The electronic linking of users, channels, value added service providers and product manufacturers will continue its inevitable march forward as it becomes easier to design and develop “Smart Systems.”  In a few years, the state of the industry will look quite different; many of today’s players will likely disappear while others will radically change their business models. The companies that survive and prosper in the era of smart connected systems will be those that embrace the disruption and respond to it with genuinely new thinking about their business models and value creation.

 

Click Here to Download Internet of Interactions Paper

Web 2.0 enabled social interactions and user-generated content and Web 3.0 the “semantic web,” so presumably Web 4.0 is driving the so-called “Internet of Things” and, while the semantics that describe this evolution can often be easily misinterpreted, peer-to-peer information and network integration of intelligent devices are combining to create new modes of value creation. Networks will integrate knowledge, people and things into systems that enable awareness, creativity, better decision making, and, ultimately, higher value solutions.  All of this describes the migration of online functionality into the physical world integrating smart devices, people and systems to foster “The Internet of Interactions.”

This phenomenon is not just about people communicating with people or machines communicating with machines; it also includes people communicating with machines, and machines communicating with people often invisibly. The solutions we are describing here have no managerial hierarchy, command and control decision-making or proprietary ownership of ideas. These networks will be self-organized by people who are motivated to explore and develop ideas they care deeply about. Collaborative innovation will extend beyond ideas about new products and services to the very manner in which business is conducted. To discover, design and develop innovative systems, organizations must consider all the elements involved and the context they fit into.

At the end of the day, the convergence of collaborative systems and machine communications will enable new modes of interaction and implies a total paradigm-shift. The depth of this shift has begun to suggest itself, but it is by no means accomplished.  But, let’s not get ahead of ourselves……

The traditional notion of “M2M” applications has largely grown up in a B2B context with equipment manufacturers developing remote services and support automation tied closely to their equipment service contracts.  These models are focused almost exclusively on customer support and automation not on new Smart Services value beyond support. 

Apple, and some of its peers in the consumer space, present what we believe is a more interesting case for how Smart Business systems and models are developing.  Apple provides a model for creating a Smart System solution that pulls together technologies from multiple domains and devices ultimately packaging new services in a way that wins buyer acceptance. Looking beyond Apple to Google, Amazon, Facebook and other players coming from the consumer-focused Social Networking and Mobile Internet arenas, there are a variety of new business models emerging from these players that are getting closer to the embodiment of Smart Systems. 

As these two classes of business models inch closer to each other in the marketplace it is increasingly evident that the consumer Smart Business models provide many lessons for the more “cloistered” equipment manufacturers in B2B arenas where the business benefits of large-scale collaboration, participative content and user-driven interaction are just barely being recognized for their real potential.

For B2B-focused players to really succeed at community building, they will need to fully embrace the real-time benefits of collaboration technologies.  Collaboration demands that we design not only devices and networks but also information interactions in ways that are not addressed by classical enterprise applications and systems today.

The intersection of social and mobile Internet technology and the Internet of Things creates value at two disparate ends of the business spectrum. The adoption of social networking and collaborative communities is creating new value for businesses, driven from “social” collaboration between employees, partners, customers and suppliers. At the other end, the rise of the “Internet of Things” has helped transform manufacturing companies into value-added service companies. Manufacturers are learning that by putting products on networks they are essentially placing themselves into continuous contact with their customers, thereby enabling them to better understand their customer’s needs and act appropriately.  The intersection of these two emerging trends creates an opportunity for business users, developers, partners and OEMs to evolve their business models and drive competitive differentiation by cleverly combining collaboration tools with the ability to support smart devices, machines, and people as peer members of a community that can design and develop new interaction values.

But very few people are thinking about smart connected systems on that level. Current IT and telecom technologists are operating with outdated models of data, networking and information management that were conceived in the mainframe and client-server eras and cannot serve the needs of a truly connected world. The nature and behavior of truly distributed information, control and collaborative systems – systems that will be  embedded into every dimension of our physical worlds - are concerns that have yet to really take center stage—not only in business communities, but in most technology communities, too.

The many nodes of a network – be they machines, people, sensors or physical systems -may not be very “smart” in themselves, but if they are networked in a way that allows them to connect effortlessly and interpret seamlessly, they begin to give rise to complex, system-wide behavior that usually goes by the name “emergence.” That is, an entirely new order of intelligence “emerges” from the system as a whole - an intelligence that could not have been predicted by looking at any of the nodes individually. There’s a distinct magic to emergence, but it happens only if the network’s nodes are free to share information and freely participate in interactions.

Our present-day conception of “intelligent devices” and global data networking does not allow for that. Until we change that situation, we will not achieve the emergent magic implied by the phrase “Smart Systems.”

All of this really means the future of interactions and that means the future of our civilization. It will require a remarkably agile information architecture that could comfortably scale to infinite interactions.  Obviously, such an architecture cannot be “designed” in any ordinary sense. Certainly, it cannot be designed “top-down” yet the architecture for the Internet of Interactions must be designed in some sense.

Some basic design principles must be put in place to guide the growth of a vast, distributed “organism” that must remain organized as it evolves according to a logic and pattern all of its own. It demands that we design not only devices and networks but also information and interactions in ways not addressed by current technologists and their thinking.

In a connected world of interactions, established and emergent players alike need to think about cooperation, collaboration and competition quite differently. We believe this will be the chapter of “The Internet of Interactions” in which everything will be in a constant state of re-configuration; the businesses themselves, the business models, the interactions between suppliers, adopters, customers and constituents, and the modes of capital formation that will drive the delivery of new technology and solutions.

The Internet of Things (IoT) and cloud computing are combining to create new modes of asset intelligence, collaboration, and decision-making.  People, information, and technology are becoming more connected, distributed, and pervasive; enabling the convergence of the physical and virtual worlds.  While the IoT is a huge opportunity with many new market entrants who are predicting that enormous volumes of connected devices are “just around the corner”, we believe the biggest challenge will be finding enough new technology and industry fluent players to develop all the applications required to inform this expanding opportunity.

Having nearly reached the saturation point with traditional enterprise application development and deployment, professional IT services firms are now turning their attention to non-IT devices capable of being connected to a network and integrated into cloud services.  Services players are taking a number of market- and technology-oriented steps to advance smart connected devices and cloud market development, including beginning to work more directly with partners for smart system applications and capabilities.

These steps will enable services firms to provide more robust business and technology support to their customers. However, while the opportunity may be very large, many professional service providers are coming to realize the prevailing model for offering generic cloud services is not robust enough for market differentiation. What will be required of the technology and services players coming together to serve the IoT opportunity?  What are the critical challenges that need to be addressed:

Enhanced Service Delivery Platforms: With more players focusing on the smart devices and systems opportunity the competition for customers is heating up.  Network operators realize that in order to be profitable it will be necessary to connect large volumes of devices, as many IoT applications require minimal bandwidth, therefore limiting the data/usage rates that carriers can charge.   In turn, operators are seeking ways to differentiate their services, since already low data rates limit the opportunity to compete on price.  One emerging area for differentiation centers on Service Delivery Platforms (SDPs).

Connecting and managing networkable devices, has traditionally been a problematic area for customers.  In the past, it took several months to get a device network certified.  Once the device was connected, there was often little visibility into how it was performing on the network, as well as, limited back end control.   SDPs have emerged as a critical tool that can help address these areas.  SDPs provide configuration services, provisioning, SIM management and reporting, billing, upgrades, and basic asset-related application services.  Realizing that these services are crucial to end customers, professional services firms are beginning to search for SDP partnerships with third parties in an attempt to customize their services and meet the needs of their constituents.

Application Development & Delivery: Today, for most users, IoT applications are cumbersome and complex to develop. Whether the application is developed by the company deploying it or a third party, they are very custom in nature and often configured for the environment in which they operate—factory, office, hospital, and elsewhere. Application development for connected devices today entails a very high level of engineering complexity, due to disparate data formats, diverse networks, incompatible IP addressing schemes, different operating systems, and so on. The applications must be compatible with different device types, configurations, and operating systems, and must be supported by different wireless networks for the customer to gain real value.  Smart system application development, to date, has focused primarily on developing better infrastructure technology for provisioning, management and billing for connected devices - not for application development and application services delivery.     

Vertical Expertise:  Applications will require analysis tools and skills, and the ability to design systems to create awareness of asset status, structure the analysis of this data, define rules and work flow, and identify the right tools to initiate the appropriate actions.  Further, for those vendors that pursue a vertical industry strategy, choosing which verticals to go after will be a key success factor. Because application requirements tend to be unique to an industry, crafting the right combination of expertise, system elements and partners to address these challenges requires deep understanding of different industry segments and their unique challenges.

Professional services firms worldwide have seen a steady march to maturity for their core business. This has lead to critical introspection of their traditional business model.  As a result, many service providers are racing to develop new opportunities enabled by “cloud” services.  The emergence of new IT and network service offerings - so-called “cloud” or “X as a Service” or “Anything as a Service “ or “Everything as a Service offerings are rapidly becoming pervasive. Many services firms think offering on-demand IT services combined with their network resources will differentiate them.  But will it? 

Services players moving to expand IT services are also facing competition on multiple fronts.  Web application and services players such as Amazon and Google are leveraging their scale and experience to offer low-cost services with the network acting as a “dumb pipe” and, IT infrastructure and services players like IBM and HP are using their systems-integration capabilities and professional services relationships with IT organizations to develop their new offerings.

For forward thinking professional services players, developing a combined cloud computing and IoT offering is a prime example of an opportunity to gain share and really differentiate if they are willing to act.  The convergence of wireless networks, IT and smart devices drives huge opportunities.  However, innovation in the design of new businesses for traditional IT services players will need to extend beyond just simple ideas about new cloud service extensions. To successfully develop this market, IT services players will need to think and act differently.  A renewed focus on developing ecosystems and the critical relationships that will drive value are key to success. 

Ultimately, the dynamics surrounding the combined cloud computing and IoT opportunity are incredibly complex.  Basic enablement, network connectivity, middleware services, value-added services, and other device management functions are all needs that generally must be addressed when customers seek to connect smart devices.  Given all of the aspects that must be addressed from the customer standpoint, we believe alliances between unique emergent platform players and a new breed of smart device-fluent solution and services partners represent the best available means to address these market development challenges. 

While it has been well established that smarter products and smarter networks can offer extraordinary business advantage to the companies that manufacture devices and the partners that develop applications and deliver systems support, complexities have thwarted wide scale adoption in many if not most instances. In the wireless network arena, CDMA and GSM-based technologies have been incompatible with one another when seen through the eyes of M2M enterprise customers and developers. Globally, GSM has become the technology of choice and yet CDMA-based Verizon Wireless is North America’s largest wireless carrier with a strong record for network performance. LTE is on the horizon but this won’t solve today’s mainstream M2M needs.  What most adopters of wireless M2M technology desire is a seamless interface to both network standards that supports a truly global reach and/or strength in domestic network coverage.

Device OEMs have innovated in many ways, some to the point of extending their own cloud platforms for managing connected devices. Still, enterprise customers have demonstrated time and again a preference toward maintaining a neutral position with respect to hardware and devices so that they can remain agile and flexible and meet the dynamic needs of their businesses. Cloud platform application providers have developed advanced device management and vertical applications in certain cases, and yet still remain relatively small niche businesses when viewed in the context of the whole global M2M opportunity.

The next chapter in the M2M arena will be driven by platform innovation -- cloud services, intelligent devices and back office systems that seamlessly integrate with one another and thereby unlock the full potential of smart connected devices. New machine-to-machine (M2M) solution platforms need to address the true potential for information-driven service innovation and application development. By embedding support automation directly into the fabric of the solution and providing tools for third party application development, new platform technologies can help product manufacturers leverage the continuously evolving relationship between connected products and customer value. Harbor has written a new White Paper that highlights the expanding value of platform innovation for M2M solutions.

This white paper was motivated by the upcoming introduction of a new M2M developer program from nPHase called nPhase ONE. This new offering provides advanced M2M capabilities for device OEMs, application developers, and enterprise customers that addresses four key innovation objectives:

1. Remove Complexities of Disparate Networks, Device Configurations, and Applications: Platform architecture engineered to remove complexities of disparate systems (such as CDMA and GSM), configurations, and applications which nets simplicity, speed to market, and reduced costs for customers and partners.

2. Enable Remote Access To Device & Network Diagnostics: Tools that extract and store the vast amount of data available through a diagnostic interface on cellular modem chipsets for troubleshooting and analytics coupled with device-side APIs that enable third party on-device applications to enable intelligent connection decisions and to participate in device connectivity diagnostics.

3. Simplify and Accelerate Application Development: Tools for third party application development that simplifies and speeds the design and development of sensor monitor¬ing and reporting applications for physical IO and serial protocols such as Modbus.

4. Provide Standards-Compliant Interfaces Engineered Specifically For Developers: Standards-compliant SOAP XML web services that offer integrators a single, portable and easy-to-use interface across disparate networks and devices providing device controls, session management and device software configuration management, ultimately shielding developers from the underlying complexity of wireless network infrastructures.

The adoption of M2M systems has been challenged with many unforeseen barriers. The nPhase ONE developer program holds the potential to change the entire structure of value delivery, alter long-standing business models, and prompt all participants to consider how to design new modes of service delivery and build new relationships with customers and with developers.

Download the New White Paper on M2M Platform Innovations Here.

Having nearly reached the saturation point with mobile phones, wireless carriers are now turning their attention to new smart devices capable of being connected to a network. Strategists in a wide range of network service providers have finally awakened to the fact that we have entered a new era of connectivity.  

Network operators are taking a number of market- and technology-focused steps to advance M2M market development, including creating distinct M2M business units, deploying M2M-specific network technology, and beginning to work more directly with partners for M2M applications. But are these maneuvers enough to really drive M2M growth?  Probably not.

The M2M opportunity presents multiple challenges for network operators. From the business model, to the supply chain, to vertical applications, to ongoing support challenges, M2M market development represents a very complex set of inter-related elements. Designing an M2M business requires a whole new design – one that involves optimizing all of these elements.
The M2M vendor landscape historically has not been aligned well with cellular network operators; its still extremely fragmented and disjointed. Today’s solutions are still difficult to design and deploy and have typically been built at a very high cost.  These solutions often require many players to perform diverse roles and the complete ecosystem to provide solutions has yet to fully develop.

In short, while the opportunity may be very large, many network service providers are coming to realize the prevailing telephony business model for managing smart devices has to change and while that process has started it is far from complete.

For cellular network operators, developing M2M capabilities is a prime example of an opportunity to gain share and really differentiate if they are willing to act.  The convergence of wireless networks, IT and Smart Devices drives huge opportunities.  However, innovation in the design of M2M businesses for the wireless carriers will need to reach beyond just simple ideas about new product and service extensions. To successfully develop this market, network operators will need to think and act differently.  A renewed focus on developing M2M ecosystems and the critical relationships that will drive value are key to success.  

Carriers that choose to go at it alone will have a hard time building market development momentum in the M2M arena.

Download New White Paper On The Cellular M2M Opportunity Here

Although visions of “Smart Buildings” have been in abundant supply for decades now, actual implementation has lagged greatly. Buckminster Fuller, the famous creator of the geodesic dome, was writing about intelligent homes and buildings as early as the 1930s. The “automated intelligent building” has been an obsession since at least the 1960s, but in reality smart buildings have remained an elusive concept during recent decades. In the typical building of today, smart devices and equipment systems have not reached their full potential. In many respects, the value of integration today is not worth much more than it was twenty years ago.

Industry participants consequently now view the “intelligent building” as more of a marketing slogan for over promising on what technology can deliver to buildings and infra- structure. For many building owners the phrase “building automation” has become so problematic that it now provokes skepticism rather than visions of innovation. Yes, we’ve had a long history of futurism, but to date progress has been incremental at best.

It is clear that customers seeking to invest in intelligent building technology are demanding wider integration of systems within a building, particularly the integration of IT and control systems. This goal has become acute with the emergence of energy within facilities as a key cost driver and sustainability concern.

Despite the false starts and overpromises all is not lost.  One company – Pacific Controls, has introduced a fundamentally different way of approaching intelligent building technology: as a smart managed service.  The forthcoming release of Pacific Controls’ Galaxy Gbot software will literally change the way buildings are managed.  Our latest white paper - The Future of Smart Services Delivery, details the approach that Pacific Controls is bringing to the intelligent buildings market.


Galaxy Gbots are a family of system management and customer support software tools -- autonomous software agents that observe and act upon device, equipment and systems behavior. Gbots are enabled by “self-learning” software agents installed in devices and equipment and implemented as a managed service. These agents or “bots” are able to sense conditions (e.g. electrical system overload protection), understand customer/user preferences (e.g. is the temperature too high) and ultimately identify issues within a system to repair or initiate actions to optimize its performance.

Gbots act as the new “first line of response” to solving equipment and systems problems. Their primary goal is to manage and optimize assets and to make critical sensed data available to the system to auto diagnose and resolve problems without unnecessary human intervention.  The “bots” are able to:

• Sense conditions such as temperature and electrical current to enable equipment health.
• Switch system parameters automatically based on customer preferences.
• Feed analytics tools with system performance and behavior data to determine immediate and future actions.
• Identify issues within a system by doing root cause analysis and troubleshooting to resolve them.

Of all the new capabilities that Pacific Controls’ technology enables is the ability of systems to automatically learn from history; learning to detect hard-to-discern patterns from installed equipment data that supports the development of algorithms that automates equipment repair and support.

The value of this type of capability is probably best exemplified by Amazon and Google.  Amazon’s ability to recommend various books and publications to users based on profiling patterns and Google’s indexing of web and related content to drive advertising revenue underscore the new economic value of smart systems.  Amazon stopped being a “store” and started being an intelligent entity that, to some very real degree, understood who you were and what you cared about.  Google quickly transcended being a search engine and reached for an understanding of what the population found interesting and designed targeted advertising as an entirely new business model.  In Pacific Controls’ case, this translates into system optimization, extraordinary customer intimacy about end product usage via connectivity, and “enterprise automation.”

Gbots represent the beginning of a new generation of smart systems technology that will provide customers with elegant and unobtrusive—sometimes even invisible—portals into networked customer support services. Before the end of this decade, many manufacturers will use smart, networked products to drive enormous growth with next-generation services.

If all this is such a good idea, why hasn’t it been done before? In short, enabling complex, multi-vendor systems with analytics and intelligence is extremely difficult -- many organizations have tried. Pacific Controls’ software agents literally and physically leverage the intelligence product manufacturers are building into their products, making something like a “smart building” much easier to contemplate than ever before. The building itself is literally on the Internet and the Internet is in the fabric of the building. Pacific Controls provides a more universal alternative to the many existing techniques for leveraging embedded data in ordinary electro-mechanical devices for monitoring and remote management - their technology enables analytics capabilities for component OEMs and equipment builders for both new and existing machines. Other technologies can be adapted and optimized for a special purpose but none are reaching for the ability to leverage the data and information “trapped” in most products today to the extent Pacific Controls’ approach does.

All of the major categories of connected solution suppliers (IT, carriers, connectivity, integration, applications, product OEMs, etc.) have histori¬cally operated within well-established business models that reflected the distinctive compe¬tencies that each group believed to be at its core. The advent of Smart Systems is causing a blurring between these legacy business models forcing all the major suppliers to re-think their strategies.

Apple and some of its peers in consumer space present an interesting case for how Smart Business models are developing across B2C and B2B. Apple is primarily a consumer-focused tech vendor. Still, Apple provides a model for creating a Smart System solution that pulls together technologies from multiple domains and packages  in a way that wins buyer acceptance. Looking beyond Apple to Google, Amazon, Facebook and other players coming from  roots in the evolv¬ing consumer mobile internet arena, there are a variety of new business models emerging from cloud services and related  platform players that are the embodiment of Smart Systems. Add to this the momentum  these players are creating via collaboration with their app communities -- Amazon has over 100,000 developers building applications and businesses; Apple with its iPhone and App Store has created a phenomenal lead position -- they are all driving entirely new forms of collaboration and peer product development.

The traditional notion of M2M applications has largely grown up in a B2B context where  equip¬ment manufacturers develop remote services and support automation tied closely to their equipment services contracts. These models are focused almost exclusively on customer sup¬port and automation,  not on new Smart Services value beyond support. As these two classes of business models inch closer to each other in the marketplace it is increasingly evident that the consumer Smart Business models provide many lessons for the “cloistered” equipment manufacturers in the various B2B arenas.  But in both cases there are some common threads – connected smart devices, continuous always-on smart services and ultimately an increasingly complex set of interactions we have often called the “The Pervasive Internet of Interactions.”  

The business benefits of large-scale collaboration and social networking tools in the B2B arena are finally being recognized as is the impact of these forces on existing business models. What is a device, what is an application and what is a service will likely no longer be the same.  This means imagining new device and  service innovations that align with customer needs as they evolve in this new chapter of the marketplace.  In this chapter, experiences and solutions are likely to be very very different from even the most advanced of today’s user experiences. The experiences in this new chapter will cut across smart devices, smart services and pervasive interactions.

For individuals and businesses, new consumption & interaction models will significantly impact traditional business models. It’s inevitable. Delivering real-time interactions across apps, services and devices will require innovation in user experience, interaction models, application models, and delivery models. This will require, as we have often pointed out, new service delivery platforms that are considerably different than those that exist today.   It seems clearer and clearer that these platform innovations will happen in small steps, providing a significant opportunity for new players to potentially lead the way.

Devices, services and interactions, while all complementary, have historically had distinct business goals and divergent models. The ability to closely couple devices, services and user experience has emerged as a requirement to stay ahead of the innovation curve. The three thrusts need to be mutually supportive without inhibiting each other.  In the next chapter of Smart Business, the best innovators will come to see the continuously evolving relationship between and among smart devices, services and interactions as fertile ground for innovation. The three need to be interwoven and mutually supportive, and increasingly, success in each will go to the players that effectively utilize their combined potential.  The opportunities this opens up to forward thinking organizations are nearly infinite. Businesses can begin to explore many new possibilities for real-time solutions unthink¬able just a few years ago.

A new Harbor Research White Paper explores the benefits of using CDMA2000 for M2M applications.

Download The White Paper Here

Across the globe today, smart devices and services are being deployed at an increasingly rapid rate. In the not too distant future, hundreds of millions, then billions, of individuals and businesses, with millions, then billions, of smart, communicating devices, will stretch the boundaries of today’s business and social systems and create the potential to change the way we work, learn, entertain and innovate.

The large potential opportunity surrounding the Machine-to-Machine (M2M) arena has caused a surge in interest on the part of businesses everywhere.  The types of devices being connected today extend far beyond the laptops and cell phones we have become so accustomed to.  Almost “en masse”, technology suppliers, OEMs, network operators, and solution providers announced strategies aimed at grabbing a piece of the rapidly developing smart devices and services market. 

Although many wired and wireless technology standards are capable of enabling M2M solutions, one particular standard – CDMA2000 – has become a very robust platform for machine-to-machine (M2M) communication.

Our research indicates that:

• End Users & Solution Providers are choosing CDMA2000 networks to manage their M2M applications due to the low total cost of ownership offered by CDMA services.
• A robust global ecosystem has emerged around providing CDMA2000 M2M products and services.  This ecosystem includes module & component providers, hardware providers, network operators, mobile virtual network operators, software/platform providers, and service/solution providers such as OnStar.
• M2M deployments utilizing CDMA2000 are being implemented on a global scale - in North & South America, Europe, and Asia/Pacific.  Additionally M2M applications are addressing a wide variety of verticals including (but not limited to) the Energy, Healthcare, Consumer, Transportation, Retail, Resource, Home/Commercial Building, IT, Security, and Industrial markets.
• Numerous benefits can be derived from the implementation of CDMA technology for M2M applications.  Benefits include high security levels, network longevity, ubiquitous coverage, high bandwidth, spectral efficiency, low latency, energy efficiency, and “always-on” connectivity.

The points above have helped CDMA establish itself in the M2M market.  Not only has CDMA garnered a strong current market share, but the technology is also well positioned to continue to grow as the M2M market expands.

Harbor's new white paper explores the application opportunities, technology requirements and business benefits arising from machine-to-machine (M2M) communication. Intelligent device networking is the next big thing in information technology and CDMA-based wireless networks are at the forefront of this transformation. This paper is for the vast community of players that make up the M2M ecosystem. M2M solution providers, device suppliers, network operators, system integrators, thought leaders in various vertical markets, and investors will benefit from this exploration.

Download Smart Devices and Services Connected by CDMA2000

The evolving vendor ecosystem that is emerging to enable the Internet of Things continues to be extremely fragmented and includes a wide variety of small emergent players. For the most part, we believe this fragmented group of players will align with larger partners, focus on vertical application solutions or “specialist” value or disappear.

Meanwhile, The IT and telecom sectors have failed to re-evaluate their relationship to advancing technology and to their constituents. One would think that their own recent pronouncements about smart connected devices would mean they finally “get it” ….but alas the business paradigms to which these industries cling today are far too limiting, too saturated, and too expensive to foster and sustain new growth. Meanwhile, as they gasp for air, an unprecedented opportunity stares everyone in the face—the opportunity to provide the modern, automated information and communications tools that 21st century business needs so desperately.

The traditional chipmakers offer a good example of the business model challenges posed by the era of ubiquitous computing. Today, these companies drive tens of billions of dollars in annual sales with IC products costing US$20.00-US$200.00 and intended for a one person/few computers marketplace (here we have to acknowledge the ARM processor community for being directionally correct). But we already live in a world that contains more sensors than people and we’re about to be catapulted into an era of networked embedded intelligence that will mean hundreds, even thousands, of connected computing devices per person. Often these are invisible “devices” in your car, your home, your office building, and nearly every electronic product you buy. The key IC products for this era will be much less expensive than the current cash-cow chips, though they will be produced in staggering volumes.

Companies like Intel are now attempting to prepare themselves for this new reality. To state the obvious, they will need to change the way they do business. And they won't be alone. All the players in this new landscape—from small, privately held technology innovators to large IT merchants, OEMs and system integrators will need to develop an understanding of the new ubiquitous-computing value chain, and make some crucial decisions about where they want to live on it, and with whom.

Cheap, self-organizing wireless sensors and smart devices have nearly infinite potential installations and applications. Their widespread adoption is inevitable. But that doesn't mean that every participant will automatically be shaking a money tree (just look at the number of wireless sensing start-ups that are littered along the highway).  Even with Cisco’s recently announced acquisition of ArchRock, one wonders when the established technology world will figure out its role and alignment with the emerging “specialists.”

Value and profitability are playing a new game of hide-and-seek. They're still there, but not where they used to be. If you keep looking in the old places...well, you know what's going to happen.

We think that profitable vendor activity in smart connected devices will recapitulate the tendency we've seen for decades in digital technology generally, and more recently in other kinds of product businesses—less and less physical value (products), more and more metaphysical value (services).

Buckminster Fuller saw this general phenomenon decades ago and called it "ephemeralization"—the tendency of evolving technology to become less and less material. More brains, less brawn. At one point in human history, you have the Egyptian pyramids -- perpetuity via lots of mass. Many years later, you have the Eiffel tower. Less brawn (mass), more brains (laws of physics). In electronic technology, the exponential miniaturization of integrated circuits and data storage are obvious examples of “emphemeralization.”

In our modeling of the Internet of Things and People opportunity for clients, we have found that with only a few “mission critical” exceptions, enablement and developer tools tend to be declining profit activities—even though literal growth can be enormous. Sustainable profits, on the other hand, can be achieved in data management and the analytic activities that flow from the data themselves.

In the short term, networking products and gateways will continue to be profitable if suppliers play their cards right. They may also be able to differentiate themselves and make money with toolsets for deployment and development, analogous to the offerings of companies in the open source space.

But after that, physical enablement and network-management tools will become mature and decreasingly profitable. So where’s the long-term money? Well, the galaxies of “dust”-borne data generated by networked devices will be worthless unless they can be translated into actionable business intelligence. The higher margins we see today in connectivity will diminish and, in the future, will not be in products at all, but in data management and related services. The products will continue to exist, of course, but only as "portals" into the valuable services offerings, not as ends in themselves.

Our conclusion? If you’re a vendor of connectivity products with no long-term data services strategy, you’re in the Pervasive Internet of Things booster rocket. You may well have a great short-term lift-off. But when the booster runs out of fuel (product-centric profits), you’ll fall back to Earth.

And that’s going to hurt.

Given the scale of the data and managed services opportunity one cannot help but wonder if a real-time unified application and integration platform can exist for the “Internet of Things and People”… a platform that would integrate devices, people and provide both with communications and collaboration capabilities – a Pervasive Internet of Interactions? If so, what would such a thing look like?

• First of all, a unified platform must be communications agnostic. The number and diversity of devices that are being connected to the Internet are growing, and will continue to grow for the rest of time. Platforms need to be able to integrate virtually any device into their system.
• Second, a unified platform would need to be open and interoperable. We see time and time again that interoperability is the single most important step in creating rapid adoption of technologies .
• Third, it will need to be scalable.
• Fourth, infrastructure will become remote and eventually free. We’ve now entered a world where renting out infrastructure will become the norm and companies will need to innovate around a comprehensive infrastructure.
• Fifth, the world of data services and informatics value creation will need to be driven by an organizing schema driven by peer-to-peer information relationships not by device and protocol interactions.

We realize this is a lot to ask for, but we believe we are beginning to see that the real Pervasive Internet “action” will be in data and information services, not in technology per se.  Its really all going to be about who owns the data. Ownership of the data will allow players to forge data-driven partnerships and shape entire ecosystems to meet the emerging needs of new types of customer relationships.

Smart Systems reposition the whole relationship of people and devices [the real world] to business systems. They must be built upon across-the-board digital automation, accomplished by enabling intelligent devices to communicate with and control each other, along with a whole new generation of information tools for managing rich, vast streams of meaningful data. The goal is to network smart devices into systems that are self-sensing, self-controlling, and self-optimizing—automatically, without human intervention.


Such systems will open an entirely new portfolio of “killer apps” that will transform the way business is done around the world, and profoundly improve customer satisfaction and vendor profitability. This represents an entirely new life for suppliers of IT infrastructure, software, Telecom operators, and for manufacturers of equipment, systems and solutions.

In the complex world of business-to-business solutions, there is no vendor that has established a clear leadership position. The “Internet of Things” represents a market of vast potential for technology suppliers (players providing silicon, network connectivity/services, IT back-ends, etc.), but what about the community of diversified manufacturers and solutions providers such as the Siemens, GE’s, Honeywell’s, Emerson’s, United Technologies and the like? How will the diversified manufacturers of assets and equipment align themselves with the Smart Systems opportunity as it develops?

Today, companies and governments have growing awareness and analysis of their financial assets and liabilities. This is what drove the growth of IT and network infrastructure over the last fifteen years. In contrast, in the era of Smart Systems, awareness and analysis will focus on physical assets and liabilities, such as cars, trucks, airplanes, buildings, hospitals, pipelines, equipment, and machinery. Physical assets tend to be very industry-specific and the means to optimize them will vary greatly from industry to industry.

Players like Bosch, ABB, Samsung, Hitachi and Alstom are using their strengths in key verticals to expand into Smart Systems. They already have equipment and systems in our buildings, vehicles, factories, offices, and homes. They have also created software and services that run and automate these complex environments. Ultimately they could be the community best positioned to break ahead of the pack, if they don’t become their own worst enemies that is.

Most people don’t think of these players as “ICT” vendors that compete in the same space as IBM, Oracle, or HP.  However, the competitive relationship is changing. In key verticals like healthcare, smart grid, and related infrastructure, GE, Siemens and a broad range of manufacturers are already providing core software products, as well as the core assets and equipment that form the basis of systems and solutions for end customers such as hospitals, electric utilities, and water/waste treatment providers. These companies are the equipment solution leaders in verticals where they are moving to aggressively add sensors and analytical software for tracking the performance and condition of these assets. These players have close, ongoing intimacy with major vertical industry segments and they are much more grounded in the real world than the general IT and communications technology community. Additionally, they are much more application and vertical-market fluent. These suppliers are positioned to be involved on both the physical and virtual side of the Smart Systems opportunity and will, in our opinion, evolve to positions of significance as the Smart Systems opportunity continues to develop.  

Equipment manufacturers and industry solution providers have much to gain, and just as much (or more) to lose if they don’t position themselves properly.

The killer apps of the Smart Systems era such as equipment monitoring, predictive maintenance, asset management, and other “Smart Services” will be intensely dependent on developing alliances and value-added relationships. If you look at the amount of money that businesses spend on these problems, or could save with better solutions, you see that there are far more dollars available in Smart Services than in the merely product-based activities of yesterday. This opportunity is far more significant than just capturing more of the [or protecting] installed equipment services and aftermarket parts revenues. Incalculable value will flow from integrating many real-world assets and facilitating monitoring, control, and systems intelligence. The architects of Smart Systems alliances will drive that value and command it.

The equipment and systems these players provide will increasingly leverage embedded computing and networking technology to deliver smart, remotely “monitorable” assets that will support entirely new modes of customer-asset interaction and service delivery. Inside such systems, reliable and blindingly fast microprocessors do what they are very good at doing (and what people are very bad at doing): digesting billions of data-points, talking to each other about the data, and controlling each other based upon the state of the data -- all in a matter of nanoseconds.  This incessant stream of ongoing business information will be “invisible” to people but will meaningfully impact end customer balance sheets. All this invisible machine activity will make the state of (i.e., the information about) a business’s assets, costs, and liabilities vastly more visible to managers and to the decision-making process, especially when decision-makers need or want to know.  New tools will provide businesses and governments with far better real-time awareness of the status of their assets and liabilities, as well as vastly improved analysis of how to maximize the returns from the assets and the costs and risks from their liability.

A company that “sensors up the world” will control the world, and have a huge competitive advantage in vastly profitable ancillary activities such as the trading of energy.  Players like GE and Siemens may well typify this more than most. Their focus on leveraging installed equipment services to support expansion into a broader scope of customer systems and process management, as well as their ability to bundle life-cycle services, capital financing, and equipment, provides a stage upon which the real long-term gains driven by Smart Systems can be seen.

We recently visited with a global capital equipment leasing arm of a major diversified manufacturer, where a senior executive characterized the advantages of remote enablement and monitoring. “Remote management,” he said, “will turn our equipment, services, and financing competencies into ‘actuarial science.”

It’s clear that there are certain players who get this more than others.  We believe the organizations that get this story the most have evolved from a particular mix of businesses and competencies that tended to inform their view of the opportunity earlier. Typically these are businesses that have:

• An inter-related mix of components, sub-systems and complete equipment systems focused on multiple, parallel verticals such as energy, healthcare, transportation, infrastructure, etc.;
• Core competencies and line-of-business participation in digital power, control and automation;
• Early and aggressive development of “connected” services opportunities in the aftermarket;
• Solution delivery systems that have over the last ten or so years forced the development of skills to address complex systems – particularly involving software and IT infrastructure.

Many people inside these companies get this; but many more haven’t yet assimilated the entire picture. These companies are large bureaucracies founded on focused products addressing focused markets. The era of Smart Systems will cut across traditional product P&L and market boundaries like a machete. If the major diversified, industrial behemoths don’t see the implications of this soon, a new category of player may emerge to fill the crucial role.