4 Usage Models for the Internet of Things

— April 03, 2014

Diverse Internet of Things trials are creating a sea of noise that often obscures the business opportunities available, according to Gartner, Inc. Analysts are exploring the four fundamental usage models, enabling business and IT leaders to clearly see how to take advantage of this next wave in Internet evolution.

“As the Internet of Things grows rapidly, it is linking millions of assets, including devices, people and places, to deliver and share information, enhancing business value and competitive advantage and creating new business opportunities,” said Hung LeHong, vice president and Gartner Fellow.“In this early and emergent phase of development, entrepreneurs are experimenting across such a diverse range of sectors, applications, business models and technologies in their efforts to uncover value. This creates confusion and makes it difficult for others to easily identify the potential in their own geographies, industries and business sectors.”

LeHong said that although the Internet of Things has a very wide applicability, some enterprises may be too quick to dismiss it in their organizations because the examples of what other businesses are doing don't match their own environments.

“A recycling company or vending machine operator, for example, may not find any applicability for the Internet of Things when reviewing how a hospital is connecting its patient-monitoring equipment to the Internet of Things. However, on closer inspection, these companies will discover that the reason the hospital has connected its equipment is to cut costs on nurses' rounds to monitor patients,” he explained. “Any company operating remote devices has opportunities to use this same model. Remote assets that require manual rounds for the purposes of emptying or replenishment, such as recycling bins or vending machines, can benefit from the same approach the hospital took. The underlying commonality is the business case to reduce the costs from doing the rounds, by connecting assets to monitor status.”

Despite their diversity, Gartner believes that all current examples can be simply categorized into four basic usage scenarios, each of which presents clear business opportunities for end-user organizations.

Manage
Look at the status of the asset to improve utilization: This model is essentially involved in the optimization of asset utilization within an environment. As various assets (which could be a device, piece of equipment or a location, such as a meeting room or a parking space) are connected and are able to provide up-to-date status information, utilization can be optimized through appropriate systems, in order to match assets with needs. The assets may be simple and report very limited data, occupied or vacant, or they could be very complex (such as a jet engine) and involve multiple sensors reporting real-time streams of data—which may amount to terabytes per hour. But this does not detract from the essential value model. 

Monetize
Charge for usage of the asset on an incremental basis: This is a specific business model that is about the monetization of a physical asset, by accurately measuring usage. It enables a potentially, very expensive capital asset to be used as the basis for a usage-based service. This brings business opportunities to replace capital expenditure with operating expenditure, more-accurate plotting of product life cycle and more-effective preventive maintenance. An example is monitoring engine hours, actual load, fuel usage etc., of a piece of equipment to bill usage against actual wear and tear.

By combining this information with location, speed and time information, the enterprise can accurately assess additional charges to reflect the risk. This could apply to a "pay as you drive" vehicle insurance service, a clear example of the application of this use case to physical objects not actually owned by the enterprise itself.

Operate
Use the asset to control its surroundings: This model builds on the well-established realm of "operational technology," which is technology used to manage the equipment and processes inside manufacturing plants. Operational technology is increasingly moving away from the proprietary and isolated architectures of the past, to exploit more mainstream technology, software and architectures—in some cases coming under the CIO's and the IT department's purview.
 
Simple examples to control a valve, but in a more complex example, the data from thousands of sensors might combine weather and atmospheric conditions with water flow pressure and depth information, in order to manage entire water supply or irrigation systems. It will reduce the need to physically visit the remote device and avoid hazardous environmental conditions around the device.
 
Extend
Provide additional digital information or services through an asset: A physical supply chain ends when a product or asset is shipped. However, when that asset is connected, a digital supply chain continues to exist in which digital services and products can be delivered to that asset. In effect, the physical asset is extended with digital services.

Simple examples might be automatic (perhaps subscription-based) downloads of firmware to a device to provide new capabilities or rectify newly identified faults. Owners of a connected automobile may download the ability to upgrade or extend the driving mode of the car. More-complex examples might be the provision of advisory information (such as imminent part failure, and excessive wear or overheating of a device) to avoid the costs of failure through preventive action. Media content is a digital product that could be sent to any connected asset, such as streaming movies to a train seat.

“Although much of the spotlight today is on the Internet of Things, the true power and benefit of the Internet comes from combining things with people, places and information systems,” said LeHong. “This expanded and comprehensive view of the internet is what Gartner calls the Internet of Everything.”

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