As seen in Global Corporate Venturing, May 2015 issue.
To ease traffic flow, drivers in Barcelona receive a text when a nearby parking space opens up. On dairy farms, ranchers can monitor herd activity to find the best window for their cows to become pregnant. And in Rio, city officials consider weather forecasts and real-time geologic data to deploy emergency personnel to slide-prone areas – a day in advance.
These are just some of the real-world uses of technology in the burgeoning network of the Internet of Things (IoT). Certainly, IoT has generated a lot of buzz in the past few years and now it seems the hype is becoming reality.
I recently participated in a Silicon Valley IoT conference focused on the enterprise space. The event was jointly sponsored by Silicon Valley Bank, Cisco, Siemens, SAP and Sapphire Ventures. Sapphire Ventures pointed out that many of the key ingredients for IoT success are now falling into place. For example, the average cost of sensors has dropped 50% in the last 10 years. The cost of bandwidth has dropped 40 times and data processing 60 times. The availability of big data analytics has mushroomed and Wi-Fi is virtually free almost everywhere, making data collection and transmission simpler. Estimates are that by 2020, approximately 30 billion objects will be connected to the Internet, including smartphones and tablets.
The event concluded the biggest promise of IOT was likely to lie in the enterprise space. The opportunity for making smart products is huge, but making them useful requires infrastructure capability that companies like Cisco, Siemens and SAP are building.
Venture capital firms invested an estimated $1.5bn in IoT in 2014, according to Cisco. Unlike in other technology sectors, venture capital funding for enterprise IoT comes primarily from large corporate venture funds, such as GE Ventures, Qualcomm Ventures and Intel Capital.
Among the enterprise areas getting attention is manufacturing. With the ability to track raw materials, inventory and market demand, manufacturers can react quickly to changing dynamics. Sensors in industrial products allow real-time analysis of performance, and often the ability to remotely diagnose and repair instantly. The opportunities to improve productivity and enhance employee safety are huge.
Transportation is also positioned for significant advances, with the ability to monitor and manipulate vehicle movements to cut congestion by creating smart road and parking systems that react instantly to changes in traffic flow. The evolution of greater efficiency in the movement of goods with smart trucks is cutting delivery times and costs, while making the roads safer for drivers and reducing fuel use.
Healthcare is another area where opportunity is ripe for interconnectivity. Monitoring and diagnosis have great potential for creating digital feedback systems to monitor health and encourage healthy living. In rural areas, patients can access medical specialists who may be in different states, or even countries.
While the promise is huge, there is no shortage of challenges to creating a truly inter-connected world. It works only if a diverse range of technology platforms can actually communicate with one another. That is why a lot of energy is being spent on standardization and interoperability, in addition to expanding infrastructure.
One of the big topics of discussion revolves around how to keep all this data secure as it flies around cyberspace. There are risks associated with billions of devices on networks that could be hacked. But this also represents a tremendous business opportunity for innovators who can solve the security challenges. There is also vast unchartered territory when it comes to setting up the legal and ethical frameworks around data collection and use.
With so much opportunity ahead, large enterprises are joining with startups to tap the potential and solve the challenges. How corporate leaders are looking at investing in the space varies. Siemens has created Technology to Business Centers (TTB), which seek out startups, individual inventors, universities and research labs. It is using a variety of approaches, ranging from contract work and hiring the innovators, to licensing their technologies. Cisco is directly acquiring or investing in companies—it has invested $1bn in the IoT product and solutions business and plans another $1bn investment by 2017. SAP is the sole investor in Sapphire Ventures, a fund focused in part on IoT.
Are you still wondering about the cows? If a cow is in heat, it becomes more active. Sensors detect that behavior early and help identify the six-hour window during which the odds of successful pregnancy by insemination reach 90 percent.
The future definitely looks "smart." For more than 30 years, Silicon Valley Bank has helped innovative companies and their investors move bold ideas forward, fast. We are proud to be helping the latest wave of entrepreneurs and enterprises developing new products and services to promote better efficiency, save valuable resources and improve the quality of our lives.