Nonlinear Thinking

Surprising Stats Regarding the Internet of Things

CMO.com publishes a weekly column, "Mind Blowing Stats"  that collects disparate and sometimes arcane data points about a specific topic.  A recent edition of the column highlighted the great traction and movement forward that IoT is achieving though most people, and companies, don't recognize how fast the technology is being embraced.  From the column:

1. In 2008, there were already more "things" connected to the Internet than people. By 2020, the amount of Internet-connected things will reach 50 billion, with $19 trillion in profits and cost savings coming from IoT over the next decade.

2. Connected homes will be a huge part of the Internet of Things. By 2019, companies will ship 1.9 billion connected home devices, bringing in about $490 billion in revenue. Google and Samsung are already ahead of the pack. Google bought smart thermostat maker Nest Labs last year for $3.2 billion, and Samsung purchased connected home company SmartThings for $200 million.

3. Right now, most IoT smart devices aren't in your home or phone; they are in factories, businesses and health care. By 2025, the total global worth of IoT technology could be as much as $6.2 trillion--most of that value coming from devices in health care ($2.5 trillion) and manufacturing ($2.3 trillion).

4. Only 0.06% of things that could be connected to the Internet currently are, which means 10 billion things out of the 1.5 trillion that exist globally are currently connected.

5. By 2020, it’s estimated that 90% of cars will be connected to the Internet as compared to 10% in 2012.

6. The connected kitchen will contribute at least 15% savings in the food and beverage industry by 2020.

7. By equipping street lights with sensors and connecting them to the network, cities can dim lights to save energy, only bringing them to full capacity when the sensors detect motion. This can reduce energy costs by 70% to 80%.

8. GE estimates that convergence of machines, data, and analytics will become a $200 billion global industry over the next three years.

9. More than two-thirds of consumers plan to buy connected technology for their homes by 2019, and nearly half say the same for wearable technology. Smart thermostats are expected to have 43% adoption in the next five years.

10. In 2008, Proteus Digital Health created a pill with a tiny sensor inside of it. The sensor transmits data about when a patient takes his medication and pairs with a wearable device to inform family members if it's not taken at the right time.

11. A whopping 94% of all businesses have seen a return on their IoT investments.

12. Wearables will becomes a $6 billion market by 2016, with 171 million devices sold, up from $2 billion in 2011 and just 14 million devices sold.

13. Currently, 7% of consumers own a wearable IoT device, and 4% of consumers own an in-home IoT device. Nearly two-thirds of consumers plan to buy an in-home device in the next five years, and wearable technology ownership will double by 2015—increasing from 7% in 2014 to 14% by 2015. By 2016, wearable technology is expected to double again and reach a total of 28% adoption rate.

14. Among wearable technology devices, wearable fitness applications and technology stand to see the most growth in the short term, with 13% of consumers planning to purchase within the next year and a total of 33% looking to adopt in the next five years. Smartwatches are the second most popular wearable device, with 5% planning to purchase in the next year and a total of 23% planning to adopt in the next five years.

15. Although the mass adoption of connected technology is likely in the long term, the majority of consumers (87%) haven’t heard of the term “The Internet of Things.”

 

The Growth of the Internet of Things (IoT)

Cisco continues to be among the vanguard of enterprises that are embracing the emerging Internet of Things (IoT).  John Chambers, CEO of Cisco, recently delivered another speech on the concept and the bottom line, from Cisco’s viewpoint, is that the IoT is going to be a $19 trillion profit market in the next few years. That includes $2.9 trillion for manufacturing alone. Internet of Things is becoming the backbone (at least in rhetoric) of Cisco's overall business strategy, and Chambers pointed in that direction once again, stressing that Cisco's IoT game plan combines the company's cloud strategy with data analytics, mobile, collaboration, and most important of all, security.

M2M and the Internet of Things

A dozen years ago in a white paper on emerging technologies I included a section on machine-to-machine (M2M) technology, though at the time that nomenclature wasn’t generally accepted.  My simple example of the power of M2M featured communications among a population of Coke machines in a large downtown area sharing real-time inventory data to allow any individual machine to direct a customer to the next closest machine should they be out of the carbonated beverage that customer desired at that particular time.

That example was fanciful at the time, but M2M has now gained traction as one of the “next big things” as hundreds of companies are combining wireless, Wi-Fi, mobile, web, and context technologies to offer information and convenience in innovative new ways.  The escalating pace of adoption for smart devices – phones, tablets, home appliances, industrial equipment - is creating new demands on enterprises and consumers around the globe which requires new thinking about the connected environment.

M2M technologies allow wireless and wired systems to communicate with other devices possessing the same capability.  M2M uses sensors, meters or like devices to capture event data (electricity usage, temperature, inventory) and share it via network with an application that translates the data into information that can be used by other devices, networks, applications and enterprises.

M2M is a critical platform for the enablement and maturation of the concept of the “internet of things” which includes everything from smartphone apps that control a home's living environment remotely to real-time analytics that help ease traffic congestion and city parking challenges.

The notion of an “internet of things” has been around for a while now.  Kevin Ashton coined the term in 1999.  Of course, a concept is never truly viable until it has its own consortium hence, the Internet of Things Consortium

The Internet of Things (IoT) represents the connection of all machines, devices, sensors, automobiles, cameras, and other "things" to help customers improve operations and save valuable time, money and even lives. The IoT connects places such as manufacturing floors, energy grids, healthcare facilities, and transportation systems.

With cloud infrastructure becoming more prominent, M2M applications have expanded beyond a one-to-one connection to become a system of networks that transmits data to personal appliances. This has made it far easier to effect M2M communication and lessened the amount of power and time necessary for information to be communicated between machines.

The critical dynamic here, and one that has been growing for at least 15 years, is that smart devices connected to the internet would eventually far outnumber the people that would be connected to the internet.  Voila! We are there.  Per Cisco, over 12.5 billion devices were connected in 2010 and Cisco’s Internet Business Solutions Group (IBSG) predicts some 25 billion devices will be connected by 2015, and 50 billion by 2020.

ERP solution provider SAP has begun to explore M2M and recently conducted a survey among IT decision makers on the impact, current and forecasted, of M2M.  Some interesting data points that emerged from that survey included:

• 85 percent of IT decision makers (ITDMs) think that M2M is a natural technological evolution and will advance the "consumerization of IT" trend
• 82 percent think that M2M interaction enables businesses to respond to real-world events
• Sixty-five percent of ITDMs think increased workforce mobility is the biggest opportunity for M2M
• 65 percent think the major challenge in M2M is managing and analyzing the real-time data.
• By year's end:
  • Mobile devices will outnumber the human population
  • Data volume will reach 4 billion terabytes
  • 90 percent of consumer-connected devices will have access to some personal cloud.
  • SAP estimated that by the end of 2020, there will be 24 billion connected devices and by 2015, 35 percent of mid-to-large organizations will adopt in-memory computing

The possibilities for machine-to-machine in concert with other emerging technologies are extraordinary. Almost every machine or device has the potential to become connected, creating interactions with other technologies and services and bringing significant impacts to processes in and across all industries.

As the notion of an “Internet of things” becomes increasingly mainstream, businesses will incorporate machine-to-machine technology to gather and use information towards both strategic and tactical ends. The end result will be new products and services that will drive new revenue streams and reduce costs for businesses.

Smart Grid Spending Explodes

A new report by ABI Research on utilities and smart grids spotlights the rapidly increasing capital investment in the component technologies that form the backbone of smart grid infrastructure. We have discussed aspects of the smart grid in the past here and here but the pace of investment is becoming parabolic as the benefit and value of the technology is becoming more profound.

A smart grid is an electrical grid that uses information and communications technology to gather and act on information, such as information about the behaviors of suppliers and consumers, in an automated fashion to improve the efficiency, reliability, economics, and sustainability of the production and distribution of electricity.

According to the ABI Report,

Spending by utilities transitioning their networks to Smart Grid capabilities reached $23.68 billion in 2012. Highlighting the growing momentum behind the spending, 2012’s total alone represents 48% of Smart Grid spending to date. During the year, spending on transmission and distribution capabilities surpassed smart meter investments as utilities increasingly looked to improve their core networks and maximize the benefits of their growing Advanced Metering Infrastructure (AMI) deployments.

Smart grid spending in 2012 was up 47.1% from $16.10 billion in 2011 as remaining government stimulus funds were spent in the United States and utilities around the world increased their own investments. Even so, these remain the early years of Smart Grid investments and spending will continue to grow over the next five years to reach $80.8 billion during 2018.

Key areas for strategic investment in the smart grid build out remain the same as they have been for the past decade, including:

• AMI
• Demand Response
• Grid Optimization
• Distribution Automation
• Software and Application provision
• System Integration
• Connectivity

You can read more of ABI’s research on smart grid here.

The Inevitability of Digital Marketing and the Digital CMO

A favorite debate focuses on the ascension of digital marketing over traditional marketing in today’s marketing model. Too many companies, even in the technology sector, still seem unable to grasp that such a transformation is taking place.

Perhaps the issue is that, even now, spending on analog/traditional marketing continues to exceed spending on digital marketing by a significant ratio according to Gartner Group’s 2013 U.S. Digital Marketing Spending Survey.  Based on the survey, average marketing spend as a percent of annual revenue, across all industries, is 10.4% while digital marketing spend is 2.5%. 

It should be noted that analog marketing tactics continue to be more expensive than digital options – media advertising being just the most obvious example.  Had the survey been broken down between B2C and B2B companies/industries, my guess is that analog and digital spending would be on a more even spending arc.

A related trend - how the advent of the digital marketing technologies that are reinventing much of the marketing model have altered the dynamic between CMO and CIO – is also highlighted by the results of the survey.  The CIOs of those same companies have seen their budget decline to 3.5% of annual revenue and with digital marketing spend at that 2.5% level, parity in technology-related spend seems not too far away.

In fact, in a 2012 report, Gartner predicted that by 2017, the CMO's technology budget will exceed the CIO's.  Pretty much every business should broadly consider itself a digital business but, right or wrong, marketing has emerged as the de facto owner of digital.  That makes the CMO responsible for driving the organization’s digital transformation, which clearly is built on many of the emerging technologies that are changing the conduct of business – mobile, social, cloud, SaaS/PaaS/IaaS.

SaaS and cloud technologies have had much to do with the changing balance of power between the two functions.  The ability to bypass the CIO organization to access key marketing technology platforms/solutions with ease in the new environment allows marketing leadership, or any other functional leadership, to avoid the traditional IT development/procurement queue and execute much more quickly on critical initiatives.

This would all seem to set the stage for the emergence and confirmation of the digital CMO, a marketing leader that not only recognizes the inevitability of this transition in the marketing model, but embraces and builds an organization to take greatest advantage of the new digital/social/mobile media.  Marketing strategy is still marketing strategy.  It is the tools, technologies, and channels that have been disrupted.  If there is a crossing of the Rubicon occurring in marketing today it is probably better to start thinking and acting digitally now than learn in some harder, and perhaps more final, way.

Compendium/Miscellanea/Almanac 04.17.2013

Stuff that has crossed my radar lately for one reason or another.

• The Strategic Plan is Dead.  Long Live Strategy. (Stanford Social Innovation Review)
• A new reality between the CMO and CIO (ZDNet)
• We’re from Corporate and We’re Here to Help (Strategy + Business)
• The Software Revolution Behind LinkedIn’s Gushing Profits (Wired)
• Pragmatic Pathway – New Approaches to Organizational Change (Deloitte University Press)
• Global Information Technology Report 2013 (World Economic Forum)
• Viral’s Secret Formula (Huffington Post)
• All eyes on the sharing economy (The Economist)
• 13 Hot Business Model Innovations (Sustainable Brands)
• Challenges and Opportunities of Investing in Cleantech and Renewable Energy (IGEL@Wharton)
• Marketers Rise to the Cloud Challenge (CMO.com)

Hotel California?

For some reason, this line from the Eagles classic Hotel California became lodged in my cerebral cortex when I saw the artist rendering of Google’s next headquarters campus.

"We are programmed to receive. You can check-out any time you like, but you can never leave! "

Compendium/Miscellanea/Almanac 01.12.2011

Stuff that I find interesting.  Maybe you will too.

• Budgets, Innovation Squarely in CMOs' Sights in 2011 (Advertising Age) 
• Clouds, big data, and smart assets: Ten tech-enabled business trends to watch  (McKinsey Quarterly) 
• How Tech Will Be Critical to Corporate Sustainability in 2011 (Greenbiz) 
• Light My Fire: The Matchbook Makes a Cultural Comeback (Fast Company) 
• How Aha! Really Happens  (Strategy + Business) 
• Swimming Against the Tide: How Technology, Media, and Telecommunications Companies Can Prosper in the New Economic Reality  (Boston Consulting Group) 
• Eric Berlow: How complexity leads to simplicity  (TED)  
• The AI Revolution Is On  (Wired)  
• The Battle for Control of Smart Cities  (Fast Company) 

The Only Constant is Change: Addendum

When it rains, it pours, or so it seems.  On the heels of a recent Forrester report on the future of IT services which I wrote about here, management consultant A.T. Kearney weighs in with their own, very similar view on that future.  This recent op-ed in Businessweek by Arjun Sethi and Olivier Aries sees most of the same external drivers highlighted in the Forrester report  but offers a different and altogether more interesting futurescape for IT services.

“ In the next five years outsourcing as we know it will disappear.  The legion of Indian service providers will be sidelined or absorbed. U.S. and European companies that pioneered this corner of the high tech industry will suffer similar fates if they don't wake up.  Who will emerge as the new leaders?  Google and Amazon.com , brands that we associate with search and retail, will become better known for outsourcing."

Longtime readers of this blog will know that I have been harping on the threat that Amazon and Google, in particular, present to the old guard of IT service providers as I have written about it here, here and here. SaaS/cloud technologies, under any name, have been a game changing disruptive force for the past 10 years. When IBM acquired Corio five years ago, that should have, de facto, been some kind of canary in the coal mine.

In their commentary Sethi and Aries also conjure up a vision of what the new outsourcing model will look like.

“In the new model, outsourcers provide standard, off-the-shelf software on a "pay-per-drink" basis. For that, they will leverage so-called cloud technology, which lets users tap into computing power available via the Internet, rather than on a desktop or computer server housed locally. The appeal is scale, flexibility, and efficiency: Thousands of server computers can attack a task more quickly—and cheaply—or handle a patchwork quilt of different technologies that companies use to run their businesses. This approach will let businesses outsource entire tasks such as the tracking of inventory, paying only for the information accessed or used.”

The commentary also mentions who might be the losers in this new model (mid-tier Indian outsourcers), possible winners (SAP, Oracle, Microsoft, Salesforce), and a several major players that are not moving fast enough (Accenture, Xerox, Dell, HP).  

I am guessing that this commentary and the Forrester report will be far from the last discussions regarding the changing IT services landscape.  I would also imagine that we will see more and more discussion of the death of the internal IT department beyond the many books and reports already written.  Fasten your seatbelts.

The Only Constant is Change

"To improve is to change.  To be perfect is to change often." - Winston Churchill

Forrester has a new report out discussing the dynamic evolution that traditional IT services providers are going to experience over the next several years.  This analysis is very timely and it addresses a combination of external drivers that I have been writing and speaking about for the past several years.  The authors, John C. McCarthy and Pascal Matzke have done a masterful job in codifying the thinking around these externalities and their impact to the existing IT service provider business model. This excerpt from the executive summary delivers the high-level on the emerging metamorphosis.  

“The tech services market is about to undergo a massive transformation that will call traditional provider business models into question. Four factors will combine to dramatically change the dynamics, economics, and competitive landscape of IT services over the next three to four years: 1) the “restructuring economy”; 2) innovation moving to the edge of the enterprise; 3) the redefining of buying and governance dynamics in accounts; and 4) “as-a-service” becoming the norm.”

For those that have been engaged in surveying the technology market landscape over the past decade, the conclusions McCarthy/Matzke draw from their analysis is no surprise.  Unfortunately, few of those individuals appear to actually work for the major players in global tech services because those firms have made few, if any, alterations to the business model they have employed for the past 15 years.  As innovation in IT moved from the data center to the business units, on-demand/as-a-service and other cloud-based solutions gained traction, and social/mobile activity emerged as integral parts of the technology platform, Nero fiddled.

And the hits just keep coming.  The Forrester report offers a forecast of why and how the IT services model of today will cease to exist by 2020.  

• Forrester sees at least nine new services entering the market as cloud/SaaS redefine the services business.
• Selective sourcing and utility pricing models broaden their footprints.
• Digital natives and the advance of business (unit) buyers push traditional IT into the background.
• Standardization in cloud/SaaS solutions create pricing transparency and profound pricing pressure on traditional service models.
• Cloud/SaaS drive increasing standardization and process industrialization of services leading to delivery models based on solution partner ecosystems.

From my perspective, the most provocative item in the report is the following table that contrasts the top ten service providers in 2010 with a forecast of what the top 10 will look like in 2020.

 

Looks like a whole lotta growth, death and consolidation in the sector.  Ten years may seem like a lot of time for the current top ten to embrace and adapt to this new environment, but the truth is that this evolution has been ongoing for at least five years.  Too many of the incumbents lack the cultural and operational survival instincts to revolutionize their business models.  Some of the logos we have come to recognize in the global tech services space have already vanished.  It will be interesting to watch how this all plays out over the next decade.