A galactic collision in the IoT universe

April 10, 2017


A galactic collision in the IoT universe

According to the latest cosmological models, our galaxy, the Milky Way, is bound to collide in four billion years with the Andromeda galaxy, creating a super galaxy named Milkomeda. This...

According to the latest cosmological models, our galaxy, the Milky Way, is bound to collide in four billion years with the Andromeda galaxy, creating a super galaxy named Milkomeda. This long-predicted event will surely not happen without much chaos and disruption for the billion solar systems that inhabit the two galaxies. For those cognizant of the laws of physics, this event isn’t any surprise. However, we can imagine that those who are not aware of these laws would be greatly frightened and surprised as to what might happen.

For me, Milkomeda is a great metaphor for what’s happening with the Internet of Things (IoT), except that the latter’s speed is magnitudes faster. To clarify, imagine galaxies are technology sectors that largely live in isolation, and are so remote that they barely see the influence they have on one another. As galaxies, they operate mostly in a vacuum, and have a unique language or approach to business and solutions. These sectors are so isolated today that they all have their own visions and stories about the IoT, a story where their sector captures the lion’s share of value.

Five sectors will collide soon in what we expect to be one of the best examples of schöpferische Zerstörung (creative destruction), to paraphrase the decorated economist Joseph Schumpeter.

Central to this collision is the embedded world. Embedded companies typically have an established product line, augmented by some services. With the IoT, they’re challenged to tackle both technical and economic problems on the device side, while still exploring opportunities for more software and services. The softwarization of the device is making many of their previous investments questionable, if not obsolete. In turn, these companies’ current experts are becoming irrelevant, and the search for new talent becomes a mandatory means of survival for an organization.

Telecom and mobile operators are not far away. Telecom has had its ups and downs. Now, most telecom companies are established players in a stable environment with well-rounded business models. The need to connect billions of devices has a ripple effect in their environment. New operators emerge with alternative technologies, and the current pricing model—as well as the value of the “pipe” versus the service—is questioned.

Software giants are following. Companies that have made their name providing operating systems, networks, or cloud services see an opportunity in the IoT. Their sheer size and the inertia of past successes don’t make them feel disrupted because the number of connected devices is still very small, and the impact on their cloud services will be imperceptible at first. This could make them overconfident, though, as ultimately new business models will emerge that they may be unable to serve.

Enterprise software companies start to feel the traction. Established enterprise players have already succeeded in integrating both cloud and software as a service (SaaS) offerings into their strategies. This sector has experience in business-to-business interaction, and will see the IoT disruption only when their customers ask for it, possibly after everyone else has started implementing it. The IoT will surely represent a challenge, with thousands of devices entering the enterprise network, and open the door to third-party developers and services.

The financial technology sector is the new kid on the block. The financial and insurance sectors are not traditionally associated with technology. They like stability and have the tendency to be conservative. Now, however, FinTech innovators that propose new payment and monetary mechanisms like blockchain, bitcoins, and mobile payment, and disruptive use of data analytics push them to innovate. With intelligent, secure and connected devices everywhere, it’s not crazy to imagine that a large number of monetary transactions may occur machine-to-machine in the future. Insurance companies already have experimented with IoT, and banks and other financial institutions are following suit.

If you’re in the embedded world, you certainly already have plans for the IoT. You may have talked to some mobile and network operators. The solution you want is likely not yet proposed by big software companies, and numerous startups are filling the gaps today. It’s almost certain that no one knows yet what to do with the new data being collected and the new capabilities these connected devices offer. However, most strategy and marketing departments are working overtime to try to figure it out, and someone will.

Prepare for the big collision

The pressure is high on device makers, and the threat of commoditization looms, so there’s incentive for them to think concretely about the IoT before anyone else. However, if you’re in any of the five sectors mentioned, you will be impacted. If you’re a decision-maker or an influencer, you should get prepared for the big collision in the following ways:

  • Implement a proof-of-concept ASAP to understand what IoT means for your business. You can implement a small IoT service in your company, and once you’ve connected devices, you’ll see what challenges this creates for your business.
  • Un-silo and exit your comfort zone. Get a feel for what the other sectors are about. Read about them, what they envision for the IoT. It will help you see things differently. I’m always amazed at how web developers get excited by an LED blinking on their Arduino board, the same as how an embedded developer is excited by his first dashboard widget for his connected device.
  • Be paranoid. As Andrew Grove, former Intel CEO, wrote in Only the Paranoid Survive, you need to prepare for orders of magnitude change or 10X forces. The IoT is one of them and it will disrupt your business. Things can be well today; to prepare for contingencies, try to imagine what could go wrong.
  • Redefine what your business is. Is it databases or data integrity? Security camera or safety? Cars or transportation? By defining the essential service that your customers buy from you, you’ll make your offer more resilient to the coming changes.
  • Think about what your business will be tomorrow, in a world where four more devices than people produce two zettabytes of data.

If you do all these things, I can’t promise you’ll be safe, but you will have a greater understanding of the IoT’s potential impact on your business and where your industry is going. Perhaps, thanks to the disruptive innovations brought by the IoT, you’ll see your sector merge with the four others, ultimately becoming one mega technology sector, as our own Milkomeda.

Semir Haddad is Renesas Electronics America’s Director of Product Marketing for microcontrollers and microprocessors for the Americas region. He’s also the leader of the global product team for the RZ MPU family worldwide. Haddad has over 20 years of experience in the semiconductor industry and more than 17 in product management with MCUs and MPUs.