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Can the Internet of Things deliver benefits to the bottom line?

Internet-of-things

EVERY YEAR, Gartner publishes what it calls its Hype Chart. It’s a barometer of where the latest tech fads sit on a spectrum, from Next Big Thing in tech, from early stage ‘innovation trigger’ (currently occupied by, among others, brain-computer interface and smart dust), through the peak of inflated expectations, down the trough of disillusionment, before emerging onto the plateau of productivity, where actual applications like 3D printers and speech recognition currently sit, making real contributions to companies’ operations and people’s lives.

Sitting at the apex of the curve of inflated expectations, poised to plummet down into the trough of disillusionment, sits the Internet of Things (IoT). What that means, at least according to Gartner, is that real, practical mainstream application of IoT systems and processes are somewhere between 5-10 years away, and that the idea is set to experience a bumpy few years before that happens.

But does that reflect the reality?

Source: Gartner

Source: Gartner

Patchy progress

The internet of things (IoT) is defined as is ‘the network of physical objects that contain embedded technology to communicate and sense or interact with their internal states or the external environment’. From a domestic standpoint, that means smartphones, fitness bands, smartwatches, fridges and ovens, smart locks, thermostats and TVs.

But adoption of IoT systems and processes is undoubtedly growing: according to Gartner’s latest estimates, there will be almost 6.4 billion devices connected by the end of 2016, with 25 billion by the end of the decade. Meanwhile, IDC pegs the IoT’s market value at $655bn (£459bn), rising to $1.7t by 2020.

At the public level, the IoT is allowing the development of smart cities, where sensor networks monitor everything from traffic flow, levels of rubbish in bins and number of people at bus stops. Its applications in defence and healthcare in particular are fairly well advanced.

In business, however, the IoT is still in its infancy. Few companies have really harnessed its power: some US retailers are using sensors to improve fleet and inventory management, but largely achieving that by building on existing asset management systems.

Use of sensors (measuring temperature, humidity, energy and water use among others) is well-trodden ground for many industries (again, healthcare, or oil and gas) but for a lot of sectors, the idea of using networked sensors to improve operational efficiencies is just not on the radar.

IoT graphHarnessing the immediate benefit 

However, there is a growing feeling among some observers that with some smart investment, IoT can quickly start to deliver genuine benefits to the bottom line. Indeed, there are many firms now offering plug ins to monitor water usage, HVAC and energy use that can be installed and operational within days.

And while the IoT may not represent the fourth industrial revolution, it could provide FDs and operational managers with compelling, reliable, real time insight over an organization’s physical assets, infrastructure and performance.

Damon Hart-Davis spent 30 years working in banking before leaving to set up OpenTRV, a start up that manufactures a sensor-led heating system designed to save energy by not heating rooms you are not in. Instead of using one thermostat for the whole house, it is designed to be simple to (retro-)fit to existing UK housing stock with radiator central heating. And it’s Hart-Davis’s belief that CFOs can utilise the IoT to effect genuine improvements across their business.

“Take a food service company, for instance” he says. “There are legally mandated limits you have to operate in in terms of the freezers you run. For most businesses, that means you need a guy going round checking each unit; so at the moment, it’s manually intensive, and there’s all kinds of risks around result tampering or lack of oversight, with potentially serious consequences.

“So clearly you’d like to reduce the cost of collecting the data, to reduce the possibilities of tampering, as well as giving real time feedback to the operational team and, ultimately, the FD.”

Achieving that would be relatively simple with IoT. “Install a little IoT thermometer that can transmit data to a central server, so it doesn’t require a human being; it has tamper protection so it can’t break, and you’re sure it’s doing what it should be doing. Simply by using that you’re cutting cost and reducing risk.”

The sensor in a system like that outlined above is relatively unsophisticated and inexpensive. It feeds data through an authentication and encryption process, then arrives back at a server which verifies it. Operational managers can then act on the data in real time, or aggregate it over time to give a snapshot of whatever’s being monitored.

Secure in the knowledge

And it can go beyond simply collecting data: you could deposit it into a blockchain, the distributed database that grew out of the development of crypto-currency bitcoin.

Using blockchain, the food service company could automatically (and securely) share by with its auditors, for instance, and the Health and Safety executive, giving a full, unimpeachable audit trail of a regulated process that can’t be tampered with.

“This is a potentially a huge deal as a risk reduction tool, a time saver and a safety enhancer,” says Hart-Davis, not to mention an assurance tool. And that’s just the food industry. “The potential applications of something similar across a whole swathe of organisations and industries so far untouched by the IoT are enormous.”

Secure monitoring of things without requiring human intervention is an obvious game changer – IoT has the potential for eliminating a lot of low paid grunt work. “It could get rid of the sort of jobs you can’t actually pay someone to do on minimum wage: it could be health, logistics, agriculture, food, you name it,” he says. “From checking stock, turning down thermostats or adjusting lighting, the possibilities are endless.”

“This is not the new industrial revolution,” says Hart-Davis, “But it might allow us to halve the food safety problem, or lower our energy use, or water use. It can reduce wasted man hours, deploy resources in a smarter, more cost effective way, cut pollution, improve working conditions and move stock quicker.”

Cheap, plentiful and trustworthy 

The game changer for the FD, many believe, will be the proliferation of relatively cheap sensors: the idea is to achieve a comparable level of granularity across the business’s physical assets and infrastructure to that which is currently delivered by ERP systems for its financial performance.

Making the data cheap, plentiful and trustworthy could form the foundation of a genuinely new way of working. Using many sensors has the great advantage of allowing anyone looking at the data to drill down and immediately pinpoint where energy use is highest, say, or emission levels are concentrated.

“Measuring more things in more detail means you can manage in more detail, which is something most CFOs would want,” says Hart Davis. “If you’re doing IoT simply for its own sake then you’re doing it wrong. But if you’re doing it to make your business run better then that’s where the benefit lies.

Of course, progress is unlikely to be without difficulty, and there are serious issues to address. Security is perhaps the most obvious. Worries over hackers breaking into heating systems – or worse – make for good headlines, but there’s no doubt that the IoT offers cyber criminals another, potentially rich playing field for extortion, malware and general chaos.

In addition, interoperability is sure to be a major hurdle. Making systems integrate and talk to each other isn’t easy when you have major tech players determined to build walled garden systems: it’s likely that Apple kit won’t work with Google apps, or Amazon may hoard its own IP, and so on.

An open source approach would solve that problem, and though we shouldn’t hold our breath on that, an organisation called OpenSensors.io aims to provide a central, open platform for publishing and subscribing to real-time data streams generated by the internet of things. The firm promises to make it easier for people to connect, deploy and remotely manage large deployments of sensors and internet-connected devices, plus subscribe to and reuse publicly available real-time data.

Beyond that, much of the activity in the IoT space is focused on developing industry specific apps. In agriculture, a start-up called KisanHub is using satellite technology and in-field sensors, to collect huge amounts of data for farmers to use in order to improve efficiency. The sensor network provides precise information on rainfall, irrigation, crop growth, wind speed, cloud cover and so on, all of which is displayed via a dashboard.

And of course, expect to see IBM, Microsoft, Amazon and the rest pour millions into their own R&D as well as acquiring the best of the rest. While sensor manufacturers make their products more resilient, efficient and smart, work to improve user interfaces is also underway, designed to give companies bespoke dashboards in order to customise how data is displayed, sorted and analysed.

In a few years’ time it’s possible that rather than simply publishing a sustainability report, the likes of Apple or Unilever will release blockchain data that follows individual components from the moment they enter the manufacture or supply chain, verified by sensors and demonstrating how products were built, shipped and sold.

Without doubt, the IoT represents a potentially game changing breakthrough. And while dreaming big about microsensors making business leaders omnipotent, all-seeing overlords may be scary, some simple research and a manageable pilot scheme with carefully targeted small scale investment could change the way your business works forever.

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