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© 2013 Cisco and/or its affiliates. All rights reserved. This document is Cisco Public Information.
Embracing the Internet of Everything To Capture Your Share of $14.4 Trillion
More Relevant, Valuable Connections Will Improve Innovation, Productivity, Efficiency & Customer Experience
Executive Summary •TheInternetofEverything(IoE)creates$14.4trillioninValueatStake—thecombinationofincreasedrevenuesandlower coststhatiscreatedorwillmigrateamongcompaniesandindustriesfrom2013to2022.
•ThefivemainfactorsthatfuelIoEValueatStakeare:1)assetutilization(reducedcosts)of$2.5trillion;2)employee productivity(greaterlaborefficiencies)of$2.5trillion;3)supplychainandlogistics(eliminatingwaste)of$2.7trillion;4) customerexperience(additionofmorecustomers)of$3.7trillion;and5)innovation(reducingtimetomarket)of$3.0trillion.
•Technologytrends(includingcloudandmobilecomputing,BigData,increasedprocessingpower,andmanyothers)and businesseconomics(suchasMetcalfe’slaw)aredrivingtheIoEeconomy.
•ThesetechnologyandbusinesstrendsareusheringintheageofIoE,creatinganunprecedentedopportunitytoconnect theunconnected:people,process,data,andthings.Currently,99.4percentofphysicalobjectsthatmayonedaybepart oftheInternetofEverythingarestillunconnected.
•TogetthemostvaluefromIoE,businessleadersshouldbegintransformingtheirorganizationsbasedonkeylearningsfrom usecasesthatmakeupthemajorityofIoE’sValueatStake.Theseusecasesincludesmartgrid,smartbuildings,connected healthcareandpatientmonitoring,smartfactories,connectedprivateeducation,connectedcommercial(ground)vehicles, connectedmarketingandadvertising,andconnectedgamingandentertainment,amongothers.
•Robustsecuritycapabilities(bothlogicalandphysical)andprivacypoliciesarecriticalenablersoftheInternetofEverything Economy.TheIoEValueatStakeprojectionsarebasedonincreasinglybroadadoptionofIoEbyprivate-sectorcompanies overthenextdecade.Thisgrowthcouldbeinhibitediftechnology-drivensecuritycapabilitiesarenotcombinedwithpolicies andprocessesdesignedtoprotecttheprivacyofbothcompanyandcustomerinformation.
JosephBradleyJoelBarbierDougHandler
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TheInternetofEverythingisHappeningNowCiscoestimatesthat99.4percentofphysicalobjectsarestillunconnected.1Conversely,thismeansthatonlyabout10billionofthe1.5trillionthingsgloballyareconnected.2Atamorepersonallevel,thereareapproximately200connectablethingsperpersonintheworldtoday.3Thesefactshighlightthevastpotentialofconnectingtheunconnected.
Evenso,thegrowthoftheInternethasbeenunprecedented(seeFigure1).Ciscoestimatesthattherewereabout200millionthingsconnectedtotheInternetintheyear2000.Drivenbyadvancesinmobiletechnologyandthe“bringyourowndevice”(BYOD)trend,amongothers,thisnumberhasincreasedtoapproximately10billiontoday,puttingussquarelyintheageoftheInternetofThings(IoT).ThenextwaveofdramaticInternetgrowthwillcomethroughtheconfluenceofpeople,process,data,andthings—theInternetofEverything(IoE).4
IoEisfurtherbeingdrivenbyseveralfactors.First,powerfultechnologytrends—includingthedramaticincreaseinprocessingpower,storage,andbandwidthatever-lowercosts(Moore’slawstillatwork);therapidgrowthofcloud,socialmedia,andmobilecomputing;theabilitytoanalyzeBigDataandturnitintoactionableinformation;andanimprovedabilitytocombinetechnologies(bothhardwareandsoftware)inmorepowerfulways—makeitpossibletorealizemorevaluefromconnectedness.
Second,barrierstoconnectednesscontinuetodrop.Forexample,IPv6overcomestheIPv4limitbyallowingfor 340,282,366,920,938,463,463,374,607,431,768,211,456morepeople,processes,data,andthingstobeconnectedtothe Internet.Amazingly,IPv6createsenoughaddresscapacityforeverystarintheknownuniversetohave4.8trillionaddresses.
Third,formfactorscontinuetoshrink.Today,acomputerthesizeofagrainofsalt(1x1x1mm)includesasolarcell,thin-filmbattery,memory,pressuresensor,andwirelessradioandantenna.Camerasthesizeofagrainofsalt(1x1x1mm)nowhave250x250-pixelresolution.And,sensorsthesizeofaspeckofdust(0.05x0.005mm)detectandcommunicatetemperature,pressure,andmovement.Thesedevelopmentsareimportantbecause,inthefuture,thingsconnectedtotheInternetmaybehardforthehumaneyetoevensee.
Finally,IoEreflectstherealitythatbusinessvaluecreationhasshiftedtothepowerofconnectionsand,morespecifically,totheabilitytocreateintelligencefromthoseconnections.Companiescannolongerrelysolelyoninternalcorecompetenciesandtheknowledgeoftheiremployees;instead,theyneedtocaptureintelligencefaster,frommanyexternalsources.ThiswilloccurthroughconnectionsenabledbytheInternetofEverything.
Figure 1. Rapid Growth of the Number of Things Connected to the Internet.
Source: Cisco IBSG, 2013
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IoECreates$14.4TrillionofValueatStakeforCompaniesandIndustriesValueatStake,accordingtoCisco,isthepotentialbottom-linevalue(higherrevenuesandlowercosts)thatcanbecreatedorwillmigrateamongcompaniesandindustriesbasedontheirabilitytoharnessIoE.CiscopredictsthattheIoEValueatStakewillbe $14.4trillionforcompaniesandindustriesworldwideinthenextdecade(seeFigure2).5Morespecifically,overthenext10years, theValueatStakerepresentsanopportunitytoincreaseglobalcorporateprofitsbyabout21percent.6
Inotherwords,between2013and2022,$14.4trillionofvalue(netprofit)willbe“upforgrabs”forenterprisesglobally—driven byIoE.IoEwillbothcreatenewvalueandredistribute(migrate)valueamongwinnersandlaggards,basedonhowwellcompanies takeadvantageoftheopportunitiespresentedbyIoE.ThosethatharnessIoEbestwillreapthisvalueineitheroftwoways (see“UseCase”sectionforspecificexamples):
•Bycapturingnewvaluecreatedfromtechnologyinnovation
•Bygainingcompetitiveadvantageandgrabbingmarketshareagainstothercompanieslessabletotransformandcapitalize ontheIoEmarkettransition.7
Cisco’sanalysisshowsthatmostofthepotentialValueatStake(66percent,or$9.5trillion)comesfromtransformationbasedonindustry-specificusecasessuchassmartgridandsmartbuildings.Theother34percent,or$4.9trillion,isproducedbycross-industryusecasessuchasthefutureofwork(telecommuting)andtravelavoidance.ItisimportanttonotethatCiscoisfocusingontheamountofprivatesectorValueatStaketomakethefindingsandinsightsrelevantandactionableforbusinessesandindustries.Whileasignificantnumberonitsown,the$14.4trilliondoesnotincludepotentialValueatStakefromtheconsumerorpublicsectors,orfromsocietalbenefitsthatarebeyondthescopeofthisanalysis.
CiscocalculatedtheValueatStakebytakingabottom-upapproachconsideringthevaluecreatedbymorethan50usecases intheprivatesectoronly—bothindustry-specificandcross-industry—andconsolidatingthemintothe21mostmaterialand value-generatingexamples.Top-downanalysiswasalsoperformedasacross-checktovalidatethecompletenessandorder ofmagnitudeofthemorethoroughbottom-upapproach.Finally,carewastakennottodouble-countvalueacrossusecases.8
Source: Cisco IBSG, 2013
Figure 2. How Much Value Is at Stake in the IoE Economy?
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5DriversFuelIoEValueatStakeTherearefivemaindriversofthe$14.4trillionIoEValueatStake.Thesefindingsallowbusinessleaderstobeginplanninghow theycanbenefitfromIoE.TheamountofValueatStakeissomewhatevenlydistributedacrosseachofthefivedrivers.
•Assetutilization($2.5trillion)—IoEreducesselling,general,andadministrative(SG&A)expensesandcostofgoods sold(CoGS)byimprovingbusinessprocessexecutionandcapitalefficiency.
•Employeeproductivity($2.5trillion)—IoEcreateslaborefficienciesthatresultinfewerormoreproductiveman-hours.
•Supplychainandlogistics($2.7trillion)—IoEeliminateswasteandimprovesprocessefficiencies.
•Customerexperience($3.7trillion)—IoEincreasescustomerlifetimevalueandgrowsmarketsharebyadding morecustomers.
•Innovation,includingreducingtimetomarket($3.0trillion)—IoEincreasesthereturnonR&Dinvestments,reducestime tomarket,andcreatesadditionalrevenuestreamsfromnewbusinessmodelsandopportunities.
ThefactthateachoftheseareashasroughlythesameamountofValueatStakesuggeststhatfirmsmustexaminehowIoEcan impacteveryaspectoftheirbusinessprocesses—includingbothcost-cuttingandrevenue-raisingactivities.
Inaddition,tobenefitfromIoE,firmsmustcombinetechnology-enabledsecuritycapabilities(bothlogicalandphysical)withpolicies andprocessesdesignedtoprotecttheprivacyofcompanyandcustomerinformation.IoE’sgrowthpotentialintheprivatesectoroverthenextdecadewillrelyheavilyuponthesuccessofcompanies’securityandprivacyefforts.9
WhichConnectionsMatterMost?Bydefinition,IoEincludesthreetypesofconnections—machine-to-machine(M2M),person-to-machine(P2M),andperson-to-person(P2P).Combined,P2MandP2Pconnectionswillconstitute55percentofthetotalIoEValueatStakeby2022whileM2Mconnectionsmakeuptheremaining45percent(seeFigure3).ItisimportanttonotethatwhileM2Mconnectionsarefastbecomingasizablesourceofvalue,theendresultoftheseconnectionsisultimatelytobenefitpeople.ThebottomlineisthattheIoEEconomyisaboutenablingpeopletobemoreproductiveandeffective,makebetterdecisions,andenjoyabetterqualityoflife.
Source: Cisco IBSG, 2013
Figure 3. P2M and P2P Still Make Up the Majority of Internet Connections.
Connectedhealthcareandpatientmonitoringprovideagreatexample(moredetailsintheuse-casesectionbelow).Byenriching theconnectionsbetweenmedicaldevicesandbothpatientsanddoctors(M2P),andamongpatientsanddoctorsthemselves(P2P), betterhospital-levelcarecanbeprovidedatpatients’homes.Thisimprovesqualityoflife,increasespositivemedicaloutcomes, andreducescostsforbothprovidersandpatients.
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ValueatStakebyGeographyandIndustryItisalsointerestingtolookatValueatStakebygeographyandindustry.Bygeography,theamountofValueatStakeiswell distributedacrossthemajorgeographies(seeFigure4).Figure4alsoshowsthedegreeofbeneficialimpactforeachgeographicregion,asdeterminedbydividingtheValueatStakebythesizeofeachregion’soutput.Thegeographicandindustrydistributions ofValueatStakeareveryheavilydrivenbyeachregion’srelativeeconomicgrowthrateandbytherelativesizeofeachindustry sectorineachregion.Forexample,China’sValueatStakeisveryheavilyderivedfromitsrelativelyrapideconomicgrowthandits largeshareofthisgrowthinthemanufacturingsector.IntheUnitedStatesandEurope,ValueatStakeopportunitiesaremore prevalentintheservicesareas.
Figure 4. Value at Stake Is Well Distributed Across Geographies, Yet Impacts Regions Differently.
Source: Cisco IBSG, 2013
Fromanindustryperspective,fouroutof18industriesmakeupmorethanhalfthetotalValueatStake(seeFigure5).10Theamountincludesmanufacturingat27percent,retailtradeat11percent,informationservicesat9percent,andfinanceandinsurance,alsoat 9percent.Theremaining14industriesrangebetween7percentand1percent.
Source: Cisco IBSG, 2013
Figure 5. The Top Four Industries Make Up More than Half of the Total Value at Stake.
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TheindustrydistributionofValueatStakeisveryheavilydrivenbyspecificusecases.Forexample,muchoftheValueatStakeformanufacturerscomesfromgreateragilityandflexibilityinfactories,andfromtheabilitytomakethemostofworkers’skills.Additionally,alargeamountoftheValueatStakeforretailerscomesfromconnectedmarketingandadvertising.ThetopfiveindustriesintermsofpotentialIoEimpactrepresent63percentofthetotalValueatStake.
Real-WorldUseCasesShowtheImpactandPotentialofIoEToreceivethemostvaluefromIoE,businessleadersshouldbegintransformingtheirorganizationsbasedonkeylearningsfromusecasesthatshowhowIoEworksintherealworld.Theeightusecasesfeaturedinthispaper,whichrepresent$6.17trillionofthe $14.4trilliontotalValueatStake,wereselectedfortheirusefulnessinhelpingbusinessleadersdeterminehowtomoveforwardwithregardtotheircompanies.11
Eachoftheseusecasesincludesageneraldescription,theamountofcontributiontothetotalValueatStake,andacomparison ofthekeyuse-caseattributesinboth2013and2022tohighlighttheimpactofIoE.Inaddition,eachusecasedescribesthevalue ofconnections,topIoEdrivers,typesofconnections,IoEtechnologyenablers,andwhethervalueiscreatedormigrated.
1.Smartfactories:$1.95trillionoftotalValueatStakeAddingconnectivitytomanufacturingprocessesandapplicationsincreasesfactoryproductivity,reducesinventorieswithreal-timeinventorysupplies,andcutsaverageproductionandsupply-chaincosts.
SmartfactoriesrepresentoneofthetwolargestusecasesintermsofValueatStake.Thevalueislargelyderivedfrommore intelligentmachinesthatincorporatebettersensors,improvedconnectivitytoothermachines,andmoreintuitiveinterfaceswithpeople.Thesenewcapabilitiesallowmachinestobeprogrammedmoreeasilyandmakethemmoreadaptabletotheirconditionssotheycanbemoreefficientatdoingtheirwork.Inaddition,back-endconnectionstothecloudforanalyticsenablemoreeffectiveintegrationoflabor,capital,andtechnology.
2013 Current state (without IoE) 2022 Potential with IoE
Automatedassemblymachinesareexpensiveandcomplicatedtocreateandinstall
Reducedcostsasautomatedtoolsbecomelessexpensivetomanufactureandimplement
Ofteninflexibleandcostlyproduct-linechanges Revenuesincreasewithabilitytoproducemultipleproductswithvariationsininputs.
Allowsforgreatercustomizationofproductsandsmallerproduct-lineruns.
Qualitycontrolsrelyonhumanperceptionanddexterity Sensorshelpworkerstoimproveproductquality
Relianceonlow-costmanufacturingcountries.EmployeeswithITanddatainterpretationskillsarecostly,scarce.
Inefficientuseofkeyinputsforproduction.Lackofflexibilityamongassemblylocations.
Socializationofknowledgeflattenstheskillscurve;IoEmaximizesaccesstohumantalentpoolsatlowercost
Reducedwaste(materials,energy).Greaterfreedomandagilitytoreallocateproductionandoptimizeinputs.
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•IoEvaluecreated:Moreintelligentdesignofmachines;greatercontrolofinstrumentationandproductionconditions
•MainIoEdriver(s):Assetutilization,supplychainandlogistics
•TypeofIoEconnection(s):Machine-to-machine
•IoEtechnologyenabler(s):Machinedesigntools,productionsensors,employeetraining
•Valuecreatedormigrated:Migratedfrominefficientproducersandcountries
Valueinsmartfactoriesisobtainedfromcost-cutting,revenuegrowth,andbetterworkforcecollaboration.Withthisinmind,manufacturingleadersshouldaccelerateadoptionofIoEtechnologiesandconsiderinitiativesthatfocusonimprovedcollaborationamongworkerstomakeemployeesmoreefficient.
2.Connectedmarketingandadvertising:$1.95trillionoftotalValueatStakeBroadITandsocialapplicationsformarketingandadvertisingtransformthewaycompaniesengagewithcustomers, analyzetheirbehavior,andoptimizetheimpactoftheirinteractions.Examplesincludelocation-basedservices,viralmarketing, andmobileadvertising.
Today,itisverydifficulttocreateandimplementcohesivemarketingandadvertisingstrategiesacrossnumerousanddisparatechannels(TV,radio,Internet,pointofsale).IoEwillenablecompaniestohaveacompleteviewoftheircustomers(behaviors,preferences,demographicprofile)anddeliverindividuallytargetedmessagesandofferstothemonanydeviceatthetimeandlocationwheretheywillhavethemostbeneficialimpact.Withinthisnewparadigm,companiescanreactmorequicklybyassessingandreacting totheirmarketsinrealtime;increaseprofitsbyofferingpricingbasedoncustomers’situationandabilitytopay;andgrowrevenuesbybundlingtheirofferingswithotherproductsandservicesbasedonaholisticassessmentofcustomers’wantsandneeds.
2013 Current state (without IoE) 2022 Potential with IoE
Missedorunidentifiedsalesopportunities Increasedsalesfromreal-timemarketassessments andreactions
Inefficientgeographicalselling Increasedsalesfromlocation-basedselling
Inflexibleproductlines IncreasedsalesfrombetteruseofInternet-driven“freemium”marketsegmentations
Lostsalesduetoshiftingcompetitivepressuresandpoortiming Increasedsalesbydirectlytyingpricingtocurrentsellingsituationandcustomers’abilitytopay
Littleholisticassessmentofcustomers’wantsandneeds Increasedsalesfromimprovedcoordinationwithotherproductsandservices(two-sidedmarkets)
•IoEvaluecreated:Assimilationandanalysisofcustomerdemographicandpurchasehistoriesfrommultiplesources
•MainIoEdriver(s):Customerexperience,innovation
•TypesofIoEconnection(s):Machine-to-machine,person-to-machine,andperson-to-person
•IoEtechnologyenabler(s):Cloudcomputing,BigData,real-timedecisiontools,security
•Valuecreatedormigrated:Both
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Data-drivenbusinessagilityisatthecoreofachievingtheValueatStakefromconnectedmarketingandadvertising. LeadersshouldfocusonIoEinitiativesthatuseBigDataandcloudcomputingtoimprovedecisionmakingacrossthe company.Tosucceed,everycustomer-facingdepartment,includingmarketing,sales,service,andsupport,mustbe abletoadaptmorequicklytorapidlychangingcustomerdemandsintheIoEEconomy.
3.Smartgrid:$757billionoftotalValueatStakeAneffectivesmartgridusesnetworkconnections—fromproductiontocustomers—tobetterunderstanduserbehavior andimprovethereliability,economics,andsustainabilityoftheproductionanddistributionofelectricity.
Utilitycompaniestodaytypicallyoperateona“besteffort”infrastructure:theygenerateandplaceenergyontheelectricalgrid withouttakingfulladvantageoftheirassets.Thismakesthegridvulnerabletofaultsandallowsonlyforaone-wayflowofelectricity—fromproducerstoconsumers.Inaddition,thesystemisinefficientbecausepowergenerationcannotbeeasilyadaptedtofast-changingenergyusagecycles.IoEwillimprovetheelectricgridbyautomaticallydetectingandrepairingproblems,controlling electricalflowsbasedonreal-timedemand,improvinggeneratorutilization,andenablingmoresustainableenergysourcessuch aswindandsolarpower.
2013 Current state (without IoE) 2022 Potential with IoE
Vulnerabletobreakdownsandsecuritythreats Automateddetectionandself-healingimprovesreliabilityof theelectricitynetwork
One-wayelectricityflow Abilitytoshapetheflowofelectricityenablesmoreflexibility anddistributedpowergenerationcapabilities
Productioncalibratedonlyforpeakdemand,requiringreservesandcausinginefficiencies
Demand-sidemanagementimprovesgeneratorutilization andgridefficiencies
Variabilityinrenewableenergysourcesprevents widespreadadoption
Enablesmoresustainableenergysourcessuchaswindand solartocontributetothepowergrid
•IoEvaluecreated:Connectssensing,measurement,andcontrolsinrealtimetoimprovesupplyanddemandalignment, increasereliability,andreducecosts
•MainIoEdriver(s):Supplychainandlogistics
•Typeofconnection(s):Primarilymachine-to-machine
•IoEtechnologyenabler(s):Integratednetworkarchitecture,smartsensorsandmeters,privatecloudcomputing,security
•Valuecreatedormigrated:Netreductioninenergycostsforallprivatesectorstakeholders
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ValueatStakefromthesmartgridwillcomemostlyfromimprovedefficienciesandincreasedreliabilityoftheelectricaldeliverysystem.Forthistohappen,however,significantregulatorychangesarerequired.Assumingthesechangestakeplace,utilitycompanyleadersmustbereadytoimplementinitiativesthatallowformoreflexibility,improveddemand-sidemanagement,andtheenablementofmoresustainableenergysources.
4.Connectedgamingandentertainment:$635billionoftotalValueatStakeThisusecaseincludesserviceprovider(SP)andsoftwarevendorrevenuesandcashflowsfromallapplicationsofonlinegaming andentertainment;itdoesnotincludenon-revenue-generatinggamingactivities(suchassubsidizedadvertising).
Connectedgamingandentertainmentencompassesawidespectrumofproductsandservices,includinggamessuchasFarmVillefromZynga,streamingvideofromNetflix,andgamblingfrombwin.partyintheUnitedKingdom.IoEwillprovideawholenewwayforconsumerstoentertainthemselvesbyallowingthemtoplaywithothersremotely,selectwhattheywanttouseondemand, andchoosethedevicetheywanttouse(anydevice,anytime,anylocation).
2013 Current state (without IoE) 2022 Potential with IoE
Asset-heavy,dedicatedhardware Asset-light,anyInternet-enableddevice
Payforownership Payforaccessorfree
Offlineordedicatednetworks(cableandTV) On-demandstreaming
Considerablespacerequirements(casinos) Digital
Aloneorco-located Together:collaborative,remote,andsocial
•IoEvaluecreated:Enhancegamingandentertainmentexperiencewithremotecollaboration,richmedia, andon-demandprograms
•MainIoEdriver(s):Innovation—increasedrevenuefromnewbusinessmodels
•TypesofIoEconnection(s):Person-to-machineandperson-to-person
•IoEtechnologyenabler(s):Next-generationnetwork,includingintelligence,video,collaboration,BYOD,security
•Valuecreatedormigrated:Mixofnewvalueandvaluemigrationfromtraditionalproviders
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Forleadersinthegamingandentertainmentindustries,thisusecasehighlightstheimportanceoffocusingonthedeliveryofcontenttoanydevice,anywhere.ItalsoshowsthatclosepartnershipswithSPsarecriticaltodeliveringtheseamless,high-qualityexperiencecustomerswillexpect,andevendemand,intheIoEEconomy.
5.Smartbuildings:$349billionoftotalValueatStakeSmartbuildingscompriseanintelligentandconvergedIPnetworkofelectronicdevicesthatmonitorandcontrolfacilitiesservices,includingmechanical,electronics,HVAC,andlightingsystemsinabuilding,toachievegreaterenergyefficienciesandcostsavings,alongwithanimprovedexperienceforoccupants.
IoEallowsbuildingstocreatevaluebybringingtogetheroperationsthatarecurrentlysiloedintoasingleIP-basedplatform. IoEreduceswaste(energy)bygreatlyincreasingtheefficiencyofbuildingmanagement(HVAC,lighting,safety).Smartbuildings alsomakemoreefficientuseofavailablespacebymaximizingoccupancy.Forexample,CiscoestimatesthatIoEcanreduce spacerequirementsforthesamenumberofemployeesby40percent.
2013 Current state (without IoE) 2022 Potential with IoE
Inefficientuseofenergyleadstohighamountofwasteandincreasedcosts;energyusenotbasedontruedemandorbuildingoccupancy
Reducesenergycostsbyusingsensorsand energy-efficientsystems
Physicalmonitoringofbuildingsystems Laborsavingsandincreasedstaffproductivityfrom remotemonitoring
Noscalingofbuildingmanagementinfrastructureacrossfacilities Costssavingsbyutilizingsharedinfrastructureand openprotocols
Inconveniencetotenantsduetofrequentbreakdownsandrepairs Improvedequipmentlifefromcontinuous,proactivemonitoringandtimelymaintenance
“Onesizefitsall”occupantexperience Buildingautomationdeliversapersonalizedexperience foreachoccupant
•IoEvaluecreated:Lowerenergycosts,lowermanagementandmaintenancecosts,lowercapitalexpenses
•MainIoEdriver(s):Assetproductivity
•TypeofIoEconnection(s):Machine-to-machine
•IoEtechnologyenabler(s):Sensors,cloudcomputing,video,physicalsecurity
•Valuecreatedormigrated:Valuecreatedfromnext-generationnetworkedsystems;valuemigratedfromstand-alone systemsandlowerstaffingrequirements
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Thisusecasewillhaveatremendousinfluenceonthecommercialrealestateandconstructionmarketsinthenext10years. AsSmartBuildinginitiativescometofruition,loweroperatingcostsshouldleadtoreducedrents,providingbenefitsforbothbuildingownersandtenants.TheIoEEconomyshouldleadtomorebuildingrenovationandnewconstruction,whichwillalsoleadtofasterbuildingobsolescence.Commercialrealestateandconstructionleaderswillneedtobeginpreparingforthesesignificantshiftsin theirrespectiveindustries.
6.Connectedcommercialgroundvehicles:$347billionoftotalValueatStakeThisusecaseisbasedoncommercialfleet(ground)vehiclesthatuseanintegratedplatformofcontrolsystemstoautomate taskssuchasnavigation,pathoptimization,andlogisticsimprovements.
Asvehiclesbecomemoreconnectedwiththeirenvironment(road,signals,tollbooths,othervehicles,airqualityreports, inventorysystems),efficienciesandsafetygreatlyincrease.Forexample,thedriverofavending-machinetruckwillbeable tolookatapanelonthedashboardtoseeexactlywhichlocationsneedtobereplenished.Thisscenariosavestimeand reducescosts.
2013 Current state (without IoE) 2022 Potential with IoE
Losttime,money,andfuelduetotrafficcongestion Reducedcongestionfromtrafficmanagementandoptimization oftransportationinfrastructure
Reducedfuelefficiencyduetosuddenaccelerationandbraking Improvedfuelefficienciesfromvehiclesintelligentlyadjustingdrivingspeeds
Highaccidentrateduetohumanerror Loweraccidentratesduetovehicle-to-vehicleandvehicle-to-infrastructurecommunication
Highvehicleinsurancecosts Insurancepremiumsbasedonactualdrivingpatterns
Ad-hocroutingofvehicles Lowerfuelandmaintenancecostsduetooptimized deliveryroutes
•IoEvaluecreated:Reducedtimelostincongestion,loweraccidentrates,lowerfuelandrepaircosts
•MainIoEdriver(s):Supplychainandlogistics,assetutilization
•TypeofIoEconnection(s):Machine-to-machine
•IoEtechnologyenabler(s):Telematics,sensors,cloudcomputing,security
•Valuecreatedormigrated:Both
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Whilethemainbenefitsfromconnectedcommercialgroundvehiclescomefromimprovedlogistics,thereisalsoanopportunity forbusinessleaderstoimproveservicequalityandconsistency,andtorealizeenvironmentalbenefitsthroughlowerenergyconsumptionandcarbonemissions.
7.Connectedhealthcareandpatientmonitoring:$106billionoftotalValueatStakeIoEwillenablebetter-connecteddevicesanddata-drivenpatientmanagement,resultinginimprovedhealthcareeffectiveness andefficiencies.
Manyoftheinefficienciesinhealthcaretodayaretheresultofsiloedsourcesofknowledgeandinformation—itisdifficulttoaccess alloftherelevantknowledgeavailableatthepointofcare.Inaddition,manymeasurementsandtestsareadministeredmanually. ThegreaternumberofsensorsandconnectionsinIoEwillallowforshorterhospitalstaysduetosmarterhomemonitoringsystems andimprovedcarefromstandardizedtreatmentsthatconformtoallknownbestpractices.
2013 Current state (without IoE) 2022 Potential with IoE
Longhospitalstaystoensurepatientscanthriveathome afterdischarge
Reducedcostsandimprovedqualityoflifefromshorterhospitalstays,withhomemonitoringsystemsthatensurehealth
Limitednumberofhealthconditionswithhomemonitoring capabilities
Widernumberofhealthconditionswithhome monitoringcapabilities
Uncoordinatedandmanualcollectionofpatienttestrecords Improveddecisionmakingfromsingleelectroniccollectionofpatientrecords
Ad-hocinterpretationofmedicaltestresultsandconditions Improvedpatientcarefromstandardizedtreatmentsthat conformtobestpractices
Multipledoctorsoffercareinanuncoordinatedmanner Improvedpatientcareandhealthoutcomesfromconsolidated,patient-centricviewsofalltreatmentaspects
•IoEvaluecreated:Continuousmonitoringofhealthconditionsinaless-expensivehomesetting;allcareaspects consolidatedandcoordinated
•MainIoEdriver(s):Assetutilization,supplychainandlogistics,andcustomerexperience
•TypesofIoEconnection(s):Machine-to-machineandmachine-to-people
•IoEtechnologyenabler(s):Medicaldevices,homeITconnections,security
•Valuecreatedormigrated:Both
Connectedhealthcareandpatientmonitoringinvolveafundamentalshiftinhowhealthcareprovidersdelivertheirservices. BillingandinsuranceprocesseswillalsohavetochangeforthisValueatStaketocometofruition.Giventhesechanges, businessleaderswillneedtofocusonbothnewtechnology-driveninitiativesandchangemanagement,whileaddressing patients’privacyconcerns.
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8.Connectedprivatecollegeeducation:$78billionoftotalValueatStakeBetterapplicationoftechnologieshelpsscaleteachers,faculty,andeducationalcontent;increasesnewwaysoflearning; andtransformstheeducationalmodel—givingstudentscurriculumflexibilitytolearnattheirownpace,anywhere,anytime, usinganydevice.
Today,educationismostlya“physical”experiencewhereprofessorsteachstudentsinclassroomsusingbooks.IoEwillallow privatecompaniestochallengethistraditionalmodel.Evennow,earlyadoptersarebreakingdownphysicalbarrierstomake educationavailabletopeoplewhopreviouslydidn’thaveaccess.IoEwillenablenewbusinessmodels,extendprofessors’ reach,andreducetextbookcosts.
2013 Current state (without IoE) 2022 Potential with IoE
Physicalclassroomenvironment Improvedaccesstoeducationbyscalingprofessorsand highest-qualitycontenttoanydevice,anywhere
One-timeinstructioninasinglelocation Greateraccessibilityfromscalingcontentandprovidingrecordableandreplicableinstructionanytime,atanyvenue
Static,linearcontentwithlimitedcontrol Improvedqualityofeducationbylearningatyourownpace,focusingonlyonrelevantcontent,andviewingricher, interactivematerial
Accessibleonlyduringuniversityandlibraryhours Improvededucationfromgreateravailabilityofprofessors andcontent
Searchforcontent(pullvs.push);costlytextbooks;designedforone-size-fits-all
Improvededucationfromproactivecontent(pushvs.pull), freematerials,andabilitytocustomizecurriculum
•IoEvaluecreated:Extendprofessors’reachandscale;enablenewbusinessmodels:scalegloballywithoutphysical venueconstraints;reducetextbookcosts
•MainIoEdriver(s):Customerexperience,assetutilization
•TypesofIoEconnection(s):Person-to-personandmachine-to-machine
•IoEtechnologyenabler(s):Video,mobility,BYOD,collaborationtools,security
•Valuecreatedormigrated:Increasedpenetrationoftheonlineeducationmodel(migration)
TheIoEEconomywillgiveprivateeducationalinstitutionstheabilitytoscaleinstructionandprovideitatasignificantlylowercost thannot-for-profitinstitutions,whichwillgivefor-profitorganizationsasignificantcompetitiveadvantageovernot-for-profitestablishments.Andwhilevideoandonlinemediaarenotnewtoeducation,intheIoEEconomy,theywillofferremarkablenewcapabilitiesbothtoimproveacademicoutcomesandextendthereachofqualityeducationtopeoplewhohavenothadaccess toit.Thiswillhaveasignificanteconomicimpact,forexample,byhelpingaddressthemoretechnicalskillsthatwillberequired intheIoEEconomy.
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HowToGetStartedWhilethescopeofIoEmayseemdaunting,thereareactuallysomeverysimplestepsyoucantaketobegincapturingyourshare oftheIoEValueatStake:
•DeterminewhereyourbusinessistodaywithregardtoIoE.Withthehugenumberofconnectionsthatneedtobemade amongpeople,data,andthings,companiesmustassesstheirstrengthsandweaknessesintheareasoftechnologyskills, businessprocessmanagement,dataanalytics,connectedness,andsecurity.
•UnderstandtheroleofITinenablingyourcompanytobenefitfromIoE.UsingITtoreducecostshasdiminishingreturns; investinginITtostrengthenandgrowthecustomerbasehasgreaterupsidepotential.
•Takestepsnowtomaximizeyourfirm’scapabilitiesintheareasofsecurityandprivacy:Asmentionedpreviously, securityandprivacyareessentialenablers—andpotentialinhibitors—ofIoE’sValueatStake.IoEsecuritywillbeaddressed throughnetwork-poweredtechnology:devicesconnectingtothenetworkwilltakeadvantageoftheinherentsecuritythat thenetworkprovides(ratherthantryingtoensuresecurityatthedevicelevel).Privacy,ontheotherhand,willrequirethat companiescombinetechnologywitheffectiveprocessesandpolicies.TobenefitfromIoE,firmswillneedtoidentifynew privacymodelsthatmeetcompanyandcustomerexpectations.
Mostimportant,firmswillneedtoconsidertheirowninternalculturalchangesthatarenecessarytoembraceIoE.ThevalueofanyITinvestmentwillbedeterminedbythecapabilitiesitenablesoutsidetheITdepartment.TheIoEValueatStakeemanatesfromthemarketing,HR,finance,production,sales,andothercorporatedepartments.Therefore,acompany’sITdecisionsmustconsidertherequirementsofthesedepartments.Corporatepoliciesonemployment,input-sourcing,andincustomer-facingareasmayneedadjustmenttoembracetheseIoE-drivenbestpractices.
TheGameIson...Challengesaboundfortoday’sbusinessleaders.Therapidpaceofchangecreatesconfusionandmisinformation,whichoftenleadstopoordecisionmakingor,worse,inaction.Whencombinedwithpricetransparencyandglobalsupplychains,manyofthesametechnologytrendsthatareusheringintheIoEeraarealsoenablingnewentrantstobecomeviablethreatsinjustweeksandmonthsratherthanyears.
Inthisenvironment,winnersandlosersaredeterminedfasterthaneverbefore.With$14.4trillionValueatStake,IoEpresentsanimportantopportunitytoincreasemarketshare,gaincompetitiveadvantage,strengthenandgrowyourcustomerbase,andincreaseprofitability.Andbecausethestakesarehigh—over10years,companiesstandtolosemorethanayearofprofitsiftheydonotembraceIoE—thetimetoactisnow.
The authors would like to acknowledge Michael Adams, Dave Evans, Jeremy Hartman, Jeff Loucks, James Macaulay, Bob Moriarty, Ewan Morrison, Andy Noronha, Kathy O’Connell, Noelle Resare, and Cisco IBSG’s industry practices for their valuable contributions to the development of this paper.
Jointheconversation:#InternetofEverything#IoE
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Endnotes1.Source:CiscoIBSG,2013.
2.Ibid.
3.Ibid.
4.CiscodefinestheInternetofEverythingasbringingtogetherpeople,process,data,andthingstomakenetworkedconnectionsmorerelevantandvaluablethaneverbefore—turninginformationintoactionsthatcreatenewcapabilities,richerexperiences,andunprecedentedeconomicopportunityforbusinesses,individuals,andcountries.
5.ValueatStakediffersfromInternetMarketSize,ortotaladdressablemarket(TAM).ValueatStakeisaforecastofthepotentialbottom-linevaluethatcanbecreatedorthatwillmigrateamongcompaniesandindustriesgloballybasedontheirabilitytoharness theInternetofEverythingoverthenextdecade(10-yearnetpresentvalue).Ciscoestimatesthisvalueat$14.4trillionoverthenext 10years.Bycontrast,theInternetMarketSize,orTAM,isprojectedtoreach$4.1trillioninannualrevenueforallparticipatingvendorsby2016.Beyondrelevantinformationandcommunicationstechnologies(ICT),itincludese-commerceandadvertising.Ciscowilladdress$258billion(6percent)ofthisInternetmarket(source:CiscoSMO,2012).ValueatStakeincludesshiftsofbenefitsamongcompetingfirmsinanindustry;shiftsofbenefitsamongdifferentindustries;new-to-the-worldrevenuegrowthfrominnovation; costsavingsfrommoreefficientprocesses;andallowancesforimplementationcosts.ValueatStakedoesnotincludeextentoflosses atfirmsthatdon’ttransform;consumerorgovernmentbenefits;socialbenefits;andvalueestimatesforreducedriskofoperations.
6.Weselectedaperiodof10yearsbecauseitisareasonableamountoftimeforcompaniestoidentify,design,andimplementchangestocapturetheirshareoftheIoEValueatStake.The$14.4trillionnumberisthenetValueatStake.ThegrossValueatStakeis$18.7trillion.Inotherwords,aninvestmentof$4.3trillionisrequiredtoachievethenetValueatStakeof$14.4trillionover10years.Inaddition,Ciscoestimatesthatthe$14.4trillioninValueatStakerepresentsanincreaseinaggregatecorporateprofitofabout21percentover10years.
7.Ciscoestimatesthat59percentofValueatStakewillbenewvalueresultingfromtechnologyinnovation,while41percentwill begeneratedbycompaniescapturingmarketsharefromthecompetition.
8.ToillustratehowValueatStakewascalculated,we’llusetheexampleofthe“ConnectedCommercialGroundVehicles”usecase.Cisco’sanalysisconsideredtwofactors:1)lowercostsforfleetownersand2)thepotentialrevenueincreaseforserviceproviders.Wealsoprojectedthepenetrationofcommercialgroundvehiclesasapercentageofthetotalglobalcommercialfleet—fromlowerpenetrationtoday(6.3percent)toestimatedpenetrationof24.5percentby2022.Usingresearch,wethenestimatedtheIoEbenefitspercommercialvehicle(includingfuelefficiencyanddriverproductivity)at$970annually.Fromthesebenefits,wedeductedone-timeandrecurringcosts.WealsoconsideredSPrevenueopportunities.Basedonthesamepenetrationnumbers,theanalysisalsoconsiderednewrevenueopportunitiesforSPs,includingconnectivityandvalue-addedservices.ToestimatetheValueatStakeforSPs,weassumedaconservativeaveragemarginof$12-$15monthly.TheoverallValueatStakenumber—$347billion—reflects thecombinednetpresentvalueofthebenefitsforfleetownersandserviceproviders.WebelieveCiscoistheonlycompanytotakethiskindofuse-case-driven,bottom-upapproachtoevaluatetheopportunityofferedbytheInternetofEverything.
9.ThecriticalneedforsecurityandprivacyinIoEisunderlinedbyU.S.PresidentBarackObama’sexecutiveorderoncybersecurity,signedonFebruary12,2013,whichencouragesallnetworkoperators,companies,andconsumerstobecybersmartandcybersecure(http://www.whitehouse.gov/cybersecurity).
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10.Sources:GlobalInsight,AmericanProductivityandQualityCenter,U.S.BureauofEconomicAnalysis,U.S.BureauofLaborStatistics(all2012),andCiscoIBSG,2013.The18industriesmeasuredfortheamountofValueatStake,inorderofsize,include: 1)manufacturing;2)retailtrade;3)informationservices;4)financeandinsurance;5)healthcare;6)educationalservices;7)professional,scientific,andtechnicalservices;8)administrativeandwastemanagementservices;9)wholesaletrade;10)arts,entertainment,andrecreation;11)otherservicesexceptgovernment;12)agriculture,forestry,fishing,andhunting;13)construction;14)transportationandwarehousing;15)managementofcompaniesandenterprises;16)realestate,rental,andleasing;17)mining;and18)utilities.
11.The$14.4trillioninValueatStakecomprisesthefollowingusecasesandvalues:1)smartfactories,$1.95trillion;2)connectedmarketingandadvertising,$1.95trillion;3)smartgrid,$757billion;4)connectedgamingandentertainment,$634billion;5)smartbuildings,$349billion;6)connectedcommercialgroundvehicles,$347billion;7)connectedhealthcare/patientmonitoring,$106billion;8)connectedprivatecollegeeducation,$78billion;9)innovativepayments,$855billion;10)wealthmanagement,$451billion;11)improvedtimetomarket,$1.03trillion;12)businessprocessoutsourcing,$742billion;13)virtualattendants,$163billion;14)supplychaincostsavings,$697billion;15)smartfarming,$189billion;16)digitalsignage,$38billion;17)next-generationworkers(BYOD,mobilecollaboration,telecommuting,VDI),$2.16trillion;18)travelavoidance,$980billion;19)physicalandlogicalsecurity,$1.09trillion;20)next-generationretailbankbranches,$20billion;21)next-generationvendingmachines(digitalmalls),$49billion.
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