Creating value through the IoE ‘Value at Stake’

Joseph Bradley, general manager, Cisco consulting services
Joseph Bradley, general manager, Cisco consulting services

Building use case is a key piece of demand generation in the tech world and beyond. The best examples feature broad applicability to reach out to as many customer scenarios as possible. But can you construct one rationale that applies to all situations, in all countries, projected out for ten years? Cisco thinks so, and has called its new concept the ‘Internet of Everything’ (IoE).

To many observers, the term ‘Internet of Things’ may ring more clear bells. Proposed by Kevin Ashton back in 1999, it referred to the incorporation of data from the physical world - from ‘Things’ - into the reams of information travelling on the Internet, which at that time was created largely by humans. According to Ashton:  "You can't eat bits, burn them to stay warm or put them in your gas tank. Ideas and information are important, but things matter much more. Yet today's information technology is so dependent on data originated by people that our computers know more about ideas than things." Data from things could and should also travel on the Internet, Ashton argued, to provide better management of the physical world, and since everything could be assigned a unique identifier that was tagged and monitored, the technology was available to make this so.

Since the turn of century, this vision has begun to take on corporeal form: supported by a seemingly infinite reserve of IPv6 addresses, the number of connected devices is expected to increase exponentially - while Cisco and Ericsson have predicted there will be 50 billion by 2020, IBM counts 1 trillion by 2015. According to Cisco, 99.4 percent of the physical objects that could be linked remain unconnected - but not for long, heralding the dawn of a new era in connectivity. If this sounds like the Internet of Things, it is - with one important twist. With the Internet of Everything, Cisco is reinserting the human element, but in this case, a mobile, instrumented person who is tracked, located, and functions as a source of data for monitoring on the Internet, just like things: Cisco defines IoE as "bringing together people, process, data, and things to make networked connections more relevant and valuable." In this schema, the network serves as the connecting foundation and data dependent apps the engine that drives insight and value.

But Cisco’s vision extends beyond the conceptual. In fact, researchers in the company’s consulting services research & economics practice have developed a methodology to calculate the value of the IoE over a ten year period: according to Cisco, the IoE will generate $14.4 trillion in global "value at stake" (or a 21% increase in global corporate profits) from 2013 to 2022 through improved asset utilization, employee productivity, supply chain/logistics efficiency, customer experience and innovation.  In addition to the total value of IoE, the research group has estimated the value that is available to organizations in 2013 ($1.2 trillion), the value that will be realized in 2013 ($613 billion), and the value "left on the table" in 2013 ($544 billion) - a measure that no doubt creates some urgency around the need for companies to invest in the infrastructure needed to participate in the IoE revolution.

Cisco’s research is based on an impressive survey of 7,501 business and IT decision-makers in enterprises and mid-sized firms in 12 of the leading economies (representing 70% of global GDP), asking for respondent estimates on likely investments in IoE, and for opinions on what the likely business value outcome would be. As explained in a Cisco white paper, "Embracing the Internet of Everything To Capture Your Share of $14.4 Trillion," research findings were developed from a review of data generated by this "bottom-up approach," which considered the value created in 50 and ultimately 21 private sector use cases - value defined as "higher revenues and lower costs" that may be achieved by different companies or industries based on their "ability to harness IoE." Report findings were then "cross checked" by an (unspecified) "top-down analysis."

In addition to enhanced connectivity, Cisco attributes the potential for increased profit and value to advances in computing capability - Moore’s Law, which predicts exponential increases in compute speed - as well as cloud, mobility, Big Data trends, and to advances in networking - Metcalfe’s Law, which argues that the value of the network increases exponentially with its size. Missing from the researcher’s set of assumptions, though, is consideration of Jevon’s Paradox, a proposition in economics which states that as technological progress increases the efficiency with which a resource is used, the rate of consumption of that resource tends to increase rather than decrease - surplus is not a given. Applied to IoE investments, this would mean that increased productivity does not necessarily translate into increased business value - as saved resources may be consumed, spent or otherwise wasted, rather than directed towards the creation of new value.

Another issue with Cisco assumptions appears in the projection of potential benefit out to 2022, based on current values. Using demand side research into user expectations of the cost and benefit of IoE investments, report authors have generated very specific numbers detailing potential value. This kind of question arises in projections of any kind, but is especially relevant in the ICT industry which is characterized by extremely rapid change. How, for example, is it possible to calculate the cost/benefit of technology investments in 2022 when there are likely to be technologies that we cannot even conceive of today? How many applications and use cases of IoE will exist in 2022 that we have yet to imagine? On this point, Joseph Bradley, general manager, Cisco consulting services and one of the report authors, noted that technology costs/benefits may indeed change - and that Cisco, therefore, has likely "undervalued" some of the potential ‘value at stake’. The opposite side of the equation may also hold true, however, particularly if productivity benefits are consumed, rather than reinvested.

If the usefulness of assigning exact values to broad technology adoption in future scenarios is less than clear, Cisco’s application of the same methodology across various industries/use cases and across different economies has produced some interesting observations. One of the more compelling sets of findings is the higher expectation on the part of business leaders in emerging countries that they will realize value from IoE (India, Brazil, China, Russia and Mexico top the list in terms of expectations) and the relatively lower ranking of these countries in terms of the actual value that report authors have calculated they will manage to achieve (except for China which ranks number two).  According to Cisco, higher expectations on the part of business leaders in the developing economies suggest increased competitive activity from these regions: companies in the developed world are realizing greater value from IoE today based on long-term investments in ICT, but will have to maintain this level of investment in order to remain competitive. Cisco makes a similar argument with respect to company size: mid-sized firms, for example, are realizing a more significant share of ‘value at stake’ on a percentage basis than are their enterprise cousins. In terms of industry focus, the message is not dissimilar: industries, such as IT, financial services and telecom are currently wresting greater value from IoE than are industries such as manufacturing, energy and retail that are less IT-intensive. Not surprisingly, recommendations directed at country, business size and industry segments is consistent: ongoing additional investment in connectivity is key to competitive success, a business case with broad applicability - complete with dollar figures showing the value that is now "up for grabs" to businesses that can "capitalize on the IoE market transition."

For businesses interested in exploring the value potential of IoE in their particular circumstance, Cisco has created a data visualization tool that can produce custom estimates of the value that is derived from M2M, M2P and P2P connectivity based on country, company size and industry.  Results for a small research/media services firm in Canada are reproduced below. Guess who?

Cisco IoE visualization tool
Cisco IoE visualization tool

 

 

 

.

 

 

 

 

LEAVE A REPLY