The Internet of Things (IoT) is set to become a major driver of digital business initiatives. Gartner estimates that, by 2020, there will be 25 billion connected things. Organizations are starting to evaluate how to embrace and exploit the opportunities provided by the use of the information collected and shared by such a massive network of interconnected things. (For definitions of IoT, “things,” operational technology [OT], etc.
Current IoT initiatives vary widely in nature. Projects developed by industries such as retail, healthcare, education and agriculture, as well as services targeted at consumers, are often based on highly standardized, interconnected things embedded in consumer goods. These initiatives will increasingly rely on an ecosystem of things included in any common object in use. Industrial and enterprise initiatives in verticals such as mining, oil and gas, utilities, telecom and transportation will involve the use of less-commoditized technology. OT equipment may require more complex design and testing, and it will have longer life cycles.
Large numbers of system integrators (SIs), service providers and technology vendors are likely to be engaged in the delivery of the elements of an IoT project. A number of vendor categories are involved in helping enterprises discover and develop IoT business models and opportunities. No single class of vendor can fulfill all the services required on its own, so partnerships, subcontracts and OEM relationships are inevitable. Players include semiconductors vendors; OEMs; infrastructure and gateway providers; communication service providers; analytics, platform and middleware vendors; IT and OT professional service providers; and SIs.
Through 2018, there will be no dominant IoT ecosystem platform. IT leaders will still need to compose IoT solutions from multiple providers. This challenge is acute, because IoT solutions are not clearly understood and are relatively immature. IoT standards either don’t exist or are still immature, and vendors are taking advantage of this “Wild West” moment in IoT adoption to advance their own agendas and points of view.
Ultimately, despite these differences, the cost structure for IoT initiatives of any nature will include a predictable list of cost elements, as described below. As organizations envisage ways of engaging in IoT projects, they need to understand whether (and in what time frame) the costs of such initiatives will be offset by the anticipated value from increased revenue or reduced costs.
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