legitimacy, in 2016 it’s going mainstream”. Evidence from our survey includes:
- Firms are gaining real commercial benefits, across all industry sectors. Revenue growth is the most important, though early adopters are also seeing cost savings across departments and other benefits (like increased health and safety).
- Typically reported financial performance improvement as a result of IoT is modest. The prospects are far brighter in three years’ time, with over 30% of firms expecting revenue and cost improvements of greater than 10% for their firms. For particular IoT applications, for example remote maintenance and factory automation, the returns can be far larger.
- IoT users are struggling to exploit the information it generates but have plans to do so. Today, less than one-tenth of respondents say they are using more than 25% of their IoT data; half expect to reach that threshold in three years’ time, with even higher usage rates expected in industries like Financial Services, Professional Services and Retail.
- To get the best out of IoT organizations have to adapt – in fact cultural and organizational changes were cited as the greatest challenges, more than the technology.
- Security concerns, particularly relating to personal data, remain significant. But early adopters are confident they will be solved and are pressing ahead.
Early adopters of IoT are learning from their experience. Many start small, build management support then get more ambitious. Others are seeking first mover advantages – like developing industry wide IOT platforms. Above all they are getting ready for when the market does take off. Well over three-quarters say IoT deployment will be critical for competitive advantage in their industry in three years’ time. As one of our IoT pioneers explains: “We’re thinking about the deployment upscale. We know what we have to do. In every segment we have two or three solutions which are in the final stages of proof of concept with our customers. So we’ll be able to follow our customers when they are ready.”
So though IoT won’t be ever present in 2016, we can expect rapid growth. And CEO’s need to take notice now, or early movers may establish an unassailable advantage.
John Reiners is Oxford Economics Managing Editor, EMEA. He manages research programs on a wide range of topics, including digital economy and international trade. He also follows emerging trends, like the emerging platform economy. He can be contacted at firstname.lastname@example.org