Internet of things (I): the numbers behind the economy and its business models

Internet of things (I): the numbers behind the economy and its business models

Photo: Blaise Alleyne

Maybe we oversimplify defining the ‘Internet of Things’ as an environment in which 100% of the existing actors and devices are interconnected through the Internet. Such an environment can mean a house and also entire cities, the so-called ‘Smart Cities’. Obviously we are still many years away from the whole world living in a stage full of interconnected objects, but undoubtedly the first steps have been taken. Many industrial processes are already on the way to it, like the house of this or that celebrity or millionaire.

The impact of the Internet on mankind has been huge, to the extent that for some researchers we are not Homo sapiens anymore but Homo mobilis. Our attitudes and behaviors have changed and therefore the social fabric as well as the international environment have grown upon new models of interaction. In a certain period of time there will be no space created or run by men not influenced by the ‘Internet of Things’.

Internet of things (I): the numbers behind the economy and its business models

Image: IDGConnect

An example of the ‘Internet of Things’

To illustrate how the ‘Internet of Things’ is gradually pervading all aspects of our daily lives we can take the example of parking meters, of which there are millions in thousands of cities around the world. The first parking meters ever required the driver going to one of these devices and pay coins to ‘buy’ time in that parking lot. This required making some physical effort; after this, the device made its job mechanically.

The parking meters evolved and became half mechanical and half digital. The most recent ones are mostly digital but nonetheless imply drivers to get out of their vehicles to go to the parking meter and buy parking time, which is a serious drawback when you are in an important business meeting that you cannot quit. If time runs out, your car (and you) will surely end in the city vehicle depot.

In principle, the ‘Internet of Things’ would among other things avoid you such outcome. Today you can buy parking time in cities like Barcelona through your smartphone or cell phone. Indeed this automated, interconnected system exists already and works in some Mexican towns. Not surprisingly, the creator of this concept was the Mexican company Parquimóvil.

The process is quite simple and the Internet is crucial to make it work: a) drivers find a parking place available; b) they send an SMS with the code found in the parking place; c) they collect their ticket at an authorized dealer; d) Parquimóvil (or the town officials working through it) record in their special software the place recently occupied and the time bought. If drivers wish to buy more parking time, they can do it by sending another SMS with the period of parking time needed. The image below depicts the process described above.

Internet of things (I): the numbers behind the economy and its business models

Image: Parquimóvil

Also, if you have a smartphone and download the app, you will be able to check for available places to park in your town. Incidentally, a similar model of geolocation service is featured by Zipcar, a car sharing service in the U.S. Similar apps are also used in the aviation industry, where the automation of services (reservations, baggage handling, pilot allocation, etc.) is the daily reality in this industry, contributing to a productivity increase. Other many industries and devices not having experienced the impact of connectivity will do it in the years to come. We are talking about appliances such as washing machines, refrigerators and many others we are suing in our daily routine. This is all thanks to the Internet.

The figures of the future of ‘Internet of Things’

Thousands of ideas, products or services like Parquimóvil or Barcelona’s app for the same purpose are successfully running today. Similarly, there are thousands projects under development and it is expected the economic value of all this will reach 8,900 million dollars by 2020, according to a survey by the consulting company International Data Corporation (IDC). Only in 2012 this IoT ‘industry’ generated 4,8 trillion dollars. To put into perspective this impressive figure, we can mention the Gross Domestic Product (GDP) of the U.S.: 16,2 trillion dollars according to the International Monetary Fund (IMF).

The IDC study is not the only one trying to quantify the value of the ‘new economy’ in the short, medium and long terms. The systems company CISCO has also made its economic forecasts. Other foresights say, in the particular case of the U.S., its economy will expand in 2025 between 0.2 and 0.4% of its GDP thanks to IoT.

In its report Internet of Things (IoT) 2013 to 2020. Market Analysis: Billions of Things, Trillions of Dollars IDC also notes that the expansion and consolidation of Smart Cities, the increasing adoption of information technology in cars and a new human culture addressing all that is ‘connected’ will be crucial for the growth of the ‘Internet of Things’.

But regardless of monetary figures the core of the issue is its continued growth and adoption of these new communication and information technologies. And generate these connected devices and analyze the vast amount of data produced requires investment of huge sums of money.

There are many investors willing to risk their fortune or part of it in new ideas. This funding model is called VC. But there are ideas that cannot access these resources, so a way to fill the gap is the so-called Crowdfunding. In other words, this means to appeal a particular audience who would ‘donate’ money to fund a specific project. A good example of this is Wikipedia.

Kickstarter, focused on supporting the development of new projects, points out in the United States over 8,000 technology projects have raised more than 170 million dollars using this crowdfunding system. Officials at Kickstarter add not only you get the money to develop your project but also your first customers, as these come usually from those who have funded you.

Debating the ‘Internet of Things’

And because the ‘Internet of Things’ is widespread and has a high impact on the daily lives of many people and organizations, the issue is debated right now in Barcelona in the Internet of Things World Forum. Indeed, from October 29 to 31 topics such as business ecosystems, standardization, inter-industry collaboration and regulation will be discussed.

Surely interesting conclusions will come up from this event. We will keep you informed.