The Internet of Things is finally ‘coming of age’, but is it delivering real business transformation?

6 mins read

Since 2013, Vodafone’s annual IoT Barometer has looked at how enterprises are using and deploying Internet of Things (IoT) technology and one striking finding in the latest report is that, for many companies, the IoT is now at their heart.

The Barometer is a global study, compiled from more than 1100 interviews with companies from across all types of markets. According to the research, some 28% of these organisations are already using IoT, while a further 35% are ‘less than a year away’ from launching their projects. Across all sectors, an impressive 76% of businesses told the survey the IoT would play a ‘critical’ part in their future success.

More budget is being allocated to IoT; more businesses are being run on the IoT and more enterprises are seeing significant returns on their investment.

“There are still problems in defining what the IoT actually is,” says Phil Skipper, head of business development, M2M, at Vodafone Global Enterprise. “It remains a nebulous term and people will say anything that is connected is part of the IoT. We have found that people are looking at IoT in much the same way as they use the domestic internet; it’s a market place for data and information from a variety of sources, enabling businesses to make more informed decisions.”

IoT is all about turning objects, whether a car or a building, into ‘intelligent’ assets that can communicate with people, applications and each other.

According to Skipper: “When we first started the survey, most enterprises were in the early stages of adoption. Many were simply wondering about the benefits from adoption. What we have seen over the past four years is a significant uptake in deployment – and these are sophisticated deployments that go well beyond just the connectivity of one application. We are seeing connectivity across businesses generating real added value.”

Skipper sees IoT being deployed intelligently and proactively. “IoT was initially seen simply as a way of driving cost out of the business. Now, we are seeing its deployment as key to revenue generation. Companies have achieved their initial objective of reducing costs, now they are looking to IoT to generate new revenue streams.”

Matt Hatton, managing director of business and market analyst Machina, agrees. “IoT is helping to change the way in which companies operate and how they go to market. Historically, IoT/M2M was about driving efficiency in the supply chain and better managing scarce resources.

“I agree there is a problem with terminology; we have tended to lump a lot of things under this umbrella term and the evolution of IoT will vary from one sector to another.

“Wearables have taken off quickly, while the use of the IoT has been much slower to materialise in some other sectors – look at the roll-out of smart meters and the use of IoT in clinical healthcare. There have been a few false starts and I expect there will plenty more as more industries embrace it.

“What this survey shows is the IoT is evolving rapidly and becoming something far more sophisticated and, in a growing number of cases, is fundamentally changing the way in which businesses are operating.

“Traditionally, companies would sell a product,” he continues. “What we are now seeing – and this research supports this – is them looking to provide a service. The concept of ‘servicisation’ is now a real trend and is being driven by companies seeking a competitive advantage.

“In order to differentiate themselves, they are building ongoing relationships with customers and delivering a more efficient service. Look at the lighting industry, for example. Companies are moving away from solely supplying lighting products to providing lighting as a service, whether that is energy monitoring or security. That increased level of service ultimately feeds back into the development of more efficient products.”

Hatton is wary of talking about ‘business transformation’ though. “We have conducted a lot of research into the adoption of IoT and, while there is a lot of good stuff taking place, whether this is turning into an overhaul of business models remains a moot point, but it is significantly transformational for many.”

Connected products

Connected products are a key growth area for IoT according to the Barometer, which found that more than 46% of early adopters were planning to launch connected solutions in the next two years.

The survey also found that IoT was being used by businesses to ‘optimise their operational processes’.

“More companies are building it into their products,” explained Skipper, “and 44% said the IoT was enhancing their customers’ experience.”

The survey found that 48% of companies who have adopted IoT are using it to change the way in which their businesses were operating, while 29% said they were using it to connect multiple organisations into extended ecosystems.

Both Skipper and Hatton see this trend permeating throughout businesses and across multiple sectors. While not a universal trend, the connectivity afforded by IoT is changing the way in which many businesses operate and providing companies with a more ‘granular’ view of how their products are being used and how they can be improved or upgraded in the field.

As a result, companies are ‘elevating’ IoT in their business. “Projects are now being driven from board level,” Skipper claims. “Companies have become more comfortable with the core technology and are becoming more reliant on IoT to deliver core business processes. As they see more benefits, so they link in more areas and derive more value – for example, by using data analytics.”

Hatton sees the business case for investment in IoT becoming more obvious. “As it drives out more cost, bigger returns on investment are being achieved and, as a result, new areas of the business are being opened up, targeted and then optimised.

“We are seeing more companies recognising how much money they are saving through rolling out IoT. While incremental benefits are harder to measure, those who have invested significantly in the IoT are seeing big returns. As a result, the IoT is becoming less a technical project and more a business initiative.”

According to the Barometer, early IoT adopters have seen a 20% improvement in key business indicators like revenue, system uptime, cost and asset utilisation. As a result, businesses are recognising the impact of the IoT on the business as a whole, as opposed to within a particular technical silo.

“Decisions about IoT implementation are now being made by the CEO, rather than by the chief information officer,” suggests Skipper.

Planning is crucial and the survey found that 70% of companies thought it was essential.

“Across the board, IoT is being seen more as a business initiative, rather than just a technical issue,” explains Skipper. “As a result, planning becomes more essential and enables companies to cut through ‘over expectations’ and to focus on the core benefits.”

A significant number of companies responding to the survey said planning was critical and that it was important to set clear targets.

An interesting finding was that the IoT and its impact was now permeating into smaller businesses (SMEs).

“Larger companies tended to be the early adopters, but falling hardware component prices and much lower connectivity costs mean that IoT deployments are now within the reach of much smaller businesses and we are seeing a real take-up among SMEs,” Hatton suggests.

“When a piece of kit costs millions, it makes sense to attach connectivity, regardless of the associated expense. But we are now seeing prices and the cost of implementation coming down and getting a lot easier to manage.

“In the past, larger companies could throw resources at connectivity and remote management. Now, smaller companies can now do exactly the same. The constituent parts of the IoT are cheaper and software platforms make it far easier to build applications and to develop innovative services.”


“When it came to security, we were surprised by the results,” says Skipper. “We found a more mature attitude towards security; certainly a more considered approach in the context of IoT and managing existing security processes across the business. The percentage of companies saying they were not doing IoT due to security was significantly lower than we had expected – just 18% said it was a barrier to IoT adoption.”

Commenting, Hatton said Machina had expected that ‘enterprises would stop using security as an excuse for not delivering IoT and the Barometer bore out that expectation’.

According to Hatton, security is a ‘solvable’ issue for most enterprises.

“Companies need to identify threats specific to their situation and then act proportionately to the risk, focusing their efforts and resources on the most threatened and sensitive data.”

Many enterprises are fearful of the novelty associated with the IoT, he suggested. “It is a fragmented market, with a lot of diversity and a lot of participants supplying devices, connectivity modules, software platforms or data analytics. The chain is only as strong as the weakest link.”

That means you need to pick your partners carefully, according to Hatton, and you need to be able to identify security challenges – not only within each element, but also end-to-end.

“Finally, you need to accept there will be security breaches, so you need to ensure the impact of any breach is mitigated.”

Hatton believes businesses must learn from others’ errors or be comfortable in putting their confidence in a third party that can handle security and privacy issues, including ensuring that other suppliers meet their obligations.

“Surprisingly, 60% of those questioned said their companies had the necessary skills to manage security, while a similar percentage thought their business technology was strong enough to manage the risk,” said Skipper.

“In principle, the security layer should be enabled by design in the IoT deployments, rather than retroactively. Yet, in reality, this will depend on what is being deployed.”

According to Aapo Markkanen, a principal analyst at Machina and author of a recent report into security and the IoT: “While individual products can, and should, be secured by design, when a project is a complex system involving different vendors at different times, the scope for doing pretty much anything ‘by design’ is limited. In these cases, security is more of a systems integration issue than a design issue.”

As a result, systems integrators are set to become critical stakeholders when it comes to securing the industrial IoT and those who want to play such a role will have to develop new competences and technologies.

Markkanen emphasises: “Security is never a choice of either having it or not having it. For an IoT-driven enterprise, getting the security right is more about judging how much cyber risk it can stomach and investing accordingly.”

While the IoT is incredibly varied, the Barometer is now discerning broad trends – most businesses will be looking to use it within the next couple of years, it will be indistinguishable from other business processes and it will become part of a company’s fabric.