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How Will Vendors Monetize the Internet of Things?

Cash registerI’m off to Barcelona this week to attend Cisco’s “Internet of Things” conference.  I believe this is the first time the company has run this event although there have been other events dedicated to this topic.  There’s no doubt that we’ll continue to see more and more things connected to the Internet.  In fact, my prediction is that over the next five years we’ll see at least a 100-fold increase in the number of connected elements.  While this might seem like a lot, it may actually be a conservative estimate, as once the IoT ball gets rolling we’ll see it pick up momentum faster than anyone would have predicted.

For some examples, all I need to do is look around my house today at all the devices that I have connected that I would never have dreamed of just a few years ago:

  • Thermostat.  I know the “Nest” ones are very popular, but I’ve got one made by Honeywell that allows me to control both radiant heat in the floor, as well as regular blown heat.  I can set several programs so I can have the heat turn off and on automatically and alert me when temperatures get below a certain level.  One of the odd things about this device is that the iPhone-based app is much easier to use than the actual panel itself, making it a “mobile first” device.
  • Treadmill.  Last year I bought a treadmill which advertised itself as running Android as the interface. And sure enough, when I turned it on the first time it requested to connect to the wireless network and actually took about three hours to download and install all of the updates to the “panel”, which one could look at as an embedded tablet.  Why might one want a connected treadmill? Well, one obvious reason is to update your running stats to a site that tracks progress, speed, etc.  There’s also the point of posting things to Twitter or Facebook so people can see how slow or fast you are.  However, the coolest use is that you can actually put in two points and if Google has a Street View of that path, it will let you “see” the run on the tablet and alter elevation as you’re running it.  Want to try running the Boston Marathon?  Go ahead and let the Android-powered treadmill let you.
  • TVs.  The “Smart TV” has become commonplace now with many sets having on-board Netflix, Hulu, and YouTube.  What’s been fascinating to watch is how user behavior has changed towards TV.  Other than live sports, my kids never watch cable TV.  Most of what they watch is Netflix and YouTube with some other on-demand services sprinkled in.

This is just a small sample of the things around my home, and doesn’t include my OnStar-enabled car — where I get e-mails once a month giving me diagnostics — or the Fitbits that we now wear to track how many steps we take, or the connected digital camera I just bought that uploads pictures automatically.

While these are all cool applications, and I see businesses becoming more and more connected, I do wonder how the traditional IT vendors such as Cisco or IBM make money off of IoT.  At Cisco Live, the company gave a cool demo where farmers could put small chips in the soil that could measure the moisture and turn the sprinklers on when water was needed.  That may be interesting, but none of the traditional IT vendors make the chips in the soil and the connectivity is either RFID or some sort of near-field communications.

Conceptually, one would think that the more things connected to a network would be better for the network vendors, but this crop of connected devices don’t really use that much bandwidth either.  Down the road there will be some professional services revenue in analyzing the traffic patterns and other data, but that doesn’t really have an infrastructure pull-through component.

So, while IoT will remain a hot topic, and we’ll see more and more of the IT community position it as “the next big thing”, it’s unclear to me how any of the traditional IT vendors really stand to make money off of it.  I’m hoping to get some answers to this question this week but, even if I don’t, it’s a fascinating technology trend to watch over the next few years.

Image credit: David Trawin (flickr)

About the author
Zeus Kerravala
Zeus Kerravala
Zeus Kerravala is the founder and principal analyst with ZK Research. He provides a mix of tactical advice to help his clients in the current business climate and with long term strategic advice. Kerravala provides research and advice to the following constituents: End user IT and network managers, vendors of IT hardware, software and services and the financial community looking to invest in the companies that he covers.