Rebooting the IoT From the Internet of Things to an Economy of Things

Rob van den Dam

Global Telecom Leader

IBM Institute for Business Value

IoT is IBM’s # 1 research area

Telecommunications Solutions Lab (TSL)

Telecommunications Research Lab

TSL China &

Telecom Research Lab

(Beijing)

TSL North

America (Austin, Texas)

Japan

(Tokyo

Satellite TSL)

TSL Israel &

Telecom Research Lab (Haifa Satellite TSL)

Telecom Research Lab (New Delhi)

TSL LATAM (Sao Paulo,

Brazil Satellite TSL)

TSL Europe (La Gaude &

Montpellier, France)

TSL Russia (Moscow Satellite TSL)

South Africa (Johannesburg, Satellite TSL)

ASEAN (Kuala Lumpur

Satellite TSL)

TSL India (Bangalore Satellite TSL)

Centers of Excellence

Institute for Business Value

Research Labs

Almaden c

Big Data & Analytics Storage Nanotech

Healthcare

Watson Semiconductors Systems Software &

Services Big Data &

Analytics

c

Dublin

Smarter Cities

Internet of Things Smarter Cities

South Africa (Johannesburg,

Satellite TSL)

Worldclass Partner

Ecosystem

Industry

Solutions Labs

Future

Agendas

Value Realization

Studies

3 to 10 year industry outlook

with action oriented next steps In-depth assessment of today’s

critical issues, opportunities, etc

CXO

Surveys

Chief Officiers studies – CEO,

CIO, CMO, CFO, CHRO, etc.

IBV: Developing thought leadership

Consumer

Surveys

Country specific profiles &

CSP benchmarking

2015

February 2015

June 2015

October 2015

February 2016 Customer

Experience Big Data &

Analytics

5,247 interviews

in 70+ countries

295 Telecom

CxOs

Redefining

Boundaries

Content

Discussing the Internet of Things

The role of Telecom Providers in IoT

The IoT is poised to changed everything

The Internet is evolving to connect

people to physical things and also

physical things to other physical

things … all in real time. It’s

becoming the Internet of Things

(IoT): Billions of interconnected

smart devices measuring, moving,

and acting upon all the bits of data

that make up daily life.

ARMONK, NY - 31 Mar 2015: IBM (NYSE: IBM) today

announced that it will invest $3 billion over the next four years

to establish a new Internet of Things (IoT) unit, and that it is

building a cloud-based open platform designed to help clients

and ecosystem partners build IoT solutions.

IBM Investing $3 Billion in Internet of Things

07/15/15

IoT-based consumer devices such as wearables

and smart appliances receive a high degree of

media attention.

IDC surveyed organizations that are actively

pursuing IoT initiatives. IoT is helping businesses

better manage very complex systems.

Consumers, businesses and governments recognize

the benefit of connecting devices to the Internet

61%

9

1

2

3

Unlock new revenue from existing products

and services

Inspire new working practices or processes

Change or create new business models or

strategies

IoT offers a transformative business opportunity

and is changing how businesses operate

However, challenges regarding security, privacy,

and common standards must be overcome

Malicious actors intent on taking

control of data, identities, and

passwords will exploit Internet-

connected devices that are not

securely developed, making them

easier targets than traditional

PCs, laptops, or tablets. – IBM X-

Force Threat Intelligence

“By 2020, each human being will

have an average of 5.1 connected devices” Frost_Sullivan

“28.1 billion in 2020” IDC

“40.9 billion forecasted for 2020”

ABI Research

“By 2020 exceed 26 billion units worldwide.” Gartner

We are at the threshold of a massive explosion in

the history of computing

The first wave of the IoT is already here. It’s the

Internet of billions of Things

Proportion of Smart

TVs being used for

Internet Viewing

Continuous

Monitoring of

Jet Engines

Automated

Smart

Meters

We have seen visible successes

in high value applications

But demand has been slow to

take off in many other areas

Proportion of Heavy

Industrial Equipment

Networked

10%

30%

Market expectations are enormous, but IoT business

models are already broken

The Internet of

Things

already needs

a

REBOOT

Video

IoT solutions that work for billions of devices won’t

necessarily scale to hundreds of billions of devices

High Cost

Lack of Privacy

Not future proof

Lack of functional value

Broken business models

High cost of supporting and maintaining hundreds

of billions of smart devices will be substantial

Support

agreements

High buy prices,

short life cycles

Low margins,

high life cycles Mismatch between cost and revenue

Lack of Privacy; the Internet is no longer a place

of trust

Centralized authorities become

single points of failure

No trusted partners on the

Internet

The Internet was original build

for convenience and on trust

Not future-proof; average life of IoT devices will

be decades

Cost of maintaining smart devices can outlast

product and manufacturer obsolescence

Average Expected lifecycle

18 to 36

months

± 10 years

± 40 years

> 40 years

Lack of Functional Value; connectivity and

intelligence is a means to a better product, not an end

Simply enabling connectivity does

not make a device smarter or better

A smart, connected toaster is

of no value unless it produces

better toast

Broken business models > as a result profits

remain elusive

Lack of sustainable business

models is holding the IoT back

And ask yourself a

few questions ……

Imagine the connected

toaster of the future .....

To see how unrealistic the expectations are with

current business models, just apply the “toaster test”

Would you be willing to pay an annual subscription for software updates to your toaster?!

How much time are you willing to spend updating

the software in your toaster?!

Would you be comfortable seeing advertising burned into your morning

toast?!

Are you willing to only buy bread from the company making the toaster?!

Do you trust the toaster maker (or the NSA) not to sell data about your heavy

consumption of Pop Tarts to your health insurer (who may then choose to

charge you higher premiums for unhealthy behavior) ?

If it doesn’t work for the toaster, it may not work for your

door lock, garage, light switch, toothbrush or toilet bowl.

To get the ‘second' wave of the IoT, it needs to be

redesigned based on 3 architectural principles

Architectural

principles

Design for radically lower cost: Embrace distributed computing, peer to peer networks and device based analytics eliminating costs associated with the IoT cloud

Design for real privacy: Privacy and

anonymity ensured by design, opt-in only, open source, transparent encryption for secure messaging and file transfers

Design for business model endurance: Transfer ownership and maintenance

responsibility from manufacturers to networks of self maintaining devices

To be secure and scalable, the IoT will evolve to be

more open and decentralized

Before 2005 Today 2025 and beyond

A truly decentralized IoT solution will require 3

foundational functions to be supported

File

Transfer

Messaging

Device

Coordination

Trustless Peer to Peer Messaging

Secure Distributed File Sharing

Autonomous Device Coordination

The set of foundational principles is an opportunity to

change the model of Internet services and security

Trustless Peer to Peer Messaging

Secure Distributed File Sharing

Autonomous Device Coordination

No single arbiter of roles and permissions • Owner/user defined interactions

• Autonomous transaction processes

• Trustless network of interactive devices

No cloud based file transfers • Secure file and data sharing

• Software/firmware updates

• Device based analytics reporting

No centralized broker of messages • Trustless encrypted messaging and transport

• Low latency, guaranteed delivery

• Store and forward capabilities, hop-ons

A secure and scalable IoT solution can be built on

open-source technology

No single arbiter of roles and permissions • Owner/user defined interactions

• Autonomous transaction processes

• Trustless network of interactive devices

No cloud based file transfers • Secure file and data sharing

• Software/firmware updates

• Device based analytics reporting

No centralized broker of messages • Trustless encrypted messaging and transport

• Low latency, guaranteed delivery

• Store and forward capabilities, hop-ons

P2P messaging protocols

P2P decentralized filesharing

Blockchains

Example

Example

Example

Not every system needs to be centralized,

however

Device Longevity

Device Value

Democracy of Devices

By empowering devices to

function autonomously, the edge

will become a frontier of new

economic value, creating an

“ECONOMY OF THINGS”

Devices on the edge can be empowered to function

autonomously in the IoT

New Marketplaces hosted by peer exchanges can

provide liquidity for transactions between devices

Similar to financial exchanges,

peer exchanges can

match

supply and demand

MUSIC NEWS WEATHER TRAFFIC MAPS

The Internet created liquid markets

of the digital world

The digital world

REAL ESTATE MANUFACTURING AGRICULTURE RETAIL TRANSPORTATION

The Internet of Things will do the same

for the physical world

The physical world

Creating liquid marketplaces of physical assets by en-

abling real-time discoverability, usability and payment

Physical

world The liquification

of the physical

world

The economic models can be constructed around the

three vectors of disruption from the IoT

3 Vectors

of disruption

So ... what is the role CSPs (communications service

providers) in this transformative business opportunity?

What are the means by which CSPs can

extract value from the IoT?

What will be the likely impact of the ‘Economy

of Things’ on different industry players?

How can the telecom industry play a

key role in this transformation?

CSPs have a strong position to capitalize on data in eco-

systems in which connectivity plays an important role

600

350

270

250

245

225

105

100

75

40

0 100 200 300 400 500 600 700

Connected Car

Clinical Remote Monitoring

Assisted Living

Home and Building Security

Pay-As-You-Drive car Insurance

New Business Models for Car Usage

Smart Meters

Traffic Management

Electric Vehicle Charging

Building Automation

Global market value for connected devices

US$ Billion

Data and analytics: the vital spice in the IoT

38

90% Volume of data created at the edge of IoT that is

never captured, analyzed or acted upon.

60% Amount of that data that loses its value within

milliseconds of being generated.

Source: IBM

http://www-03.ibm.com/press/us/en/pressrelease/46453.wss

To innovate, operate, and engage at the next level, data must be turned into insights

Today

In a few

years

‘Systems of Insight’ can be created by unlocking

DATA from billions of interconnected devices

IoT is expected to create 100ZB

of data per year in China alone

by 2030. – IDC

41% of decision makers

surveyed say their organizations

plan to collect and process IoT-

related data close to the point of

creation. – IDC

07/15/15

Personalized and instant are the new

expectations for engagement.

Internet of Things gives businesses access to

product usage data they’ve never had before.

Personalized services designed from usage

data creates opportunities for new sources of

revenue.

Insights that lead to new ways to engage; mobile and

social are changing expectations on engagements

Advanced

analytics that

consumes

data, analyzes

it and

generates

actionable

insights in

context

41

What did

I learn?

How do

I improve?

What is

happening?

Why did it

happen?

What could

happen?

What action

should I

take?

To potential of Internet of Things lies with

intelligence

Developers

ISVs

Banking

Consultant

s/SIs

Healthcare

Media

Social

business

Personal

comms

Security

Policy

Analytics

M2M

Etc… Etc…

Managed

customer

interface,

services,

platforms

and

networks

Service providers and partners CSP solutions

Consumers Business Government/

Industries

Putting CSPs in the middle of the IoT ecosystem

CSPs data/analytics

access models:

(Big) Data as a

Service (DaaS)

Analytics as a

Service (AaaS)

.

APIs will be the driver for this model

Evaluate opportunities and roles in IoT

ecosystems

Develop capabilities to turn IoT data into smart

actionable insights

Expose assets via APIs and begin the journey

for collaborative value

Recommendations for CSPs

Thank you

Rob van den Dam

Global Telecom Industry Leader

IBM Institute for Business Value

rob_vandendam@nl.ibm.com

www.ibm.com/iibv