FULL CONTACT - JSE MAGAZINE

FULL CONTACT

As the internet enters the next stage of its evolution, it’s changing the face of business – and society – in the process

FULL CONTACT

It’s the pill-shaped micro-camera that travels through your body, feeding information about your digestive health to your doctor’s computer. It’s your car, driving itself while it sends a message to your kettle, letting it know that you’re nearly home and needing a cup of coffee (but factoring in the five-minute traffic jam that you don’t yet know about). It’s the parking meter in the city centre that adjusts its rates based on the demand for parking spaces, and the internet-enabled billboard right next to it that scans your face and changes its advertising message based on your consumer profile. It is the ‘internet of everything’. It’s happening now. And it’s about to change your world.

To begin to understand the internet of everything (also referred to as the ‘internet of things’), one must first understand what the internet itself has become, and how dramatically it has changed in our wireless, always-on, cloud-covered, modern age.

It’s no longer just a closed network of desktop computers used by academics to share knowledge, nor the wild, borderless Web 2.0 marketplace that it later became. It’s now the internet of everything, guided – as Intel says – ‘by the fact that if something has an on/off switch, it should probably compute, and if it is going to compute, it should also connect to the internet’.

The implications are far greater than your Facebook account offering personalised advertisements based on how much you liked your friend’s Asian holiday photographs. What we’re talking about is an internet of actual objects, chattering silently to each other while you go about your business. It’s cars, heaters, fridges, kettles, toasters … anything. (And we really do mean anything: not just machines.)

In 2011, the Dutch company Sparked created a sensor implant that measures the vital signs of cows, then transmits that data to farmers who can instantly determine the animal’s movements, health and eating habits.

The Cisco Internet Business Solutions Group estimates that there will be about 15 billion connected devices (cows included) by 2015, and around 40 billion by 2020. GSMA, the global mobile industry trade group, puts the current number of internet-connected mobile devices (phones, tablets, phablets, etc) at about six billion, and it expects that number to double to 12 billion by 2020. John Chambers, CEO of Cisco Systems, highlighted the economic potential of this new internet of everything in a recent blog post at cisco.com. ‘Despite all these connections, we estimate that more than 99% of all physical objects that may one day join the network are currently still unconnected. Think about that – we’ve only just begun to connect the unconnected. What will happen when a full 1% of things are actually connected? When 10% get connected?’

What we’re talking about is an internet of actual objects, chattering silently to each other

Market research firm Gartner has an idea of what that future might look like. While it anticipates that IT spending in Europe, the Middle East and Africa will show an average annual growth rate of 2.2% through 2017, Gartner sees the internet of everything creating new markets and an entirely new economy.

‘The traditional IT market is not going to grow at a faster rate any time soon, if ever. Increased growth will come from the non-traditional IT market,’ stated Peter Sondergaard, global head of Gartner Research. ‘While in 2015 the combined IT and telecom market will hit nearly $4 trillion, the incremental revenue generated by the internet of things suppliers is estimated to reach $309 billion per year by 2020.

‘Half of this activity will be new start-ups and 80% will be in services rather than in products. The internet of things is a strategically important market. It will accelerate fast and will drive both revenue and cost efficiencies.’

Speaking at the Cisco Expo 2013 at Sun City last March, Cisco’s senior vice-president Howard Charney said: ‘In the future, the internet of everything is about bringing people, processes and data together, and turning information into action. And how big is the opportunity? In the private sector alone, we are talking about a $14.4 trillion industry over the next 10 years.’

According to IDC figures cited in presentations at the expo, only 0.05% of the world’s available data is being mined for value. That represents a massive opportunity for tech and data companies. No wonder, then, that more and more tech companies are hopping onto the bandwagon.

In February, Qualcomm Technologies and Deutsche Telekom announced that they would make an internet of everything development platform available to app developers worldwide. ‘Oracle realises that creating the next wave of internet-connected devices is just a starting point,’ said Judson Althoff, Oracle’s senior vice-president of worldwide alliances and channels.

‘But … the real opportunity is in enabling these devices to become part of a larger and vastly more intelligent system of collecting, processing and acting on data.’

At the same time, AT&T and IBM announced that they would start jointly offering internet of everything services designed to help municipalities, utility companies and other organisations better manage their infrastructure. ‘There is a huge amount of growth of the things that are connected,’ said Michael Curry, IBM’s vice-president of product management. ‘When you have that many things connected in, you have a big data problem. Companies want to be able to take that data and use it to optimise operations and predict failures.’

Full-contact-Pull-Quote

‘The internet of everything is transforming how cities deliver services and how citizens interact with government’

DAVID MPHELO, EXECUTIVE DIRECTOR, CISCO SA

Gartner’s researchers believe that the internet of everything will re-invent industries at three distinct levels: business process, business model and business moment. ‘At the first level, digital technology is improving our products, services and processes, our customer and constituent experiences, and the way we work in our organisations and within our partnerships,’ stated Hung LeHong, research vice-president at Gartner. ‘We do what we normally do, but digitalisation allows us to do it better or develop better products within our industry.’

As products and processes become digitalised, companies will find completely new ways of doing business – leading, inevitably, to transformational changes in business models. LeHong points to Nike, whose connected sports gear takes it to the fringes of the health care industry, and Google, who started out as an online search engine and is now dabbling in the automotive industry with their self-driving cars.

‘These organisations had no business in your industry, and are now re-inventing them,’ said LeHong.

To illustrate the third level – what Gartner calls the ‘business moment’ – LeHong used the example of large hotel chains such as Hilton or Hyatt. When the first wave of e-commerce sites hit, customers started looking for better deals on rooms in competing hotels on sites like hotels.com. Now, a social networking site like Airbnb offers a massive inventory of rooms – not just in other hotels, but in apartments, manors and even in other customers’ own homes.

‘The source and inventory of rooms changes every single night – creating competition at the business moment level,’ said LeHong, ‘A “business moment” can come from nowhere, yet [they] are increasingly everywhere, and are almost never the same in product, time frame or competitor.’

Michael Rosemann, professor and head of the Information Systems School at Queensland University of Technology, throws out the notion of business models entirely. ‘The future enterprise resource system is designed for families and people,’ he said at last year’s SAP Global Business Transformation Summit. ‘Right now, we still think in business models. We have customer master records and we expect customers to come to us.

Expect big things to happen. And when it happens, expect one of your connected devices to tell you all about it

But we’re starting to see that people want to have a digital world on their own terms. It’s time for companies to hand over control to customers, not just for co-innovation scenarios but to co-innovate this notion of digital capital and how to use it for what they want to do … It’s great to talk about business transformation, but the ultimate KPI is the extent to which we transform the customer.’

Those customers aren’t necessarily individuals or companies – it could be your local government. A Cisco study published at the end of January claimed that the internet of everything could generate as much as R152.5 billion in value for SA’s public sector over the next decade by saving money, improving employee productivity, generating new revenue (without raising taxes) and enhancing citizen benefits. How will it do this?

First is at a city level (R131 billion) through areas like smart grid, cyber security, travel, mobile collaboration and chronic disease management. Second, at a citizen level (R21 billion) via payments, counterfeit drug programmes, telework, chronic disease management and smart street lighting.

Full-contact-infographic

‘With more than two-thirds of South Africans living in urban centres and more migrating into these areas daily, our cities must become more flexible and responsive to citizen needs, while making the most of public resources. The internet of everything is transforming how cities deliver services and how citizens interact with government,’ said Cisco South Africa executive director, public sector business, David Mphelo. ‘Our public-sector leaders in SA are also under tremendous pressure to bridge the gap between rising citizen expectations and shrinking resources and they should act now to identify major internet of everything opportunities and begin by re-imagining what is possible in an internet of everything world.’

A hundred billion here, a hundred billion there … pretty soon you’re talking real money. No wonder the internet of everything has captured the imagination of economists, investors and techies across the world. And no wonder everybody wants a piece of it. ‘We’re all in. We’re making this our cornerstone of our campaign to become the number-one IT company,’ Chambers told an audience of international executives at Cisco’s California campus in February last year. ‘It isn’t a billion-dollar commitment. It’s way, way beyond that in terms of the resources and time we’re going to put behind it.’

Expect big things to happen. And when it happens, expect one of your connected devices – maybe your phone, maybe your car, maybe your internet-enabled pet poodle – to tell you all
about it.

By Will Sinclair
Image: Gareth van Nelson/HSMimages