What Is the Internet of Things?
The Internet of Things (IoT) is a broad trend that has been years in the making, but has only recently become economically viable. Costs for cellular models have declined while the rise of cellular networks has created nearly ubiquitous connectivity.
The IoT involves expanding this Internet connectivity to everyday objects, which will create incredible amounts of data that will facilitate more-informed decisions on just about everything. The IoT has the potential to dramatically change how people live their daily lives by providing the data and connectivity for people to optimize lifestyle choices around.
The benefits can manifest in everything from savings on your utility bill from improved efficiency to improving automobile safety by having cars speak directly to each other. Or think about having a sensor inside or on your body that can preemptively warn you before you have a heart attack. What if you had greater access to your personal health data to improve your diet? The possibilities are limitless.
Investing in the Internet of Things
The IoT value chain will consist primarily of data collection, data transportation, and data analysis. Think of small sensors and embedded wireless modules, cellular networks, and business intelligence software, as examples within each respective segment.
The earliest phase will be getting enough hardware infrastructure distributed in order to begin data collection. Like other hardware markets, these companies may face commoditization and lose pricing power eventually, although this may be the first growth frontier thanks to the high volumes that will likely entail.
Data transportation will occur via wireless networks that have facilitated mobile computing, as cellular data networks continue to expand and improve performance. Data analysis and interpretation may offer the greatest opportunity in scalable value creation, although it may be the farthest to maturity.
One challenge that the IoT will face will be standardization. Companies hoping to capitalize on the IoT may prefer proprietary approaches, but that inherently closed approach may limit potential adoption. For truly widespread adoption to take place, standards need to be as open as possible in order to foster innovation. There will be numerous investable opportunities within the IoT considering its global scope.