The Internet of Things is quickly becoming one of the most-hyped technologies in IT circles -- the big data term of the moment. But as the concept of the IoT becomes more familiar, how businesses can derive value from it is a question that needs to be answered. And increasingly, analytics is seen as the key to making investments in IoT technology worthwhile.
The futuristic example of the networked refrigerator has become a popular way for people to explain how the IoT works. The idea is that sensors embedded in the refrigerator will know when products that you typically keep on hand are running low or reaching their expiration date, triggering the refrigerator to automatically order more via its network connection. It sounds a bit like something from The Jetsons, though, and businesses outside of the home appliance or food delivery markets may wonder what's in the IoT for them.
But IoT technology has potential applications well beyond the consumer space. For example, package delivery trucks, manufacturing systems and electrical grids all typically have sensors to monitor performance. More and more companies are now starting to collect and store data from such sensors. The next step is to analyze the data. Looking for patterns in it could illuminate ways to improve business operations, such as doing more preventive maintenance or designing more efficient delivery routes.
"The way I think of it is it makes things we deal with more addressable," said Joe DeCosmo, chief analytics officer at Enova International Inc., an online financial services provider based in Chicago. But DeCosmo, who previously worked as a consultant to public utility companies on projects to balance energy production with consumer demand, said that without the analytics piece, sensor data is just a lot of noise.
"The data combined with the analytics makes those addressable opportunities," he said.
High expectations for IoT tools
In its 2014 Hype Cycle for Emerging Technologies report, published in August, consultancy Gartner Inc. placed the IoT at the very top of what it calls the peak of inflated expectations. But many IT departments that are thinking about the IoT now are focusing primarily on the data collection aspect. In order to get to a point where IoT projects really deliver business value -- and avoid falling into Gartner's trough of disillusionment -- organizations need to have a plan for analyzing IoT data and acting on those analytics' results, said Steven Sarracino, founder of Activant Capital Group LLC, a Greenwich, Conn., venture firm that invests in technology companies.
Vendors marketing IoT products also need to emphasize data analysis capabilities, not just collecting sensor data, according to Sarracino. "There are a lot of [vendors] that will take the data and present it, and it will look pretty in a dashboard," he said. "But if they're not doing sensor-driven analytics, it's not useful."
Retail is one industry where Sarracino sees IoT technology having an impact today. His company recently invested in a software vendor called RetailNext Inc., which applies analytics to data from security cameras and Wi-Fi beacons to help retailers understand how customers are interacting with in-store displays.
Sarracino said retailers have been analyzing customers' Web activity data for years to identify opportunities to optimize their online services. Now, he added, they're looking to do the same kind of thing in their brick-and-mortar locations.
Constructing an IoT analytics business case
But the opportunities aren't limited to retail. For example, Dan Hussain, a technologist who is founder and president of patent law firm American Patent Agency PC and investment company American Pioneer Ventures, has developed software designed to analyze sensor data from cranes being used to build high-rise towers to help identify potential structural failures in the cranes. Hussain said such machines have long had sensors to monitor their performance. What's new is that construction companies are now starting to ask how they can use that data to improve performance and avoid potentially dangerous safety issues.
This new strategic focus on IoT data collection and analysis can give organizations visibility into areas of their operations they've never had before. "We talked to many Fortune 500 companies and CEOs and found that many of their problems come from a lack of data coordination," Hussain said. "But once you get things connected, everything takes off."