As the mobile ecosystem moves from connecting people to connecting machines, Sanjaya Krishna, a Principal and Digital Risk Consulting Leader at KPMG in the US, sat down with Maciej Kranz, the Vice President/General Manager of the Connected Industries Group at Cisco Systems – one of the pioneers and leaders of the Internet of Things (IoT) movement – to find out where this market is going and how MNOs and businesses may take advantage of this new and emerging area.
Internet of Everything (IoE) is the intelligent connection of people, processes, data and things to the internet, in a way that creates new opportunities and efficiencies.
Internet of Things (IoT) is a sub-set of IoE. It is the latest of many technology trends that together create IoE. IoT is focused on creating value through the flood of networked sensors, devices and things that are rapidly being connected to the internet.
The term Machine to Machine (M2M) has been in use for more than a decade, and is well-known in the Telecoms sector. M2M communication had initially been a one-to-one connection, linking one machine to another. But today's explosion of mobile connectivity means that data can now be more easily transmitted, via a system of IP networks, to a much wider range of devices.
Sanjaya Krishna (SK): What is the promise of IoT/M2M communications?
Maciej Kranz (MK): M2M communications – or the broader category of 'the Internet of Things' – is changing the way many industries go to market and operate. Pretty much everything these days is being connected. At Cisco, we have helped organizations connect trains to system controls; car manufacturers connect their products to networks; oil and gas companies connect oil rigs to command centers, and healthcare devices to diagnostic data centers.
I truly believe that this type of connection will have a much more profound impact on how businesses operate than the original internet did more than two decades ago. But today, we believe that only 0.2 percent of all devices that could be connected actually are, leaving 98.8 percent of devices yet to be connected. So this leaves a huge gap between what could be accomplished and what is already underway, and of course, that presents enormous opportunities.
SK: What is the opportunity for mobile network operators in all of this?
MK: M2M will fundamentally change how mobile network operators (MNOs) and service providers operate. We are already seeing some MNOs move towards offering managed services within individual verticals in order to offer a more end-to-end solution to their clients. But the emerging market has also created new opportunities for specialist vendors – such as Wyless (a leading provider of global M2M wireless connectivity solutions and managed services) and Axida (an award-winning home delivery software specialist in the UK) – who are bringing new value propositions to the market by offering these kinds of service creation capabilities.
To really capture this market, we think that MNOs will need to invest in some vertical expertise in order to develop solutions that align to the needs of each vertical industry that they plan to service.
On the one hand, oil rigs and vending machines are far less fickle about service provision than humans, meaning that – once a deal is struck – machine clients are often much more 'sticky' than consumers. But M2M also offers MNOs new opportunities to deliver higher value to their clients through the provision of more sophisticated solutions that, for example, combine customer analytics with inventory and maintenance schedules to ensure the right products are available at the right time.
SK: And how is Cisco helping to enable the movement towards wider connectivity?
MK: We believe that we have two important roles here. The first is to provide an effective infrastructure platform that enables the creation of stacks that combine connectivity, computer storage, data aggregation and even data policies. And – since there is nobody in the industry capable of creating these complete stacks on their own – we work closely with all key players in the industry in this regard.
We are also working at providing interfaces at the device level, at the network layer and at the platform layer so that we can integrate with other partners, whether they are specialized industry-specific partners or horizontal partners. Our strategy here is essentially to build lines of business relevance and architectural differentiation by providing directly relevant solutions with our partners based on horizontal platforms.
SK: What is slowing adoption of M2M technologies today?
MK: I firmly believe that this is one of those areas where the entire industry needs to come together to solve some of the big challenges such as the setting of standards, the development of business models, the management of some of the social implications and even the creation of new capabilities and new job functions.
Much of the current activity underway in many industries is focused on vertical integration through proprietary end-to-end systems. Ultimately, we believe that the winners will be defined by how well they embrace the openness that will be required to achieve success in this area.
That being said, there is certainly a movement underway to bring greater collaboration to the ecosystem. This year, for example, Cisco will host the inaugural Internet of Things World Forum, which will unite leaders and innovators together to create a framework for collaborative industry innovation and market adoption that, in turn, should help accelerate the impact of the Internet of Things on the global economy, society and the environment.
SK: Are clients seeing a lot of value come from their IoT strategies?
MK: It really all depends on how well considered the use case is for connecting everything in that sector. For example, if you are running a car assembly line and truly understand the role that systems play in creating tangible benefits, you can likely reduce costs by around 20 percent and increase uptime – a key measure of manufacturers – by up to 75 percent.
The key will be in developing a business case that provides obvious benefits to providers and consumers. Smart meters in parking, for example, are a clear benefit to cities since parking is an important source of public revenue. For citizens and customers, smart meters in parking means that when you go out, your vehicle can find the closest parting spot, guide your car to it and even pay for it without any intervention from the driver. A clear win-win for everyone.
But other industry sectors are still working to articulate the benefit to customers and end-users. I think that everyone can intuitively understand that connecting medical diagnostic devices to a central monitoring system is a smart strategy, but so far there are few business models that clearly demonstrate what the actual return is on that investment. Clearly, much of this will soon become apparent as more organizations start to explore the M2M/IoT space.
SK: And what impact will all of this have on the traditional CIO or CTO role at those companies adopting M2M technologies?
MK: I think this is a really exciting time for the technology functions. As more and more operations are connected to the network and automated, the role of the CIO or CTO will certainly start to transform. I think that the CIO or CTO of the future will need to have an equal mix of operational and technological capabilities in order to ensure the technology they are purchasing and integrating meets the needs of the business.
Ensuring data security, in particular, will become a key function of the technology function which – whether led by the CIO, CTO or CISO (Chief Information Security Officer) – will require not only a holistic view of the network but also a more consistent security architecture.
SK: Obviously, data security and privacy are already top of mind for technology companies and MNOs, but M2M brings other security challenges as well, right?
MK: Absolutely. Take the movement towards a more connected car. In five years or so, cars will start communicating to each other which will reduce accidents, enhance traffic flow and may eventually eliminate rush-hour gridlock. In this scenario, however, likely the bigger concern for security officials is preventing hackers from hijacking the car controls or feeding the computer fake data to cause an accident.
Another example is the Stuxnet virus. It was a wakeup call for the industry and showed that security would really need to be front and center for M2M to really enjoy widespread adoption.
SK: The rapid growth in M2M means a lot of data moving around the internet. Can our current infrastructure handle this rapid increase in usage?
MK: Basic connectivity applications (connecting vending machines, for example) can be handled using current networking architectures and paradigms. But when you start implementing more data intensive applications, such as data aggregation from sensors in oil-rigs or video analytics, the traditional network paradigm needs to evolve in order to meet the demand.
Simply put, we believe that you can't always take the data to the analytics. More often than not, you will need to take the analytics to the data in order to process and react to the data in real-time.
SK: So, like cloud and social media, M2M seems set to be yet another fundamentally transformational technology.
MK: It will be truly amazing. We recently did some research that found that the Internet of Everything's 'value at stake' – that is, the amount of private sector activity up for grabs, either through shifts or value creation – is predicted to be USD14.4 trillion over the next 10 years. Clearly, M2M is about to radically transform today's business operations into dynamic, intelligent, data driven and innovative business processes.
Sticking to the vehicle example, just think about the fact that around 10 to 15 percent of a North American's commute time is spent in traffic, or that – at any time – somewhere between 7 to 12 percent of traffic in North American cities is made up of people looking for parking, or that 10 to 17 percent of fuel is wasted in cities by drivers sitting at red lights when there is no cross traffic. And then just think of all of the productivity, environmental and quality of life benefits that IoT could offer in that situation. It's going to be big business.
The views are those of authors and do not necessarily represent the views and opinions of KPMG International.