how will internet of things, mobile internet, data

How will Internet of Things, mobile internet, data analytics and cloud transform public services by 2030?

techUK Public Services 2030 Conference

4 March 2015

CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited

Andrew Goodman, McKinsey & Company

McKinsey & Company | 1SOURCE: McKinsey Center for Government

Governments must do more… … with less

Demographic changesmean public services are evolving as populations age

Emerging global interconnectivity requires increased coordination

Increasing public sector complexity from cross-cutting issues

Rapid technological innovation raises citizens’ expectations

Macroeconomic vulnerability and uncertainty

Unsustainable debt burdens driven by healthcare, pension, and economic stimulus

Pressure for public sector productivity improvement

Winning the war for top talent as the workforce ages and the skilled labor market tightens

Increasing natural resource constraints

Need for transformative innovation in government

Governments will need to do more with less over the next decade

McKinsey & Company |

Twelve potentially economically disruptive technologies

SOURCE: McKinsey Global Institute analysis

Autonomous and near-autonomous vehicles

Renewable energy

Advanced oil and gas exploration and recovery

Advanced robotics

Cloud technology Advanced materials

3D printingThe Internet of Things

Energy storageAutomation of knowledge work1

Next-generation genomics

Mobile Internet

2

1 Includes Data Analytics


By 2025, these technologies could have economic impact in the trillions$ trillion, annual by 2025

Impact from other potential applications Low High

Range of sized potential economic impacts in each category

IT and how we use it

Changing the building blocks of everything

Rethinking energy comes of age

Machines working for us

0.2–0.6

Automation ofknowledge work1

Energy storage

Autonomous and near-autonomous vehicles

0.2–0.5

5.2–6.7

0.2–1.9

Advanced robotics

0.1–0.6

1.7–4.5

3D printing

0.7–1.6

Renewable energy

Next-generationgenomics

0.1–0.5Advanced oil and gasexploration and recovery

Advanced materials

0.2–0.3

Internet of Things 2.7–6.2

Cloud technology 1.7–6.2

Mobile Internet 3.7–10.8

SOURCE: McKinsey Global Institute analysis

What does this mean for the public sector?

3

1 Includes Data Analytics


Big data has already helped transform several industries in the private sector

Food / agriculture

Financial Services

Granular POS data drives changes to merchandising, marketing

Sophisticated machine-learning algorithms predict future purchases

Regulators make data public at scale

Transaction data enables segmentation, evolution of highly targeted products

Government and other players provide reporting and prediction data and services

Innovation (e.g., genetically modified seeds) bends cost curve and changes playing field

Retail / grocery

��

�

�

�

�4SOURCE: McKinsey analysis

AUTOMATION OF KNOWLEDGE WORK - DATA ANALYTICS

McKinsey & Company | 5

The relevance of big data in the public sector will hinge on gaining access to larger datasets in the private sector


adds ~12 terabytes daily

transfers ~19 petabytes over its networks daily

processes ~24 petabytes daily

Relative size of data processed or stored by organizations

SOURCE: OECD; Twitter; AT&T; Google

< 1 terabyte of data stored, total


Application of data analytics in the public sector could help to significantly reduce rates of fraud and error


Selected analytical techniques Relevance in the public sector

Text mining

Machine Learning

Network analysis

Geospatial analysis

▪ In 2013 the National Fraud Authority estimated that the UK government loses in excess of £15 billion a year through tax fraud, and more than £7 billion in expenditure fraud and error through improper payments

▪ The US Government has identified 13 ‘high-error’ programs with annual improper payments in excess of $750m – some have improper payments rates in excess of 20%

▪ Several advanced analytics techniques have been used to improve compliance and recovery by insurers, payors and tax authorities

SOURCE: National Fraud Authority; PaymentAccuracy.gov

ExamplePublic SectorApplication


Projected growth in the Internet of Things Key concepts

7

More objects are becoming embedded with sensors and gaining the ability to communicate – the physical world is becoming an information system

INTERNET OF THINGS

SOURCE: MGI, Company Annual Reports, Capital IQ, Machina, Expert Interviews, Global Insight, Census

1 Personal computers, tablets, and smartphones excluded

Billions of connected end-points

3.6

201817

2.9

16

2.3

15

1.8

14

1.3

2013

1.0

▪ The Internet of Things is an ecosystem includes data sources (sensors) and other devices embedded in the physical world connected by networks to data visualization and analytic computing resources

▪ Connected end-points in the IoT can provide information on identity, location, status, and instructions

▪ In many industries (e.g. GE aircraft engines), IoT concepts and devices have been used for 20 years

▪ While consumer products (e.g., wearables) are a focus of media attention, 70-80% of total value of the IoT lies in enterprise applications


RFID tags Relevance to the public sector

RFID tagging has been widely used in the private sector, but its use in public sector procurement remains limited

SOURCE: McKinsey analysis 8

INTERNET OF THINGS

▪ RFID tags can be reused as new information can be over-written

▪ Readiness exceeds sight range (can be read through walls, ceilings, etc.)

▪ Multiple items read at a time (hundreds in seconds)

▪ Identifies one specific unit of product. Like a Passport or Driver License, it is unique

▪ RFID tagging has helped private sector firms to increase the accuracy of inventory tracking by 25%+

▪ Use of passive and active RFID tags can help to reduce inventory loss and enable data-driven supply chain optimisation

▪ The US Department of Defense has used RFID tags in its supply chain since 2005 and now tags more than 15,000 cargo loads a week

▪ Despite pilots dating to the 1990s, use of RFID in the government supply chain is still limited compared to the private sector



San Francisco’s SFpark initiative optimizes parking spot utilization and reduces congestion through GIS sensors

SOURCE: San Francisco Municipal Transport Agency

SFPark is a parking system that:

▪ Collects real-time information about where parking is available

▪ Adjust prices of parking at different locations dynamically, according to demand

▪ Reduces traffic congestion by decreasing the number of drivers circling and double-parking and ensures drivers willing to pay a premium are more likely to find a convenient spot

▪ Central database monitors parking occupancy, transport officals analyses historical parking occupancy and usage patterns by location to make data-driven pricing decisions

▪ Price revisions are readily communicated to the public

▪ Rates are adjusted no more than 50 cents per hour down or 25 cents per hour up, and no more often than once per month

▪ Embedded real-time sensorsidentifies parking lots that are available

▪ Drivers can easily visualize parking availability and pricesonline and via smartphones to plan their journeys

9

INTERNET OF THINGS



Consumers are increasingly demanding mobile devices…

… and will have multiple connected device in the near future

SOURCE: Cisco Traffic forecast; SA; Interviews; Strategy analytics, WSJ press article, Team analysis

Asia-Pacific

Western Europe

0.9Middle East/Africa

1.5

Latin America 2.1

Eastern Europe 2.2

4.4

North America 5.8

Japan 5.4

Global mobile device salesmillion units

54

0

66

20

230

130

510

190

+35%

+25%

1,460

+25%

+20%

+15%

2020

2010

2005

Laptops

Smartphones

Tablets

Internet devices per person 2015E; units

Adoption of mobile devices is growing at double-digit rates – mobile devices have become more ubiquitous than land lines

MOBILE INTERNET

10


Estonia’s Mobiil-ID System Selected uses

11

Mobile devices could help to provide an integrated solution to citizen identification, authentication and verification

MOBILE INTERNET

▪ Estonia has one of the most advanced and widely used e-government systems in the world – almost 100% of the population have an electronic ID

▪ Mobiil-ID can be used on any smartphone or tablet and replaces a traditional electronic ID card

▪ With Mobiil-ID, citizens can access public e-services, authenticate their identity, and provide digital signatures for transactions, public service registration and contracts

▪ The government has made Mobiil-ID’s digidoc libraries available to developers to catalyse private sector uptake

SOURCE: Public sources; McKinsey analysis



There has been a fundamental shift from a “build model” to a “consume model” in Enterprise IT, giving rise to Cloud Service Providers

Legacy Archi-tecture

Cloud

PrivateCommunityHybridPublic

SaaSIaaS PaaS BPaaS

Cloud services are fundamentally changing IT consumption model …

…giving rise to the Cloud Service Provider segment …

… and creating risks & oppor-tunities for traditional players

SOURCE: McKinsey Cloud Service Provider Initiative

Business processes

Software applications

Development platform

IT infra

CLOUD

12


Moving to a modern cloud-based environment could help government departments realise IT savings of up to 40%

CLOUD

Comparison of monthly per-desktop TCO for desktop environment(% cost, normalized to benchmark of 100%)

88

32

15

2014

66

4244

111419Other

-42%

User support(L1 – L3

helpdesk)

Hardware 109

188

Software / services

Gartner 2013 TCO benchmark

100

27

Government - cloud based environment

Government - prior to cloud transformation

Savings primarily driven through significantly reduced software/services and user support costs, reflecting the centralised support and deployment of updates and apps in a cloud environment

SOURCE: Gartner; Mckinsey analysis



Thank You

how will internet of things, mobile internet, data

Documents