11 things IT leaders need to know about the internet of things

Drive Your Business
11 Things IT
Leaders Need to
Know About the
Internet of Things

2 ©2015 WGroup. ThinkWGroup.com
The Internet of Things (IoT)
is the next phase in the
evolution of the Internet.
As managing big data and extracting intelligence from
it have become practical, broadband and wireless
communications are blanketing the world. Massive clouds
of storage are readily available. Smart products and
embedded sensors addressable from the Internet are
burgeoning. All of these trends promise great opportunities
for businesses and for nearly every aspect of society.
IoT, however, presents a host of challenges ranging
from security concerns to how (and when) vendors will
standardize the way in which their devices communicate and
interoperate. This paper takes a look at challenges CIOs and
senior IT leaders are likely to face as IoT continues to grow
and to the business benefits you’ll enjoy by embracing IoT.

Introduction
More than 100 devices connect to the Internet every second. By 2020, Cisco estimates that
number to be more than 250 per second.1
Morgan Stanley projects the Internet will be loaded
with 75 billion devices by the end of the decade.2
Analyst firm IDC offers a higher estimate, some
200 billion, while Cisco estimates the IoT market at $14.4 trillion by then.3
Those connecting
devices will include sensors on “things,” people, and animals that generate terabytes of data.
The data those devices generate can only have value if it can be collected,
processed and analyzed—then used to deliver business advantage. As IoT grows,
the compute power and analytics software needed to give you information suited
for making business decisions becomes even more complex, more costly.

But even more daunting than the sheer volume of data, IoT will include devices communicating
via WiFi, NFC, 3G, 4G LTE, and, a recent entry, Low Power Wide Area Networks (LPLANs) using
radio spectrum that lies in the space between TV channels.4
Other protocols like Bluetooth and
Zigbee will join Internet Protocol in feeding some of these communication channels to create entire
new webs of information.5
The IoT European Research Cluster explains the IoT and its impact:
“Internet of Things (IoT) is an integrated part of Future Internet including existing
and evolving Internet and network developments and could be conceptually
defined as a dynamic global network infrastructure with self-configuring capabilities
based on standard and interoperable communication protocols where physical and
virtual “things” have identities, physical attributes, and virtual personalities, use
intelligent interfaces, and are seamlessly integrated into the information network.
In the IoT, “smart things/objects” are expected to become active participants
in business, information and social processes where they are enabled to
interact and communicate among themselves and with the environment by
exchanging data and information “sensed” about the environment, while
reacting autonomously to the ‘real/physical world’ events and influencing it
by running processes that trigger actions and create services with or without
direct human intervention. Services will be able to interact with these “smart
things/objects” using standard interfaces that will provide the necessary link
via the Internet, to query and change their state and retrieve any information
associated with them, taking into account security and privacy issues.”5
Most of the physical world is yet to be “instrumented” and connected to the Internet. As
smart products, shipping containers that continuously report their location, and sensors
embedded in virtually any kind of device roll out, the IoT will bring dramatic change.

Adapting information systems to accommodate IoT devices and their data will involve what
Forbes calls a “Big Bang Disruption.”6
However, the biggest disruption will be on business
processes, because IoT sensors and the like are only the enablers of a technology – enablers
that give you (actually, drive you to) a new way of doing business. The fact that IoT generates
enormous continuous volumes of data is what makes it so
challenging. The fact that much of it may require
attention in real time complicates matters further.
As your colleagues in marketing, engineering,
operations and finance begin making
plans to embrace some aspect of IoT, they’ll discuss
specific business problems to be resolved through IoT. For example, one goal might
be to reduce your field-service costs. Adding sensors to your products so they can self-
diagnose and “phone home” when (or before) service is needed can reduce service costs.
It also may increase customer satisfaction, customer lifetime value, and loyalty.
Beyond the software and hardware needed to receive and analyze streams of data from
thousands of self-diagnosing products, business processes will have to change. Presumably
those alerts from smart products that need attention will appear on a console or dashboard.
Who will handle dispatch? What training will they need? Can the dispatch be automated? Will
the field-service staff need something more than a cell phone to respond to the dispatch? How
will new procedures fit with the traditional process for receiving customer calls and dispatching
service personnel? What accounting steps are needed to measure success of the initiative?
Challenges
Managing change1
IoT generates enormous
amounts of data – and
much of it requires attention
in real time.


A typical manufacturing company’s basic operation looks something like this:
• Conceive a product.
• Develop and test the product.
• Buy components and raw materials, including
all the functions handled by enterprise resource
planning (ERP) systems, such as ordering,
receiving, scheduling, shipping, and supply
chain planning.
• Manufacture the product.
• Sell the product.
• Support and service customers.
• Reiterate with the next product.
Which of these will benefit the most from adding IoT to the mix? How will you prioritize
various IoT initiatives? How will you implement IoT to meet your objectives? How
will you process the flood of data it can generate? How will you use that data?
How will IoT advance the goals of the company toward greater profitability?
In almost every field, the way of doing business changes. For example, property managers
may be concerned with reducing energy costs by installing sensors in energy consuming
devices. An organization that provides medical care, may be considering how medical devices
can report their status (working, not working, pending failure, in need of recalibration, etc.)
What new job positions and training are required to monitor data from those devices?

Further, because IoT will inevitably spawn changes, there will be:
• New technologies to learn, embrace and deploy
• New standards to learn
• New software suited to analyzing the IoT data streams
• New hardware, such as gateways that collect and pre-
process IoT data
• New relationships with suppliers, many of which are not
currently part of your ecosystem
• New training required to keep the staff up to date with the
impact of IoT on their daily duties, and perhaps new job
descriptions.7
Another aspect of managing change lies in recognizing that IoT is in its
infancy. Vendors of products associated with IoT, as well as data center
and cloud solutions to manage it, will rise and fall. Vendors won’t begin
to consolidate and take winning positions in the market for at least a
few years. It’s wise to connect with those segments of the market that
are relevant to your IoT initiatives rather than focusing on individual
vendors. Use the vendors you do connect with as advisors and experts,
capable of helping you understand the landscape as it changes.

If you intend to manufacture products that use sensors, it’s important to understand
interoperability issues. Just as Ethernet is the standard protocol serving as the
foundation of the Internet, manufacturers of smart products must arrive at a single
standard that allows sensors and smart devices to communicate with one another.
Beyond those basics, the standards needs to address security issues.
No single standard exists, but the Open Interconnect Consortium (OIC)8
and the All Seen
Alliance9
are principal contenders.10
Both intend to offer certification of smart devices to assure
each device can communicate with other devices complying with their respective standard.
The OIC membership totals more than 100 member companies and includes the UL Verification
Lab, IBM, Honeywell International, National Instruments, Accenture, Samsung SDS, and Intel. The
All Seen Alliance claims about 180 members, including Canon, Microsoft, Panasonic, and Sony.
Device interoperability
IoT product families may use sensors that communicate with one another.
Those conversations between sensors can take place in the cloud, rather than
building out an entire infrastructure to handle the ongoing drip of data between
sensors. The cloud offers flexibility, reliability, and cost savings.
Amazon’s Web Service (AWS) is the largest cloud provider on the planet. AWS recently
announced its simply named “AWS IoT” platform. Rather than addressing standards for sensor
design, AWS IoT works with cloud services on its AWS platform, enabling sensors to exchange
data and allowing applications to communicate securely with “billions of devices.”11
With
the hockey-stick growth of AWS (81 percent over the last year) and more than one million
customers, considering its newest platform may be a wise step for companies embracing IoT.12
Using the cloud
2
3

The 2015 IT Risk/Reward Barometer published by ISACA, a non-profit best practices
organization, (formerly known as the Information Systems Audit and Control
Association), addresses a number of security concerns which, somewhat surprisingly,
include consumer products that are capable of connecting to the Internet.13
Smartphones, smart watches, wristbands that monitor one’s health, and
other consumer devices are growing in popularity. Some of those
devices may be able to connect through your company’s wireless
network – perhaps not natively, but after being hacked – potentially
opening an endpoint security threat. The proliferation of connectable
devices available to consumers is only destined to increase.
As ISACA points out, “many manufacturers have left their connected
devices vulnerable to hidden, or unexpected, risks. The rush for mass
adoption may have come at the expense of thorough safeguards.” Among IT
professionals, nearly three-quarters believe security measures are not adequate to safeguard
corporate data from intrusions through IoT devices, and a similar number rate that as a “medium
to high” risk.13
Preventing damage from IoT consumer devices requires several actions.
Employees who
‘bring their own things’
• Ensure all workplace devices owned by the organization are updated
regularly with security upgrades.
• Require all devices be wirelessly connected through the workplace
guest network, rather than internal networks.
• Provide cyber security training for all employees to demonstrate their
awareness of best practices of cyber security and the different types of
counterattacks.
• Ensure that IT and security professionals are properly trained and
certified.13
4

If your company intends to collect data from the smart products it sells, these issues
are more than academic. With thousands or millions of devices exchanging data with
your servers, many 24x7, the question of bandwidth and storage deserves serious
consideration. That’s true whether your servers are on-premises or in the cloud.
Your storage capacity as well as that
of the pipeline into your data center
(or your cloud services provider) are
typically provisioned for people running
applications, making asynchronous
demands on resources. Take a look at the
bandwidth you’re paying for, then do the
math to determine how IoT incoming data will impact your available storage and bandwidth.14
In a similar fashion, IoT calls for a review of your data retention and governance
policies. How much of that IoT data needs to be kept? For how long?15
Further, consider that IoT products targeted to consumers may collect personally identifiable
information (PII) as well as operational data that shows how the device is being used, its state,
and so forth. While the output of your analytics software parsing operational data is important
to marketing, engineering and other operations, the existence of PII on your servers calls for
an extra layer of security and special handling to preserve the customer’s privacy. Consider
your rules for data governance and your privacy policies (even smart TV’s come with privacy
policies today!) if you plan to store and process IoT data that can threaten the integrity of PII.
Storage, bandwidth, and
data governance
With thousands – or millions –
of devices exchanging data with
your servers, the question of
bandwidth and storage deserves
serious consideration.

5

Network latency checks, alerts and other traditional methods of monitoring data center
operation may need review with an eye toward data center infrastructure management
(DCIM) if IoT data will be collected at your data center. DCIM offers diverse information
about the operation of a data center, including such issues as optimizing systems
for the greatest efficiency; management of power, heating and cooling; optimizing
physical aspects (like space management); and other forward-looking topics.
Data center
infrastructure management
6

Durable and non-durable manufacturing accounts for about 12 percent of the national
GDP and, were it a nation, it would be the 10th largest in the world.16
IoT is already
having some of its greatest effects to date in manufacturing, so much so that the
term “IIoT” (Industrial IoT) has been coined to acknowledge its impact.
One approach to implementing IoT lies in connecting the manufacturing floor to a
corporate network. In turn, that step connects the shop floor to the larger business
and can provide global visibility into the factory. Providing sensors across the floor and
signaling devices that workers use to flag a problem lets management monitor and take
action as needed. This approach can deliver a number of positive outcomes:
Manufacturing
The financial benefits
that IoT delivers
• The effectiveness of machine and equipment used in the manufacturing
process can increase. If a machine needs attention, it can be addressed
in minutes, rather than hours or days. Predictive maintenance enabled
by sensors installed in shop floor machinery adds further to minimizing
downtime.
• Management can make decisions more quickly when material supply slips,
largely eliminating work stoppages and dips in production efficiency.
• Manufacturing defects (DPMO or defects per million opportunities) can
approach and reach the Six Sigma level of only 3.4 defects per million
products. This leads to reductions in both scrap and as warranty returns.
• Inventory and its holding costs can be reduced.
• Employees become empowered to collaborate and play a role in notifying
supervisors of quality problems. Likewise, the cost of training tends to drop
as employees are focused on specific tasks driven by the overall system.
7

Connecting the manufacturing operation to suppliers delivers another round of benefits.
Management can see the dependencies, the movement of materials, and process times
involved in receiving raw material when suppliers embed position-reporting devices into their
deliveries. If a manufacturer connects ERP to those suppliers, orders can be placed with
specific delivery dates, closing the loop between order and receipt and eliminating shortages.
For those manufacturers who embed sensors
in their smart products, those products can
send real-time data to report their
state (off, in use, in need of service,
etc.) as well as data unique to the
specific product. That data gives manufacturers
a direct link to every product shipped,
allowing remote visibility, and with it the potential to interact with the product and provide
maintenance and service at an optimum level. Dispatching a service person to diagnose
a home appliance breakdown, for instance, is more costly than remote diagnosis.
Customer satisfaction increases when the service person arrives on site to do the repair
with the necessary parts already in the service vehicle. Even better, if the smart product
provides information to predict the need for maintenance, quarterly and other periodic calls
for a service person to “check in” on the product can be drastically reduced or eliminated.
Smart product sensors can send
real-time data to manufacturers,
giving them the opportunity to
provide service at an optimum level.


In summary, manufacturers can also expect to achieve:
• Improved manufacturing production processes and greater
efficiency on the shop floor
• Remote management, real-time management, and more proactive
maintenance
• Improved energy management through sensors measuring power
consumption
• Comprehensive, end-to-end supply chain management
The financial impact of IoT comes from several directions.
Manufacturers may realize a 30
percent reduction in maintenance cost
through predictive maintenance, according
to a study by the Department of Energy.
Diebold, maker of banking ATM’s,
reported more than one in six problems
were solved remotely with a consequent
15 percent decrease in downtime.17
Greater efficiencies in executing
a range of business processes
reduce both COGS and SG&A.
Productivity of employees increases,
so that certain tasks may require
fewer man-hours to accomplish.
The supply chain becomes more efficient.
Time to market diminishes and innovation
ramps up. Witness Tesla’s Software Update
7, which allows certain vehicle models to
drive themselves semi-autonomously.
Customer lifetime value and market
share are both likely to increase.

Smart products generate data that can reveal usage patterns. For instance, how and when do
customers use the product? What features are most popular? Least popular? What error messages
are triggered and why? IoT data can give you insights into products never before available.
They may reveal trends that lead you to selling additional services.
“Premium” software upgrades, for example, could be sold
and installed remotely. SLAs might be marketable on certain
kinds of products. For some product classes, IoT data, once
it’s anonymized, might be salable to other businesses.
With products that consume other products you might establish an
automatic resupply order for the consumable. For instance, a 3-D printer
may consume plastics, resins, metals, or ceramics. After “X” number of cycles
the printer could submit an order to deliver more material. If the resupply order
goes to another company, you may have the potential of establishing a new business relationship that
can expand your business, or perhaps you’ll find it’s possible to sell your IoT data to that supplier.
Monetizing IoT data
Beyond manufacturing
Because IoT will affect virtually every segment of U.S. business in one form
or another, estimating IoT’s financial impact is speculative. However, for most
business segments, profit opportunities exist in each of the following areas.
8

When you connect your products, you also are connecting your customers to your company.
As noted above, the increased levels of service you can provide because you have a “digital
umbilical cord” can lead to increases in loyalty, customer satisfaction, and customer lifetime
value. While prospecting for new customers will always be part of the sales and marketing
process, selling more to the established base just makes sense. IoT can help you do that.
Increasing customer loyalty
Having a digital connection to the product from afar gives marketing a wealth of
information that can lead to improving products and developing new ones.
Making marketing more intelligent
Smartphones will only become more sophisticated.
Besides the millions of apps available for
consumers, manufacturers have already tapped
into the power of smartphones to offer apps
with their commercial products. For instance, a
surveillance monitoring camera can present its
view to a smartphone via WiFi. Based on use data
from embedded sensors, marketing might find the
need for a new app that alerts the user to motion or other events. Perhaps an app that
offers facial recognition would be desirable in certain security environments.
The margins on software almost always outstrip those on hardware. Once software is complete
its cost of duplication drops almost to zero. Focusing on selling apps with smart products,
or perhaps charging for upgrades and “Premium” versions, adds to the bottom line.
Increasing profit
margins
10
11
9

With IoT being so pervasive in its impact on business, and because it will develop in ways difficult
to predict, be sure to stay in touch with new developments. You may find these references helpful.
IDC’s paper, “Investing in an Internet of Things (IoT) Solution: Asking the Right
Questions to Minimize TCO,” provides a checklist for those moving toward IoT.18
Gigaom provides summaries of research on IoT
topics and sells full-length reports.19
451Research.com offers both complimentary reports [20] and
a subscription-basis research dashboard21
that addresses
“prevailing issues driving IT innovation,” including IoT.
Finally, from academia, visit the Harvard Business Review22
and search for “IoT” to reveal a variety of studies and papers.
Further reading

References
[1] http://blogs.cisco.com/news/cisco-connections-counter
[2] http://www.businessinsider.com/75-billion-devices-will-be-
connected-to-the-internet-by-2020-2013-10
[3] http://betanews.com/2015/03/30/internet-of-things-brings-a-
sense-of-purpose-to-cloud-mobile-and-big-data/
[4] http://www.iotjournal.com/articles/view?13625/
[5] http://www.internet-of-things-research.eu/pdf/IoT_Cluster_
Strategic_Research_Agenda_2011.pdf
[6] http://www.forbes.com/sites/bigbangdisruption/2013/12/16/big-bang-
disruption-the-internet-of-things-takes-off-gradually-and-then-suddenly/
[7] http://evertiq.com/news/37861
[8] http://oic.org
[9] https://allseenalliance.org/
[10] http://www.cio.com/article/2994777/internet-of-things/iot-
standards-groups-get-ready-to-rumble-at-ces.html
[11] https://aws.amazon.com/iot/
[12] http://www.cnbc.com/2015/10/09/how-amazon-wants-to-dominate-in-enterprise-tech.html
[13] http://www.isaca.org/SiteCollectionDocuments/2015-risk-
reward-survey/2015-it-risk-reward-barometer-report.pdf
[14] http://www.gartner.com/newsroom/id/2684616

[15] http://www.itbusinessedge.com/blogs/integration/five-
questions-to-help-cios-avoid-iot-data-problems.html
[16] http://www.themanufacturinginstitute.org/Research/Facts-About-Manufacturing/
Economy-and-Jobs/8th-Largest-Economy/8th-Largest-Economy.aspx
[17] http://thevarguy.com/var-guy/031615/internet-thngs-8-case-studies#slide-4-field_images-69801
[18] https://www.idc.com/prodserv/custom_solutions/download/1639.pdf
[19] http://research.gigaom.com/topic/internet-of-things/
[20] https://451research.com/internet-of-things
[21] https://451research.com/research
[22] http://hbr.org/
References

Drive Your Business
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