The Biggest Market Yet to Adopt the Internet of Things

In my high school days, students would often connect their computers via LAN. They were able to share movies and music. But, best of all, they could play PC games together at the same time. They called them LANs, or local-area networks. I would often get asked by my friends, ‘Are you coming to LAN tonight?’

How did we connect without using the internet? Our computers linked via telephone lines and radio waves.

These LANs were usually confined to one room. Now, if this were still the method of connecting computers, I think we’d all be in trouble. Sharing information over short distances is a serious hindrance for businesses.

We should be thankful for the Internet of Things (IoT), then.

You might have heard of this term before. But the actually meaning is often misunderstood.

It means to connect any device with an on and off switch to the internet and/or each other. This could include everything from smartphones and coffee machines, to wearable devices and fridges.

In 2014, Gartner, an advisory firm, predicated that, by 2020, there will be over 26 billion connected devices. But according to Visual Capitalist, this figure might be double that.

They believe there could be 50 billion devices connected to the internet by 2020.

We already have a lot of consumer products adding to the IoT. But a larger contributor could in fact be the industrial industry. It’s called the Industrial Internet of Things (IIoT). And it could be one of the next biggest industries that all investors will want to be in.

The investment still yet to come

The IoT term isn’t anything new. We’ve had internet connected devices for years now. But the IIoT is still new territory for most businesses. IDG researchers conducted a 2016 survey surrounding the adoption of the IoT. The study found that 70% of organisations were still in early discussions about the IoT.

That means they are still in the planning phase of using the IoT to enhance operations.

Industries which stand to benefit from the IIoT include transport, natural resources, manufacturing, renewable energy and smart cities.

The benefits of the IIoT are clear. It improves efficiency. Operation costs improve, too. Assets are better utilised, and their performance goes up. Best of all, however, is the increased sharing of knowledge within the organisation.

As an example, iron ore miners could attach sensors to their drills. These sensors could, in real time, share data with engineers and experts. This information could be the efficiency of drilling. Or it could be the concentration of iron ore at the site. Feasibility studies could carried out at the site.

They could deem whether it’s worth excavating on a second by second basis.

The best part is the sharing of information in real time. No more wandering in the dark. Companies could predict and analyse whether a project will be a success or failure.

The same benefits are on offer for factories and energy generators. Just think of the IIoT as another tool to achieve optimal operational efficiency.

In the coming years, around 40% of the total data created will come from sensors. This includes large-scale industrial machinery like power grids, aeroplanes and oil extraction.

Not only will the IIoT improve operations, it will create and boost other markets, like, for example, the industry of big data.

A lot of the data produced by devices won’t be particularly useful. But some of the data will be. The market of making sense and sorting data would likely boom in the future. According to Visual Capitalist, it’s expected to reach US$300 million by 2020.

But if the IoT is so brilliant, why has it not been more widely adopted by organisations? As I mentioned before, most organisations are still in the planning phase of adopting the IoT.

Barriers for now

For senior IT executives, data integration is a major barrier. What this means is that data coming from various sources and formats is hard to make sense of. Organisations have to set up new teams just to sort and make sense of data.

And right now, a lot of senior IT executives just don’t have access to the right skills and expertise.

Jeremiah Stone, the General Manager of General Electric Company [NYSE:GE]’s digital business, commented on these barriers, saying:

We have seen first-hand, how the data integration problem has challenged IT and OT teams for decades and now the advent of the IIoT adoption is compounding the problem. To extract meaning and value for industrial data, new systems are required to handle the challenges posed by the volume, velocity and variety of these data sets.

But if we are to evolve into a truly connected world, these barriers will need to melt away. Yet I believe this will happen without much help. The advantages for adopting the IoT are already too attractive.

Managers can make sense of business happenings in real time. Processes are made more efficient, and problems could be predicted before they even happen by using analytics.

It’s a space you’ll want to watch going forward.

Härje Ronngard

Junior Analyst, Money Morning

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