Internet of Things connections to quadruple by 2020

A new report by Verizon predicts that the Internet of Things is poised to transform virtually every major market sector, growing to more than 5.4 billion connections by 2020.

connected devices
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Here in 2015, the Internet of Things (IoT) is already having a massive effect on business, according to a recent report by Verizon, and by 2025 it predicts best-in-class organizations that use IoT extensively will be up to 10 percent more profitable than they are today.

"We see the Internet of Things as an extension of our machine-to-machine business, as does everyone else in the marketplace today," says Mark Bartolomeo, vice president of IoT Connected Solutions at Verizon. "When you think about machine-to-machine, what you're really looking at is connecting devices and collecting data from those devices. The next big leap for IoT is really about the use case. IoT is about interconnecting these devices for specific use cases and deriving value from the data."

On the road with IoT

For instance, transportation companies are using data to reduce fuel consumption, while local governments are turning to smart LED street lighting that doesn't need regular maintenance but automatically reports when it needs repairs. Utilities are deploying smart meters that provide more granular data on energy usage while minimizing or eliminating the need for home visits.

One highly recognizable example of IoT in action is the way automotive insurers have begun setting premiums for commercial and fleet customers though usage-based insurance (UBI). Rather than rely on broad indicators like the driver's age and gender, these insurers are installing devices in the users' vehicles. These devices can track how many miles a driver drives in a year, when and where they take their trips and how safely they drive. With this data, insurers can align their premiums against measured risk.

Bartolomeo is quick to note that while machine-to-machine technologies have been around for some time, the game-changer is the way new IoT technologies are reducing the complexity of deployment. After all, machine-to-machine technology is just a first step toward IoT. To complete the IoT circuit, machine-to-machine technology must be enabled by secure network connectivity and cloud infrastructure that can transform the data generated into information and insight for people, businesses and institutions.

Verizon says that for a solution to be considered part of the Internet of Things, it must demonstrate what Verizon calls the "Three As":

  • It must be Aware. A connected asset must be able to sense something about its surroundings. It might sense location, proximity, altitude, temperature, vibration, humidity, light levels, motion or something else. Without the capability to sense, it's not IoT.
  • It must be Autonomous. The data processed from a connected asset must be transferred to a central location or processing application automatically — either at a set time, or when a condition is met or threshold crossed. Without connectivity, it's not IoT.
  • It must be Actionable. Verizon notes that IoT isn't just about gathering data; it's about using data to make better decisions. Whether the output is manual or highly automated, analysis of the data must be integrated into business processes. If the data is not actionable by your or a third party, it's not IoT.

"We're going to see more turnkey solutions and packaged solutions," he says. "We can expect higher value, less complexity and more accelerated deployment. We think the adopters of IoT absolutely will experience many of the same benefits: improved customer experiences, improved profitability and operational efficiency."

When it comes to customer experiences, IoT technologies can help make services:

  • More personal. Data can tell an organization where a customer is and what they're doing, making it possible to predict what they might want or do next. For example, digital signage might present a passing customer with a personalized offer based on previous purchases.
  • Faster and better. Telematics and asset tracking solutions are helping retailers offer next-day deliver, or even same-day deliver in some cases. The same data can allow customers to see exactly where their delivery is via a smartphone app or website.
  • Accessible to all. These technologies can help organizations reach previously underserved communities. Financial institutions are using mini branches and video tellers to attract younger customers and to serve the elderly and infirm. IoT devices are also helping individuals better manage chronic health conditions.
  • Available everywhere. Data is on the go. Cars are becoming a hub for data gathering and service delivery. For instance, companies are offering navigation services based on real-time traffic information crowdsourced from other road users.

But it's not just about customer experience. Organizations are also using IoT to drive growth and business performance. For example, industrial equipment manufacturers are leveraging IoT to sell outcomes like machine hours rather than just products. Organizations are also using sensors to monitor assets like elevators and shipping containers in near real-time.

IoT can be a life-saver

IoT technologies are also being used to improve safety and reduce risk. Train and car manufacturers are outfitting their vehicles with systems that can predict and prevent accidents. Wearable devices can sense environmental factors to identify when a worker is in imminent danger or has had an accident. Connected alarms, door locks, motion sensors and tracking devices can even help staff detect threats remotely.

For the report, State of the Market: The Internet of Things 2015, Verizon combined its usage data, a sizing and forecasting of the global IoT market by ABI Research, insights gleaned from working with companies and public sector organizations on real IoT projects, third-party research from Gartner and IDC and an online survey on consumer attitudes toward connected vehicles.

Based on its research, Verizon predicts the number of business-to-business IoT connections will more than quadruple between 2014 and 2020 to more than 5.4 billion connections globally. Verizon itself saw 45 percent year-over-year revenue growth in its IoT business in 2014. It now manages more than 15 million IoT-enabled connections for a wide range of industries.

Machine-to-machine connections Verizon manages saw growth in 2014 in the following sectors:

  • Manufacturing: 204 percent
  • Finance and insurance: 128 percent
  • Media and entertainment: 120 percent
  • Home monitoring: 89 percent
  • Retail and hospitality: 88 percent
  • Transportation and distribution: 83 percent
  • Energy and utilities: 49 percent
  • Public sector/smart cities: 46 percent
  • Healthcare and pharmaceutical: 40 percent

Bartolomeo is quick to note that a number of the sectors with relatively slower growth were actually early adopters of IoT-enabled technologies — like energy and utilities, which has been deploying smart grids and smart meters for some time.

Looking ahead, the automotive sector will play a big role in the coming growth: 14 car manufacturers account for 80 percent of the worldwide automotive market and each one of them has a connected-car strategy involving telematics. Additionally, ABI Research found that more than 13 million health and fitness tracking devices will enter the workplace by 2018. Moreover, by 2025, Verizon predicts smart city capabilities will be a critical consideration for companies when they decide where to invest and open facilities.

Bright lights, smart cities

"When it comes to smart cities, we look today and cities are deploying smart parking and smart street lighting. They are investing in video as a service to improve public safety. They are adapting their signaling, water management and pipeline management."

In a smart city, Bartolomeo says, if there is a water main break, city systems will be able to automatically reroute traffic patterns, shut down parking meters in the area and coordinate repair teams.

"It's all about analytics," he says. "What is the relationship between a streetlight management program and public safety? Between traffic flow control and smart parking? How do I really use the application data?"

IoT has the potential to radically transform your business. If you haven't put some thought into what it can do for your business, Bartolomeo says now is the time to start.

"Start small with a very specific use case," he says. "Don't take too broad an approach. You can deploy a better customer experience or better field service model. Pick one that's really core to your business and really focus on that."

It might only take a couple dozen sensors and some simple automated alerts. Once you find success, you can expand. At that point, think big and scale fast! Verizon notes that while standalone IoT projects can offer significant tactical benefits, transformations tend to come when you start to integrate projects into core business systems and processes. That provides decision makers with potent insight into their markets and operations.

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