How Big is the Internet of Things? Cisco Explains

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Everyone seems to be talking about the Internet of Things (IoT) with ever-expanding estimates of how many devices will be connected, how big the market will be, and what impact it will have on the overall economy. I’ve been pretty skeptical of these guesses, so recently I took the opportunity to talk with some Cisco executives about their recent prediction that what they call the “Internet of Everything” (IoE) will impact $19 trillion worth of value over a 10-year period from 2013 to 2022.

Joseph Bradley, vice president in charge of Cisco’s IoE consulting practice, explained that Cisco wanted to look at markets impacted by the growing move toward connecting all sorts of devices, and wanted to do a “bottoms-up” assessment by looking at 61 use cases. Overall, the study concluded that the 21 use cases in the private sector represented $14.4 trillion of “value at stake” while the 40 use cases in the public sector added another $4.6 trillion.

Joel Barbier, lead of the research and economics team at Cisco consulting, said these are “conservative” estimates, because they don’t include everything. The various use cases were specifically picked to be mutually exclusive, and the number reflects a net present value, indicating slow but cumulative adoption of the technology, he said.

In the private sector, the use cases include a number of industry specific use cases, such as the smart grid and connected commercial vehicles; as well as cross-industry use cases such as telecommuting. The big drivers in the value at stake number include improved asset utilization by reducing selling, general, and administrative expenses and cost of goods sold; improved employee productivity; supply chain and logistics; improved customer experience; and innovation, including reducing the time to market.

In the public sector, the 40 use cases include things in progress at multiple “lighthouse cities,” according to Christopher Reberger, a research and economics team member who helped create that report. Examples include Smart Cities efforts in places such as Nice, Barcelona, and Glasgow, where the idea is to use new technology to connect and integrate city systems, for things such as parking, traffic lights, and emergency notification. Other use cases include education, healthcare, and defense applications.

Bradley said the study was designed to start conversations with CIOs, not meant to be translated directly into GDP growth. He noted that not all the potential gains of these technologies will be translated to value. For instance, he said IoE technologies will impact millions of job worldwide, and one outcome may be that more jobs will become technology-based, but the impact on displaced workers is unclear. Overall, though, he said these technologies could easily contribute $1 trillion a year to total world production, and eventually, this could mean growth of 1 to 1.5 percent above what otherwise would have occurred.


One thing I noted was that these use cases often involve multiple technologies–not just connecting many more “things” but also using new technologies such as Cloud Computing and Big Data and analytics features. The Cisco executives didn’t disagree–rather, they pointed to the convergence of all these technologies as a driver for increased productivity. The actual productivity growth statistics in recent years haven’t been as large as they were in previous decades, so it will be interesting to see if these new technologies can change that. That may well be one of the most important questions in economics over the next few years.

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