The Internet of Things: Why Now?
The time is ripe for an IoT explosion. The number of connected “things” in the world has skyrocketed from about a million in the early 1990s to 13 billion today. As the Internet of Everything (IoE) gains momentum—digitizing business processes in every industry—we expect to see 50 billion connected devices by 2020. The technology connecting all these devices has become affordable and easy to integrate. But that is not the primary reason for this explosion in connected devices. I believe we are entering a “golden age” of digitization because of the confluence of the following factors:
Business Relevance: Lines of business (LOBs) are emerging as a key buying center for technology. The executives running plants, oil fields, or logistics systems have realized that technology solutions can deliver business outcomes critical to their business success —beginning with improved productivity, increased uptime, and reduced costs. It used to be that LOBs would work only with specialized integrators for specific, customized solutions. Today, business leaders want to change the way they consume technology. They are looking for technology providers who, together with a comprehensive ecosystem of partners, can pull together business-relevant solutions based on open standards and architectures. To meet these needs, technology companies such as Cisco are changing how we operate and how we go to market. Cisco has invested heavily in developing vertical solutions based on horizontal capabilities. We have built deep services practices and vertical go-to-market capabilities, and have invested in a comprehensive ecosystem of partners with whom we deliver not just great technology, but solid business outcomes.
IT/OT Convergence: The consequences of the above changes for both the traditional operational technology (OT) and IT roles are profound. As I said in an earlier blog, OT functions are increasingly adopting IT technologies and architectures. At the same time, IT is becoming more of a business partner to the line-of-business and OT groups, with a better understanding of business outcomes and operational requirements. IT and OT are coming together because of use cases that require data to flow from the plant to the IT infrastructure to the cloud. For example, a few years ago Harley-Davidson, the legendary American motorcycle manufacturer, was facing many intense challenges, including misaligned production and IT functions, and islands of incompatible data everywhere in the organization. After pulling together a team from IT and operations, the company converged its networks into a single network and began consolidating data islands. The results include increased productivity, efficiency, flexibility, and agility. Better data and workforce enablement has led to an 80 percent faster decision-making process, and new product introduction time has gone from about 18 months to less than two weeks. These and other improvements have resulted in a three-to-four percent increase in profitability.
Open Standards: As industries and technologies mature, there is an inevitable move to open standards to improve scalability, interoperability, and cost. We’ve seen this many times before, as specialized, proprietary technologies converged on IP and Ethernet. The evolution from analog voice to digital voice and analog video to digital video are just two of many examples of such transitions that occurred during the first wave of the Internet. Across many industries, the economics, scalability, and interoperability of commercial off-the-shelf components and IP-based architectures are too compelling to resist. A variety of standards bodies, consortia, and industry groups are working to create open and flexible IoT systems that can serve as foundations of industry solutions.
Cross-industry Use Cases: As IoT deployments converge around open standards, a number of compelling use cases are emerging that allow ecosystems of vendors to develop vertical business solutions based on horizontal platforms and capabilities. The common components often represent 60 to 80 percent of each vertical solution. For example, remote asset monitoring solutions provide powerful business benefits across multiple industries—oil and gas, service provider, transportation, manufacturing, and others. The benefits multiply with preventive maintenance capabilities when exception alerts from the monitoring systems link the assets with operation centers to not only respond to failures but also to anticipate pipeline leaks, network interruptions, vehicle breakdowns, or production downtime.
These four elements, combined with the “network effect,” which multiplies the value of connections as their number grows, are driving the rush to connect everything. At Cisco, we have thousands of customers who have already adopted IoT solutions—and every day there are more who see the evidence in their own businesses and industries that the time is now for IoT.