IoT’s Success Will Be About The ‘Information Profit Margin’

Almost 20 years ago, on a clear, chilly spring day in Massachusetts, Federal Reserve Chairman Alan Greenspan spoke at the Boston College Finance Conference 2000. What he said would mark a pivotal moment in our thinking about the impact of technology:

“When historians look back at the latter half of the 1990s a decade or two hence, I suspect that they will conclude we are now living through a pivotal period in American economic history.
“New technologies that evolved from the cumulative innovations of the past half-century have now begun to bring about dramatic changes in the way goods and services are produced and in the way they are distributed to final users.
“Those innovations, exemplified most recently by the multiplying uses of the Internet, have brought on a flood of start-up firms, many of which claim to offer the chance to revolutionize and dominate large shares of the nation’s production and distribution system.”

Greenspan’s speech was prophetic. This was a moment when the confluence of digital computing, mobile telephony and the internet were beginning to transform businesses. We stand at a similar moment in the summer of 2017 with respect to the Internet of Things (IoT) and its promise. A similar confluence has been taking place in recent years: Ubiquitous hardware and software and a panoply of wireless technologies (broadband, narrowband, near-field) are being stitched together to form the early, pioneering foundations of IoT systems of the future. From these foundations will spring a trillion devices in the next 20 years, with the amount of data coursing through them exceeding 2.3 zettabytes.

Data revolution
Up to now, the information revolution has mainly affected person-to-person communications and the way we access data that was stored on remote computers. In the next two decades, we will see a revolution in the type of data we collect. The Internet of Things gives us the ability to capture information about anything, anywhere, in real time, and the cost this technology is falling rapidly.

By 2035, technologies that are nascent today will eventually be so commonplace that we will hardly notice them. Consumers will consider it normal that the cost of car insurance depends on how well they drive, their car alerts the local mechanic when a part is about to fail, and street lights turn off when the road is empty.

The IoT has the potential to boost the economy by transforming business models, increasing output, cutting waste and eliminating accidents. The productivity gains stemming from IoT will help us feed and house the global population as it marches relentlessly towards 10 billion people.

So it’s all well and good to predict beneficial (and grand) outcomes for technology. After all, engineers are a generally optimistic crowd. But to better prepare for the change and better inform ourselves how innovation might best be pursued in the IoT Age, we produced a white paper, ‘The route to a trillion devices’, in which we take a closer look at the economics of IoT. On a macro scale, we believe that IoT could bring similar productivity gains to those seen in the U.S. in the late 1990s, just before Greenspan took to the Boston College stage. Although the pace of change will be more gradual than the original internet boom, the adoption of IoT has the potential to add trillions of dollars to output worldwide.

On a micro scale, deployment will be driven by the information profit margin. The value of information is on an upward trend thanks to advances in data science and machine learning; the cost of collecting information is on a downward trend thanks to innovations in semiconductor technology, cloud computing, and mobile connectivity. This divergence is leading to an exponential increase in the number of opportunities for companies to profit from IoT.

A few predictions from the report:

• Boost to global GDP resulting from IoT: $5 trillion per annum by 2035
• Annual spend on IoT modules and data services in 2035: $1 trillion per annum by 2035
• Number of IoT devices will be built between 2017 and 2035: 1 trillion
• Cumulative spend on IoT connectivity modules between 2017 and 2035: $750 billion.

To learn more about the information profit margin and how it will drive the deployment of IoT technology, download the white paper.