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It's time to start thinking about how you can exploit the "Internet of Things."
David McCann, CFO Magazine
November 1, 2010
If you think of yourself as a good driver — and doesn't everyone? — you might have the chance to prove it, and save money in the process. Progressive Insurance's MyRate program, available in eight U.S. states, outfits your car with a sensor that tracks speed, acceleration, braking, and other driving behaviors. The data, transmitted through a radio network, allows Progressive to assess whether you're as adept behind the wheel as you believe, and set your rate accordingly.
That is but one manifestation of an expanding capability that many call the Internet of Things (IoT). Embedding sensors and communications capabilities into any and every object imaginable can facilitate previously unattainable levels of data analysis and, in some cases, response (in certain manufacturing applications, for example, the embedded devices don't just collect data but adjust machines based on it).
The technology will greatly expand what we normally think of as "the Internet," which is, in essence, a network of networks. In the Progressive example, cars themselves are rolling computer networks, with dozens of interconnected microprocessors that link to the Progressive sensor, then the radio-transmission network, and finally the insurance company's internal computer network.
The IoT concept dates to the 1990s, yet few corporate executives know it by name and even fewer have begun to think about how they might use it. Still, some applications of the IoT are now commonplace, like radio frequency identification, or RFID, which businesses have been using for several years to track products through supply chains.
While the Progressive example shows how the IoT can disrupt business models, much of the action so far has been in the areas of process improvement and resource management. In chemical factories, for example, sensors can track and modify ingredient mixtures, temperatures, or pressures, while in data centers they can optimize cooling systems.
Some retailers are experimenting with sensors to record foot traffic throughout stores and at individual displays in order to optimize layouts. Others are offering apps that take advantage of the GPS sensors in shoppers' cell phones and beam them special offers on the very item they might be contemplating buying at the moment, for example.
That said, it's still early days for the IoT. "The pace of adoption is accelerating dramatically, and the opportunity is huge," says Kris Pister, a University of California, Berkeley, professor who has been focusing on the development of the IoT for 15 years. "There is nary a company or industry for which the Internet of Things could not be applied. But we're very much at the beginning of a curve. It will be several years before we really hit our stride."
The most forward-looking possibilities for the IoT involve what Michael Chui, a senior fellow with the McKinsey Global Institute and co-director of a recent IoT research effort, calls "complex autonomous environments." One example would be linking motor vehicles to a network that provides a sort of autopilot capability, enabling cars and trucks to move in a more coordinated fashion on highways, reducing accidents and traffic jams.
As both the cost and size of the technologies that underlie the IoT spiral downward, it's conceivable that every manufactured object could be connected to an ever-expanding network of networks. That would take many years, and the degree to which it could happen would depend on the utility to be gained. As Gartner analyst Jackie Fenn says, "Do I need a sensor in my cup to tell me my coffee is cold?" Maybe not, but a voice alert that refill time is near would be welcomed by more than a few techno-loving workers.
David McCann is senior editor for technology at CFO.