The evolution of the internet Welcome to the internet of things. enterprise.bcs.org

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1 The evolution of the internet Welcome to the internet of things enterprise.bcs.org

2 02 The evolution of the internet Welcome to the internet of things Introduction As technology developments continue to transform our lives, CIOs have great opportunities to drive business innovation and success. Over the last ten years we have seen how the internet has changed the way we communicate and share information. Social networking has opened up new and profitable ways to grow and maintain our network of business contacts, to recruit the best employees and to interact more effectively with our customers. The next step is the internet of things. Gartner predicts a massive growth in business models based on the internet of things as the technology matures and costs fall over the next decade. New related technologies and smart devices will emerge over this period and new services and collaborations will enable CIOs and their teams to focus on solving business challenges rather than technical complexity. Today sensors are embedded in many different products from cars to fridges, water meters to petrol pumps. Technology developments such as inexpensive high-speed networks, the introduction of IPv6 which vastly increases the potential number of internet addresses, and the ability to process and analyse huge volumes of data are leading to the growth of the internet of things. This is an evolution of the internet from a people-to-people network to an enormous people-to-machine and machine-to-machine communications system. The internet of things has the potential to empower CIOs to deliver improved customer service, cost savings and innovation. Machine-to-machine communications are a rapidly growing part of the global economy today, especially in the automobile industry, the energy sector, logistics and healthcare. But the internet of things is also opening up opportunities to combine data across different industry sectors, breaking down the silos of data capture and processing, as billions of devices share a common communications network. Growth on a massive scale The potential scale of the internet of things is enormous. The OECD (Organisation for Economic Cooperation and Development) estimates that 50 billion devices could be connected to each other via the internet by According to Cisco there are potentially 1.5 trillion things that could be connected to the internet, equivalent to about 200 connectable things per person in the world today. No wonder that Cisco and others refer to the connection of people, data and devices as the internet of everything.

3 03 Internet of things applications today Here are some examples of how the internet of things is being implemented today to improve customer service, reduce costs and add value: Devices and apps that rely on the internet of things enable consumers to manage their personal exercise regimes, keep tabs on their food intake and monitor their heart rate. Tags in clothing alert wearers to adverts for similar clothes from the same supplier in shopping malls, and stock availability. Car manufacturers and dealers track vehicle wear and tear and alert customers when tyre wear reaches a critical point or when engines or other components are failing or due to be changed. Healthcare services are able to allow patients who would otherwise require long stays in hospital to continue to be monitored and recuperate in their own homes. Sensors in medical apparatus monitor indicators such as heart rate and this data is fed back to medical staff in hospitals who communicate with patients at home by voice and video internet links. Smart refrigerators allow consumers to check stored food items for expiry dates, identify shopping lists and plan menus, accessing this information on their smartphones. Companies are able to develop a deeper and richer understanding of their customers, their preferences and demographic profile. It is possible to deliver individually targeted marketing messages at a time and place (device) that produces optimal results. Advertising campaigns can be informed by real-time market assessments and reactions. Smart water metering produces accurate data about consumption without the need for home visits and automatically alerts customers if consumption patterns are abnormal (which may indicate a water leak). Farmers use temperature and humidity sensors distributed among high-value crops to identify where conditions encourage outbreaks of pests or diseases. Irrigation can be targeted precisely to where water is needed, helping reduce water consumption costs. Smart grids allow utility companies to better understand power use patterns and improve the reliability, efficiency and sustainability of the production and distribution of electricity. The electricity grid is improved through the automatic detection and repair of faults, control of electricity flows based on real-time demand, improvements in generator utilisation and more effective use of sustainable energy sources such as wind and solar power. Wide ranging benefits The internet of things can bring significant business benefits in five key areas identified by Cisco: enhancing business processes and making more efficient use of assets, reducing expenses and the cost of goods sold; using employees more efficiently; eliminating waste and improving supply chain and logistics processes;

4 04 enhancing the customer experience and growing market share; increasing the return on R&D investments, reducing time to market and creating new revenue streams from new business models and opportunities. Gartner suggests five questions to ask to help identify areas worth exploring: What might be possible if we knew, with confidence, the real-time location and status of our assets and employees? How could we exploit more accurate and detailed information? Could the improved communications that the internet of things delivers be used to make our business processes more dynamic, such as using real-time pricing of products depending on stock and demand? How could we exploit remote control and monitoring? How could we exploit large-scale introduction of sensors into our products, assets and other things? Time for CIOs to focus on the end customer Until now CIOs have focused primarily on developing and improving back-office and front-office processes. PwC identifies the internet of things as an opportunity for CIOs to evolve their role into a focus on the end customer, gaining the opportunity to be key partners in helping their businesses break new ground. Sensors linked to the internet will generate a substantial and continuous flow of data back to the business. Aggregating, integrating and analysing this data requires skills and experience that CIOs are well placed to provide. Meeting the challenges and tackling the risks As with any technological development the internet of things brings not only benefits but also challenges and risks. Today we can only catch a glimpse of the full potential of the internet and the risks that will emerge. It is the scale and speed of development that poses significant challenges, especially the huge volumes of data that will be collected and processed. In the past it has been relatively easy to identify personalised data and protect it. As the internet of things grows and develops across industry sectors and the divide between private and public organisations, it will become practical and economic to collect and analyse vast amounts of apparently depersonalised data to produce personal information that many consumers would regard as intrusive and inappropriate. Some have even predicted that the internet will come to be seen as a massive surveillance tool. Companies will need to be very sensitive to this perception and the risk it poses to customer relationships. They will need to combine technologyenabled security capabilities with policies and processes to protect the privacy of both company and customer data. CIOs will need to pay particular attention to the following areas:

5 05 Privacy concerns need to be addressed at the outset, applying the principles of the Data Protection Act to all devices connected to the internet. Mitigating controls can then be built into systems to help avoid potential risks both to customer relations and corporate reputation. Particular care should be taken with Near Field Communication (NFC) devices that are increasingly used for more sensitive transactions and applications. These devices have a multitude of different approaches to security and are not necessarily compatible with each other. As enterprises become increasingly reliant on vast, complex networks of connected people and devices, the potential risks increase too. Failure in any element of the network or device connected to it may introduce vulnerabilities to hostile attack or cause critical system failure. A thorough risk analysis and effective risk management system will be needed from the outset. Risks may be reduced by excluding as many of the cheap device level components as possible from direct internet access by using internet enabled gateways. Adequate and sustainable security features are more readily incorporated on gateways than on individual low cost sensors. A compelling business opportunity for CIOs The evolution of the internet of things will drive new business opportunities and innovation. CIOs and their teams have many of the skills and competencies that will be needed. They are experienced in designing, deploying and monitoring complex hardware, software and network solutions. They may already manage 24/7 operations and are skilled at integrating, storing and analysing real-time data. CIOs can step forward and work with colleagues on the board to drive innovation and growth. It is perhaps one of the most compelling business opportunities that CIOs have ever had. To benefit from this opportunity CIOs need to assess the skills and competency levels of their teams, especially in relevant technologies, business process management, data analytics, telecommunications and security. That's where BCS, The Chartered Institute for IT, can help. We work with CIOs to help you reach your objectives and deliver people who are ready to face the challenges enterprises are facing.

6 06 References The Executive s Guide to the Internet of Things (2013) TechRepublic Bradley, J., Barbier, J. and Handler, D. (2013) Embracing the Internet of Everything to capture your share of $14.4 trillion. Cisco IoT Special Interest Group Internet of Things (IoT) and Machine to Machine Communications (M2M) Challenges and opportunities: Final paper May 2013 Technology Strategy Board https://connect.innovateuk.org/c/document_library/get_file?p_l_id= &folderId= &name=DLFE pdf Jones, N. (2013) The Internet of Things will support a wide range of business models. Gartner Research Note Mathaisel, B., Parker, B. and Baya, V. (2013) Internet of Things: evolving transactions into relationships. CIO leadership in post-transaction relationships: IT s role in customer engagement PwC Technology Forecast techforecast-2013-issue-1.pdf Schneier, B. (2013) Will giving the internet eyes and ears mean the end of privacy? Guardian Technology Van der Berg, R. (2012) The Internet of Things. OECD Insights

7 About the author Elizabeth Sparrow DSc, DUniv (Open), MSc, CITP, C.Dip.A.F., FBCS, FRSA is Enterprise Relationship Advisor for BCS Learning & Development and a member of the BCS Internet of Things working group. Elizabeth is an accomplished leader and IT professional who served an extended period of 17 months as BCS President between 2009 and The BCS Internet of Things working group was set up to review the impact of the internet of things on society and to recommend how BCS might play a role in encouraging public debate, understanding and critique of this development of technology. The group has examined the development of standards; privacy and ethics; security, safety and resilience; the need for education; and the role of government in supporting research, investment and policy development, and has produced a series of recommendations for BCS. Read more about the group s work at: About BCS We help global enterprise align its IT resource with strategic business goals. We work with organisations to develop people, forge culture and create IT capabilities fit to not only lead business change but to meet companywide objectives and deliver competitive advantage. IT has been gaining momentum within global business for decades and we ve been there from the beginning, nurturing talent and shaping the profession into the powerhouse that s now driving our digital world. Today organisations partner with us to exploit our unique insight and independent experience as we continue to set the standards of performance and professionalism in the industry. Call us on +44 (0) or visit us at enterprise.bcs.org BCS The Chartered Institute for IT First Floor Block D North Star House North Star Avenue Swindon SN2 1FA T +44 (0) enterprise.bcs.org BCS, The Chartered Institute for IT is the business name of The British Computer Society (Registered charity no ) 2013 If you require this document in accessible format please call +44 (0) BC261/LD/REP/0713

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