Riding the third wave:The IoT’s impact on businesses in Asia

A DIGITAL REALTY WHITE PAPER

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Propelled by an exceptional convergence of trends – big data, mobile phone ubiquity, interoperable hardware, the resurrection of artificial intelligence, cloud computing, 3D printing and crowd funding – the emerging technology known as the Internet of Things (IoT) is predicted to link up everything with everyone in an integrated global network.

Whether we’re ready for it or not, we are rapidly evolving towards a world where just about everything will be connected.

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People, machines, production lines, natural resources and virtually every aspect of economic and social life is expected to be connected via sensors and software to an IoT platform, continually feeding big data to every node in real time.

1 The Worldwide and Regional Internet of Things (IoT) 2014-2020 Forecast: A Virtuous Circle of Proven Value and Demand by Denise Lund, Carrie MacGillivray, Vernon Turner and Mario Morales, International Data Corporation (IDC), 2014: http://www.idc.com/getdoc.jsp?containerId=248451

For IT vendors, service providers, systems integrators and retailers alike, this ‘third wave’ of the Internet encompassing billions of connected devices presents huge potential to discover new revenue streams and customers. By some estimates, global IoT revenues will balloon from $2.3 trillion in 2014 to nearly $7.1 trillion by 2020, and in Asia Pacific, excluding Japan, the industry is expected to grow from over $600 million to $2.4 trillion during the same period.1

Yet there’s still relatively little understanding of what businesses in the Asia Pacific region should be doing to adapt to this changing landscape. What exactly will the IoT’s impact be on enterprises across the region? How should they identify and capitalise on the IoT’s potential efficiencies, business process implications and revenue opportunities? What do companies need to consider when assessing whether their data centres can take the IoT load, and what should they be doing right now to prepare?

Recently, Digital Realty sought advice on these questions from a panel of Asia-Pacific based CIOs, CTOs and IT infrastructure and facilities regional managers. This white paper summarises their wide-ranging and, at times, divergent views, and analyses the issue on which they all agreed: any IoT initiative will require a tailored data centre strategy that balances current needs with future growth and potential application.

BURGEONING MARKETS

Most people are familiar with the kind of IoT solutions that target the home consumer. These range from smart self-adjusting thermostats to IP-connected appliances, such as light bulbs that turn on when your car signals to your home that you are a certain distance away.

Then there is ‘wearable technology’ that sends data about your physical activity, heart rate, respiration and sleep patterns to a database in the cloud as well as to your mobile phone and computer.

Yet as Craig Stires, Associate Vice President, Big Data Analytics & Software, IDC, sees it, the industrial applications will offer the greater initial IoT opportunity, rather than consumer technologies.

“Consumer IoT is a compelling proposition because globally, the Millennial generation has already developed a high affinity for full-time connectivity,” he says. “But these are still quite limited to observing the behaviour of the wearer and displaying it in an application. This will take time to develop to a more meaningful market. The industrial application of IoT is more relevant today. The availability of connected machines and employee wearables is putting real opportunities on the table for organisations around automation, efficiency, and safety.”

Sharat Sinha, Vice President (APAC), Palo Alto Networks, agrees. “I think it’s the industrial products that will gain traction first,” he says, noting that industrial firms are already aiming for growth by launching services that help clients improve productivity and reduce costs, using sensors and analytics to cut operations costs system-wide.

“Think of a chemical plant with multiple transducers – these would traditionally have been managed through some proprietary protocols. But now we’re seeing a move towards companies managing these through the larger IP network,” he continues. “The consumer devices generate the most hype, but the revenue may well initially come from the enterprise or commercial market.”

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COLLABORATION IS KEY

At the same time, linking devices with wireless networks is very much a booming market. This represents a lucrative opportunity for telecoms, in particular, with new connected wireless devices set to surpass the number of mobile handsets in the coming decade.2

“The connected device category is definitely driving a lot of demand on our networks,” believes Arun Kundu, Director, APAC Professional Services & Global Strategy, Verizon Enterprise Solutions. “And the model for tackling that is really distinct. The obvious opportunities are in the areas of automotive and smart grid, where we manage more than 15 million connected devices.”

No matter what part of the market experiences the greatest impact first, the panelists agree that collaboration between partners in the IoT ecosystem can improve the operational and cost efficiencies needed to meet growing demand for connected devices.

“For every use case, a different core group of expertise providers is required to develop the analytics and/or the solution to a point where these can interact with the end device. So, what we’re finding is that industry consortia are becoming really important for us,” says Thomas Jakob, Regional President, Asia Pacific, Bosch Software Innovations.

“That’s why the Industrial Internet Consortium (IIC) was recently formed to facilitate the rollout of new services and capabilities that leverage the IoT. It includes leading IoT players like Cisco, IBM, GE, Intel as well as Bosch and we’ll be creating and running test beds so we can learn to solve the problems quicker, generate new services, and generate standards.”

BARRIERS TO ADOPTION

Panelists agreed that it will take time and education before the general public grasps the real value of IoT and sees it as more than just a way to track your steps, have your car schedule an oil change, or have your refrigerator order your milk.

The Internet’s third wave is likely to be propelled by businesses that are able to rationalise their operations by further automating processes, using sensors to simplify distribution patterns and better manage inventories, deploying algorithms that eliminate human error, and so on.

These business savings have the potential to bring down the price of consumer goods – when operating

environments are monitored continuously for hazards or when objects can take corrective action to avoid damage, risks and costs diminish.

Big data, in turn, will be processed with advanced analytics, transformed into predictive algorithms, and programmed into automated systems to increase productivity.

However, the exponential pace at which the IoT is gathering speed has created a ‘fear factor’ for many businesses which is disrupting adoption.

“There is a perception that the IoT is overwhelming, complicated and expensive” says Julian Chan, Head of Information Technology (Asia Pacific), Microsoft. “Enterprises are concerned about the scale of the initial investments they’d have to make to take advantage of the IoT. What would they have to pay for capacity, for network, for security? There’s a lack of clarity about the fact that the yield for businesses will come from the productivity gains.”

Mr. Chan continues, “Instead of thinking about the massive amounts of data being produced by billions of devices, enterprises must realise how one piece of data can provide value to an organisation. We need to be making it clear how the IoT translates into connectivity, servers, data centres and applications. The reality is that we now have very sophisticated platforms to harness data and we can apply it in all sorts of ways.”

“There is a perception that the IoT is overwhelming, complicated and expensive.”

2 Connected Life: The impact of the Connected Life over the next five years by Strategy& pwc, 2014: http://www.strategyand.pwc.com/global/home/what-we-think/reports-white-papers/article-display/connected-life

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PRIVACY AND SECURITY CONCERNS

But while billions or even trillions of connections can create unprecedented opportunities, they also create new risks. The sheer diversity of IoT devices alone dramatically increases the attack surface for exploits and malware. As Mr. Sinha puts it, “The more you get connected, the more you’re connecting to the whole world – which means more potential entry points for hackers. Security is absolutely critical when it comes to the IoT.”

At the moment, the consumer IoT market is loosely regulated and lacking security and safety standards. Meanwhile, other industries, such as medical, manufacturing, automotive and transportation, have standards that must be updated to include IoT devices.

A concern over information privacy is another challenge facing the IoT that could prevent it from achieving rapid adoption.

“At Adobe, our applications and the way we structure our data collections are going to have to change in order to accommodate user anonymity,” comments Charles Sansoni, Senior Data Engineer, APAC TL Network Operations, Adobe. “After all, if someone buys a web-enabled toaster, it’s easy to track where that toaster is being used – in fact, it’s nearly impossible to divorce the two sets of data. Some countries require companies to pay high taxes on their network traffic, because it involves potentially personal data. I anticipate more countries will follow suit once the IoT really gets underway.”

As Mr. Chan notes, these are societal and political issues as much as they are technical. “If you analyse the diverse regulatory requirements worldwide, what’s needed is cooperation between governments in order to be able to protect data and ensure privacy,” he said.

Mr. Jakob suggests that enterprises may need to take steps towards self-regulation to make IoT security a reality. “Industry needs to think about developing its own standards and security models,” he said. “Waiting for governments to act may take too long.”

GEOCITIES OF THINGS

Cities are fertile ground for realising IoT value. Indeed, the IoT is often perceived as a major enabler for the ‘smart cities’ of the future.

The panel pointed out that at the regional or city level, opportunities are likely to cover things such as improved building management, clever ways to provision basic services (for example, ‘street lighting as a service,’ which can be managed and consumed to more accurately reflect changing patterns of need and demand), water management and policing.

At a state level, the IoT holds particular promise in areas like road infrastructure (for example, better monitoring of conditions by using intelligent sensors and Big Data computing capabilities), traffic management and healthcare.

The panel points to Singapore as a good example of what a 21st century IoT-powered city might look like. The city-state utilises sensors to save money and optimise a range of processes, from traffic monitoring (traffic patterns are analysed to reroute drivers) to waste management (waste pickup is optimised by measuring container levels).

Security and emergency detection is another major focus. Here, sensors are used to detect radiation, gases and other hazardous conditions in real time.

Factors driving the adoption of IoT throughout Asia Pacific include regional governmental efforts to improve competitiveness in their economies and city planners’ efforts to address social demographic challenges in their cities.

But as Mr. Stires notes, when it comes to getting connected, every country has different priorities and challenges.

“Taiwan is running pretty much in parallel to what Singapore is doing in terms of trialing smart city processes, but in the Philippines, there are issues around transparency and data ownership which will need to be addressed,” he says. “I think we’ll also see pickup in Malaysia, but there’s a tonne of infrastructure that needs to be laid down, so it’s going to take time.”

“If you analyse the diverse regulatory requirements worldwide, what’s needed is cooperation between governments in order to be able to protect data and ensure privacy.”

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The IoT: 5 facts your business needs to knowIndustry the Primary Driver

Consumer IoT generates the most hype, but it’s the industrial applications that will offer the greatest initial opportunity, and generate the most revenue.

Collaboration is Key

Collaboration between partners in the IoT ecosystem can improve the operational and cost efficiencies needed to meet growing demand for connected devices.

Productivity Gains to Outweigh the Risks

Barriers to adoption include the perception that the IoT is expensive and complicated – which obscures the fact that the yield for businesses will come from the productivity gains.

Addressing Privacy and Security Concerns

The consumer market is loosely regulated and lacking security and safety standards, with concerns over information privacy a further challenge. Enterprises may need to take steps towards self-regulation to make IoT security a reality.

Geocities of Things

In Asia, in line with a global trend, governments are increasingly looking to cities as fertile ground for realising IoT value. Singapore is generally regarded as a good example of what a 21st-century IoT-powered city might look like.

A Need for Careful Planning

To capitalise on the IoT’s potential efficiencies, business process implications and revenue opportunities, companies need to be considering now whether their data centres can take the IoT load. Does your business have the data centres and the infrastructure in place to help it realise the IoT’s benefits?

A NEED FOR CAREFUL PLANNING

While the IoT accelerates and the amount of data generated continues to rise, there are growing questions over whether businesses have the capabilities in place that will help them realise the IoT’s benefits as quickly as possible.

Chief among these is their data centre strategy. IoT-driven services and devices generate vast amounts of real-time data – data that is highly dynamic. As the panel pointed out, this continuous flow of information will often need to be shared with an ecosystem of partners, who bring their own data to the table to create new insights, or package it with content to deliver different types of services.

As such, the need for direct and secure access to partners and suppliers will drive the need for a range of connectivity options.

The essence of the IoT, however, is speed of access to data, and speed of cross-referencing and delivery of insight. This makes latency a fundamental consideration, just as with any data infrastructure. IoT initiatives, therefore, will need to be supported by tailored data centre strategies that provide the kind of flexibility, scalability, security, availability and connectivity that the third wave of the Internet will demand.

Bernard Geoghegan, Managing Director – EMEA and APAC, Digital Realty, puts it this way: “Now, while the IoT gathers pace, is when businesses should be asking themselves whether they have the data centres and the infrastructure in place to support these levels of data collection and analysis.”

“Businesses should be asking themselves whether they have the data centres and the infrastructure in place to support these levels of data collection and analysis.”

Digital Realty supports the data centre and colocation strategies of more than 600 firms across its secure, network-rich portfolio of data centres located throughout North America, Europe, Asia and Australia. Digital Realty’s clients include domestic and international companies of all sizes, ranging from financial services, cloud and information technology services, to manufacturing, energy, gaming, life sciences and consumer products.

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