If you feel like you’re getting barraged by hype surrounding the Internet of Things—essentially sensors connected to networks—don’t worry, it will be worth it.
All that hype is actually understated, according to a new report.
The IoT is going to be worth more than any of us thought, the report implies. That report, published by McKinsey Global Institute, says the “potential economic impact” of the IoT will be “$4 trillion to $11 trillion a year” by 2025.
However, before we all get too excited, there are some caveats. Certain conditions need to be in place, the report says.
Interoperability between IoT systems needs to be addressed. In other words, to achieve the kind of numbers that McKinsey bandies around, the systems need to be able to talk to each other.
Plus, more IoT data needs to be used. The report uses an example of a 30,000-sensor oil rig. The McKinsey researchers say that in today’s terms, of the 30,000 sensors, only 1% of the data is used.
That’s because “organization” and “prediction” is underutilized as a datum, it says. Most sensors are there just to control and detect anomalies. Better value can be obtained with more in-depth sensor uses.
Consumer-oriented IoT will be less important than business applications, the report says, agreeing with a Gartner analyst whose ideas I covered recently in “Projecting the Internet of Things’ massive potential impact on business.”
Gartner analyst Daryl Plummer says that the joining of business and IoT is the next innovation in IT and digital business.
Customers will be the principal beneficiaries of the IoT, the report says. McKinsey uses the example of chronic-disease patients, and says by 2025 “remote monitoring could create as much as $1.1 trillion a year in value by improving the health of the patients.”
A secondary beneficiary will be the industries themselves, in that makers of industrial equipment, say, can create new business models.
Digitization of machines
Look for the digitization of machines, vehicles, and other things. Products will be serviced using IoT, too.
“Manufacturers, oil and gas companies, and other businesses have already begun to see the initial payoff from IoT technologies in their operations,” the report adds.
The numbers are staggering.
McKinsey’s crunchers reckon that out of the $3.9 trillion to $11.1 trillion value in 2025, $210 billion to $740 billion will be from vehicles; the home market will be in the order of $200 billion to $350 billion; and the IoT in factories will make up $1.2 trillion to $3.7 trillion from operations and equipment optimization.
Public health and transportation in cities will make up $930 billion to $1.7 trillion, and that’s not including health and fitness, which will come in at around $170 billion to $1.6 trillion.
But it’s really in the transformation of business processes, such as predictive maintenance, asset utilization, and higher productivity, and in new business models like remote monitoring as a service, that McKinsey reckons will be key to the IoT’s increasing value.
And what could possibly go wrong?
It’s not all going to be a walk in the park. Heads-up for major questions about data security and privacy.
“And in most organizations, taking advantage of the IoT opportunity will require leaders to truly embrace data-driven decision making,” the report says, implying it isn’t now.