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Analyst Angle: Six trends that are driving Industrial IoT

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I’m just back from CES, and it’s clear that IoT in the home offers a certain magic that interests press and consumers. But even though voice agents are gaining traction, and ushering in a new world of connected smart homes, the big action in IoT is taking place a little more discretely in large industrial verticals, who have been making inroads with connected devices for years.

The reasons that the Industrial IoT, or IIoT, is a few steps ahead of the consumer space is just another iteration of the same old story from fax machines, to personal computers, to Blackberry: If it’s just “cool”, consumers will adopt first, but if there is a ROI that can be realized, industry will adopt first. An example of this would be autonomous vehicles, for which many would guess that Tesla, Uber, or GM/Cadillac were leading brands. But it’s not so – the first autonomous vehicles were used in mining operations and ag, from brands like Caterpillar and John Deere (which has been at it since the mid 1990s).

So it is with the IIoT. The compelling cost savings, efficiencies, and ROI mean that corporations have a fiduciary responsibility, and are under competitive pressure to seek and deploy technology that can improve operations.

That said, even though IIoT has been around far longer, it has had a much tougher row to hoe. This is because each vertical industry needed to solve all of the challenges on their own, which drives up the cost of the investment. What is different today is that both the IIoT and its consumer equivalent are being pushed along by some strong tailwinds, which lower the barriers to deployment. Let’s look at the big trends:

Connectivity
The past 30 years have seen incredible progress in wireless connectivity solutions. Standards-based solutions like Wi-Fi, cellular radios, and even satellite connections have dropped in price, in terms of all three of: CapEx, monthly minimum fees, and per MB fees. A number of new standards (ex: NB-IoT) and companies (ex: Sigfox) exist just to serve the IoT market using the latest modulation schemes, and low power profiles. The technologies now allow almost seamless global connections, and the lower costs open up thousands of business cases.

Cloudification
Connectivity can link millions of IIoT devices, but Cloud solutions offers a place to store all the data they create, manage, and execute instruction sets. Whether private or public Cloud, it’s hard to envision an IoT explosion without the facilitation of the Cloud.

Big Data, AI, and Analytics
Collecting loads of data, and deciding what commands to send to connected actuators and devices is a massively complex task. But huge progress has been made in the fields of Big Data, and the associated fields of analytics. With thousands of connected nodes, knowing what to do at any given time is like finding a needle in a haystack. Without modern analytics, more data would just mean “bigger haystacks”. With analytics, more data means “more needles”. AI and machine learning form another layer of progress which will allow systems to be programmed with goals, and to learn and discover their own way of optimizing the IIoT system towards those goals.

Miniaturization and available hardware
Hardware keeps getting smaller, even though capabilities are increasing. Industrial IoT users can thank the smartphone boom for advances in radios and sensors which have been made reliable, cheap, and with a deliberate preference for small footprint and low-power consumption. Many of these same chips are now leveraged in IIoT hardware. This eliminates the costs of developing the chip, and reduces the costs per unit.

Moore’s law, Kryder’s Law, Metcalfe’s Law
Everyone probably knows Moore’s Law. It basically says that the efficiency of silicon chips grows at an exponential rate. Fewer will know Kryder’s law, which holds a similar position about memory and storage. And Metcalfe’s Law is a telecommunications classic that states that the value of a network of things is proportional to the square of the number of nodes on the network.

The key take-away here is that the IIoT is subject to, and leveraging multiple exponential growth theories, all at the same time. If progress is your objective, these exponential trends mean significant wind at your back.

Cost of Capital vs. Labor
At the risk of turning a tech article into a political paper, we must note that the cost of capital has been very low for a number of years in the USA, while the cost of labor has been on an upward slope, driven largely by the cost of healthcare. Businesses will naturally gravitate towards the relatively cheap resource, in this case a capital investment in automation solutions. IIoT solutions are relatively attractive in these economic conditions.

So, even though the IIoT has been around, slowly growing, for a while, it is reasonable to think we are at turning point, towards much faster progress and adoption. Before, each vertical had to develop entire IoT solutions for themselves, at great expense in R&D, deployment capital, and operation costs. Today, with the support of these above meta trends, much of the challenge has been solved by “horizontal” solutions that cut across many industries and are available as “common off the shelf” solutions and hardware.

None of this means that IIoT solutions are now easy or cheap. Hardly! They remain complex, and at scale are still capital intensive. But they are becoming significantly more affordable, achievable, and with reduced risk. This means thousands of business cases around IIoT which were formerly ROI negative, now become ROI positive. WE should fully expect industry players to react. 

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