saving the internet of things: presentation to facebook

© 2015 IBM Corporation

Institute for Business Value

Facebook, 12 January 2015

Device Democracy: Saving The Internet of Things

© 2015 IBM CorporationPage

Agenda

2

The Internet of Things Really Small Enormous Problem

Fixing The Value Proposition

Evolution & Revolution

Fixing The Technology

From Here To There


You can see the computer age everywhere but in the productivity statistics.

Robert Solow, 1987


Computers spread through enterprises throughout the 1970s and 1980s even as growth stalled

4

0

5,625

11,250

16,875

22,500

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

IBM PC Apple II Macintosh AmigaAtari 400/800 Atari ST C 64 TRS-80NeXT PET Other

PC Platform Volumes, 1980-‐1990 jeremyreimer.com

0%

1%

1%

2%

3%

1970s 1980s 1990s

GPD Per Capita Growth, G7 OECD

http://jeremyreimer.com


0

100,000

200,000

300,000

400,000

1975 1979 1983 1987 1991 1995 1999 2003 2007

IBM PCApple IIMacintoshAll Others

Though personal computers seemed to be everywhere, the reality is that we had only just started to really consume computing power

5

PC Platform Volumes, 1975-‐2010 jeremyreimer.com

PC “Wins”



In the PC industry, the market development era had to be completed before we could see the value of scale and productivity

6

Perfect The ProductBuild The Ecosystem

Establish Control Points

Market Development Era

IBM PC 5150

Cut Costs & Grow Scale

Focus on Value Creation

Refine User Experience

Scale & Productivity Era

Dell scaled up PC business with Build To Order


The mobile industry today is where the PC industry was in 1990: just out of the first battles for market-share and into the period of scaling up

7

0

150

300

450

600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Symbian WinMobilePalmOS BlackberryAndroid iPhoneLinux Others

Smartphone Platform Market Share & Shipments, 2000-‐2012 jeremyreimer.com



Though the volumes may seem large, only about 20% of the world population have mobile phones or are connected through social networks. We’re just getting started.

8

Perfect The Product

Build The Ecosystem

Establish Control Points

Market Development Era

The T-‐Mobile G1: First Android Phone

Cut Costs & Grow Scale

Focus on Value Creation

Refine User Experience

Scale & Productivity Era

The Smartisan T1 Android Phone


When it comes to the internet of things, we’re still in the market development era - defining platforms and value propositions before we achieve real scale

9

Smart CitiesSmart Infrastructure

Connected Home

Medical Wearables

Smart Watches


The Internet Of Things Is going to be about much more than volume, however. Tomorrow’s embedded devices are going to be radically smarter as well.

10

Full ARM SoC as powerful as many cell phones with 2GB of RAM.

Boots when connected. Runs Mac OS Core (XNU)

Receives MPEG stream and converts it to HDMI output.

The Apple Lightning to HDMI Connector

Source: ExtremeTech.com report on Apple lightning HDMI connector cable, retrieved March 2013

http://ExtremeTech.com


Billions and billions of devices. Every one of them as smart as the original iPhone. All of them as smart as an enterprise class server in the early 1990s.

11

Billions of Devices

Millions of Locations

Terabytes of storage & bandwidth

The cloud is moving out of your data center and into your doorknob.

Image Flickr Creative Commons License


Agenda

12



The Evolution & Revolution


From Here To There


If it ain’t broke, don’t fix it.

Bert Lance, 1977


The Internet of Things has a big problem: with a few notable exceptions, it lacks a compelling value proposition

14

No Apps

No Subscription

No Problem


In fact, beyond extremely high value, integrated systems, adoption of connected, intelligent devices is stalled right now

15

Connectable vs. Connected

Data vs. Insight

Products vs. Solutions

30%

40%

30%

OtherConnectableConnected

100%

PredictiveReactive

5%

15%

80%

ProductsServicesSoluVons

Deployment of heavy industrial systems that are networked:

Source: IBM Research, Client data, 2012


The unique properties for markets in information mean that expectations for analytics revenue are often far too optimistic

16

If there is more than one source:

And the cost to make copies is:

BUT

$0

SOSupply is:

And the market price heads to:

$0

Lots of Data Is Useful & Valuable

YES

Where can I find a parking spot?


The Internet of Things has a couple of other problems as well

17

TWO “OTHER” PROBLEMS

COST SECURITY



COST SECURITY



COST SECURITY

MORE DEVICES

multiplied by

GREATER LONGEVITY



COST SECURITY

0

30

60

90

120

Subway House Jet Car Laptop Phone



COST SECURITY


Agenda

22





From Here To There

WHAT IF WE STARTED WITH A CLEAN SHEET OF PAPER?


BETTER PRODUCTS .01FUNCTIONMAKE COOL STUFF


BETTER PRODUCTS

.01FUNCTIONMAKE COOL STUFF

CREATE DIGITAL

MARKETS

CREATENEW

VALUE

.02BUSINESSMODEL

PLAY WELL WITH OTHERS


BETTER PRODUCTS

CREATENEW

VALUE

.01FUNCTION

.02BUSINESSMODEL

MAKE COOL STUFF


CREATE DIGITAL

MARKETS

.03TECHNOLOGYSTAND UP TO BULLIES

DECENTRALIZEDRESILIANT EFFICIENT


WHAT IS NEEDED TO GROW FROM 10 BILLION TO 100 BILLION?

HOW DO WE ADDRESS SCALE & SECURITY ISSUES?


BLOCK CHAIN

+

BITTORRENT

TELEHASH

+


The Block Chain foundation comes from BitCoin, a wholly decentralized banking system

29

Traditional banks are built on private, centralized systems:

There is one central ledger for accounts, identities, and transactions.

Account owners

Bank balances

Transaction records

New Transactions

In Bitcoin, the central functions are distributed to all the participants in the system:

Thanks to cheap computing power and clever process design, BitCoin enables truly distributed transaction processing.

Every user has access to their own copy of the entire transaction ledger in a long file called the BLOCK CHAIN:


The Block Chain enables something crucial: computing after trust

30

Transactions are confirmed by CONSENSUS

Multiple ecosystem participants check on each transaction to provide REDUNDANT VERIFICATION

No single point of failure

No need to trust all the participants


Extract the financial component from BitCoin and you have a generic transaction processing system that is programmable

31

Take Bitcoin and remove the financial component

You a have powerful distributed transaction processing system

Account owners

Bank balances

Transaction records

Any transaction-intensive processing activity

Transaction processing engines are the foundation of many key technology systems:

Travel Reservations

Billing Systems

Health Records

Social Media

Device Data

Documents

Both old… And new…


Efficient

32

Server-less architecture means far lower centralized costs for management & administration:

Our current estimate on the cost manage millions of devices for enterprises.

-99%


Secure

33

Transparent, open-source nature of BitCoin platform creates security through transparency.

This reverses the traditional online approach to security and enables trust through verification.


Enduring

34

0

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

BitCoin NYSE Twitter Facebook

Transactions Per DayVarious Online ServicesStandard ScaleAs of April 2014

1

100

10,000

1,000,000

100,000,000

10,000,000,000

BitCoin NYSE Twitter Facebook

Transactions Per DayVarious Online ServicesLog ScaleAs of April 2014

0

22,500

45,000

67,500

90,000

2009

2010

2011

2012

2013

2014

BitCoin Transactions Per DayOverall Growth TrendStandard ScaleAs of April 2014


BitCoin technology, on everything, everywhere


We can put the Block Chain on smaller and smaller devices

36


At CES, IBM and Samsung showed off our joint Block-Chain based proof of concept

37

2 Block-Chain Demos:

Advertising marketplace for Large Format Displays

Washing machine that orders spares & service and manages power consumption.


Agenda

38





From Here To There


The future is already here. It’s just not very evenly distributed.

William Gibson


When it comes to the business model for the internet of things, we believe there are two key opportunities

40

BETTER PRODUCTS

FUNCTIONMAKE COOL STUFF

.03TECHNOLOGYSTAND UP TO BULLIES

DECENTRALIZEDRESILIENT EFFICIENT

CREATE DIGITAL

MARKETS

CREATENEW

VALUE

.02BUSINESSMODEL



The internet turned digital products into liquid digital assets

41

DISCOVER

USE

PAY

Online Payment icon (cc) by Slawek Jurczyk from the Noun Project


We believe that Internet of Things will do the same for the physical world

42

DISCOVER

USE

PAY


Lots of vendors are already out there enabling these tecnologies

43

DISCOVER

USE

PAY


Companies like Uber are already transforming the Taxi business

44

Drivers and customers can both see the marketplace:

Analytics tells drivers where to find customers:

UBER (and similar services) are using data to bring LIQUIDITY to markets:


Uber and related services do much more than just labor & regulatory arbitrage

45 Sources: Uber, New York Taxi & Limousine Commission, Boston Taxi Commission, UBER fares based on UberX

Today, average Taxi utilization is relatively low:

55%

UBER fares are lower than regular taxi prices

-‐18%

…but Uber drives report higher incomes:

+22%


If it’s driven by an asset that can be tagged, managed and shared, then a service is being built around it:

46

The number of new digital online services that do this is growing enormously:

UBER (and similar services) are using data to bring LIQUIDITY to markets:

Just 550 Employees

Estimated $1bn in revenue

$10bn Valuation


OptimizationInstrumentation Monetization


IBM invented the computer reservation system for American Airlines

The world’s first physical marketplace digitized:

• Eventually, every flight on every route was available as a digital asset to be bought and sold online

• Airlines could monitor their business in real time and apply optimization tools to inventory, pricing & routing


Average US Airfares, Adjusted for Inflation1979-2013

Aver

age

Airfa

re, i

n C

onst

ant 2

000

Dol

lars

0

125

250

375

500

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013


Total US Airline Industry Revenue, 1995-2013, US$ BillionsRe

venu

e, U

S$ B

illion

s

0

40

80

120

160

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Network CarriersLow Cost Carriers


US Airline Industry Profits, US$ Billions, 2000-2013Re

venu

e, U

S$ B

illion

s

-$30

-$23

-$15

-$8

$0

$8

$15

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Sum of all profitsince 2000:-$44 Billion


Even as the airlines were going bankrupt left and right, the most powerful players in the travel market were the airline reservation systems (sound familiar?)

American spun-off SABRE in 1999. SABRE had an initial market capitalization of $6billion. AA was only worth $3.8 billion in 2002

52


Agenda

53





From Here To There


Five lessons we could learn from the Internet of Things so far

54

1. Just because you can connect it, doesn’t mean you should.

2. Current IoT architectures are mismatched to technology.

3. We cannot restore trust to computing.

4. Forget fitness trackers, we’re headed for the Economy of Things.

5. Where Facebook users go, enterprises follow.


DO WE REALLY NEED A SMARTER TOASTER?


Read all about it.

57

ibm.biz/DeviceDemocracyDevice Democracy: Saving The Internet of Things

IoT Block Chain Technical White Paper (Draft Version) ibm.biz/BdEAyL

Device Democracy: The Economy of Things Coming in March 2015

http://ibm.biz/DeviceDemocracy

http://ibm.biz/BdEAyL

http://www-935.ibm.com/services/us/gbs/thoughtleadership/internetofthings/

© 2015 IBM Corportation

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