Executive Summary - Cisco...IoE Creates $14.4 Trillion of Value at Stake for Companies and...

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Embracing the Internet of Everything To Capture Your Share of $14.4 Trillion

More Relevant, Valuable Connections Will Improve Innovation, Productivity, Efficiency & Customer Experience

Executive Summary •TheInternetofEverything(IoE)creates$14.4trillioninValueatStake—thecombinationofincreasedrevenuesandlower coststhatiscreatedorwillmigrateamongcompaniesandindustriesfrom2013to2022.

•ThefivemainfactorsthatfuelIoEValueatStakeare:1)assetutilization(reducedcosts)of$2.5trillion;2)employee productivity(greaterlaborefficiencies)of$2.5trillion;3)supplychainandlogistics(eliminatingwaste)of$2.7trillion;4) customerexperience(additionofmorecustomers)of$3.7trillion;and5)innovation(reducingtimetomarket)of$3.0trillion.

•Technologytrends(includingcloudandmobilecomputing,BigData,increasedprocessingpower,andmanyothers)and businesseconomics(suchasMetcalfe’slaw)aredrivingtheIoEeconomy.

•ThesetechnologyandbusinesstrendsareusheringintheageofIoE,creatinganunprecedentedopportunitytoconnect theunconnected:people,process,data,andthings.Currently,99.4percentofphysicalobjectsthatmayonedaybepart oftheInternetofEverythingarestillunconnected.

•TogetthemostvaluefromIoE,businessleadersshouldbegintransformingtheirorganizationsbasedonkeylearningsfrom usecasesthatmakeupthemajorityofIoE’sValueatStake.Theseusecasesincludesmartgrid,smartbuildings,connected healthcareandpatientmonitoring,smartfactories,connectedprivateeducation,connectedcommercial(ground)vehicles, connectedmarketingandadvertising,andconnectedgamingandentertainment,amongothers.

•Robustsecuritycapabilities(bothlogicalandphysical)andprivacypoliciesarecriticalenablersoftheInternetofEverything Economy.TheIoEValueatStakeprojectionsarebasedonincreasinglybroadadoptionofIoEbyprivate-sectorcompanies overthenextdecade.Thisgrowthcouldbeinhibitediftechnology-drivensecuritycapabilitiesarenotcombinedwithpolicies andprocessesdesignedtoprotecttheprivacyofbothcompanyandcustomerinformation.

JosephBradleyJoelBarbierDougHandler



TheInternetofEverythingisHappeningNowCiscoestimatesthat99.4percentofphysicalobjectsarestillunconnected.1Conversely,thismeansthatonlyabout10billionofthe1.5trillionthingsgloballyareconnected.2Atamorepersonallevel,thereareapproximately200connectablethingsperpersonintheworldtoday.3Thesefactshighlightthevastpotentialofconnectingtheunconnected.

Evenso,thegrowthoftheInternethasbeenunprecedented(seeFigure1).Ciscoestimatesthattherewereabout200millionthingsconnectedtotheInternetintheyear2000.Drivenbyadvancesinmobiletechnologyandthe“bringyourowndevice”(BYOD)trend,amongothers,thisnumberhasincreasedtoapproximately10billiontoday,puttingussquarelyintheageoftheInternetofThings(IoT).ThenextwaveofdramaticInternetgrowthwillcomethroughtheconfluenceofpeople,process,data,andthings—theInternetofEverything(IoE).4

IoEisfurtherbeingdrivenbyseveralfactors.First,powerfultechnologytrends—includingthedramaticincreaseinprocessingpower,storage,andbandwidthatever-lowercosts(Moore’slawstillatwork);therapidgrowthofcloud,socialmedia,andmobilecomputing;theabilitytoanalyzeBigDataandturnitintoactionableinformation;andanimprovedabilitytocombinetechnologies(bothhardwareandsoftware)inmorepowerfulways—makeitpossibletorealizemorevaluefromconnectedness.

Second,barrierstoconnectednesscontinuetodrop.Forexample,IPv6overcomestheIPv4limitbyallowingfor 340,282,366,920,938,463,463,374,607,431,768,211,456morepeople,processes,data,andthingstobeconnectedtothe Internet.Amazingly,IPv6createsenoughaddresscapacityforeverystarintheknownuniversetohave4.8trillionaddresses.

Third,formfactorscontinuetoshrink.Today,acomputerthesizeofagrainofsalt(1x1x1mm)includesasolarcell,thin-filmbattery,memory,pressuresensor,andwirelessradioandantenna.Camerasthesizeofagrainofsalt(1x1x1mm)nowhave250x250-pixelresolution.And,sensorsthesizeofaspeckofdust(0.05x0.005mm)detectandcommunicatetemperature,pressure,andmovement.Thesedevelopmentsareimportantbecause,inthefuture,thingsconnectedtotheInternetmaybehardforthehumaneyetoevensee.

Finally,IoEreflectstherealitythatbusinessvaluecreationhasshiftedtothepowerofconnectionsand,morespecifically,totheabilitytocreateintelligencefromthoseconnections.Companiescannolongerrelysolelyoninternalcorecompetenciesandtheknowledgeoftheiremployees;instead,theyneedtocaptureintelligencefaster,frommanyexternalsources.ThiswilloccurthroughconnectionsenabledbytheInternetofEverything.

Figure 1. Rapid Growth of the Number of Things Connected to the Internet.

Source: Cisco IBSG, 2013



IoECreates$14.4TrillionofValueatStakeforCompaniesandIndustriesValueatStake,accordingtoCisco,isthepotentialbottom-linevalue(higherrevenuesandlowercosts)thatcanbecreatedorwillmigrateamongcompaniesandindustriesbasedontheirabilitytoharnessIoE.CiscopredictsthattheIoEValueatStakewillbe $14.4trillionforcompaniesandindustriesworldwideinthenextdecade(seeFigure2).5Morespecifically,overthenext10years, theValueatStakerepresentsanopportunitytoincreaseglobalcorporateprofitsbyabout21percent.6

Inotherwords,between2013and2022,$14.4trillionofvalue(netprofit)willbe“upforgrabs”forenterprisesglobally—driven byIoE.IoEwillbothcreatenewvalueandredistribute(migrate)valueamongwinnersandlaggards,basedonhowwellcompanies takeadvantageoftheopportunitiespresentedbyIoE.ThosethatharnessIoEbestwillreapthisvalueineitheroftwoways (see“UseCase”sectionforspecificexamples):

•Bycapturingnewvaluecreatedfromtechnologyinnovation

•Bygainingcompetitiveadvantageandgrabbingmarketshareagainstothercompanieslessabletotransformandcapitalize ontheIoEmarkettransition.7

Cisco’sanalysisshowsthatmostofthepotentialValueatStake(66percent,or$9.5trillion)comesfromtransformationbasedonindustry-specificusecasessuchassmartgridandsmartbuildings.Theother34percent,or$4.9trillion,isproducedbycross-industryusecasessuchasthefutureofwork(telecommuting)andtravelavoidance.ItisimportanttonotethatCiscoisfocusingontheamountofprivatesectorValueatStaketomakethefindingsandinsightsrelevantandactionableforbusinessesandindustries.Whileasignificantnumberonitsown,the$14.4trilliondoesnotincludepotentialValueatStakefromtheconsumerorpublicsectors,orfromsocietalbenefitsthatarebeyondthescopeofthisanalysis.

CiscocalculatedtheValueatStakebytakingabottom-upapproachconsideringthevaluecreatedbymorethan50usecases intheprivatesectoronly—bothindustry-specificandcross-industry—andconsolidatingthemintothe21mostmaterialand value-generatingexamples.Top-downanalysiswasalsoperformedasacross-checktovalidatethecompletenessandorder ofmagnitudeofthemorethoroughbottom-upapproach.Finally,carewastakennottodouble-countvalueacrossusecases.8


Figure 2. How Much Value Is at Stake in the IoE Economy?



5DriversFuelIoEValueatStakeTherearefivemaindriversofthe$14.4trillionIoEValueatStake.Thesefindingsallowbusinessleaderstobeginplanninghow theycanbenefitfromIoE.TheamountofValueatStakeissomewhatevenlydistributedacrosseachofthefivedrivers.

•Assetutilization($2.5trillion)—IoEreducesselling,general,andadministrative(SG&A)expensesandcostofgoods sold(CoGS)byimprovingbusinessprocessexecutionandcapitalefficiency.

•Employeeproductivity($2.5trillion)—IoEcreateslaborefficienciesthatresultinfewerormoreproductiveman-hours.

•Supplychainandlogistics($2.7trillion)—IoEeliminateswasteandimprovesprocessefficiencies.

•Customerexperience($3.7trillion)—IoEincreasescustomerlifetimevalueandgrowsmarketsharebyadding morecustomers.

•Innovation,includingreducingtimetomarket($3.0trillion)—IoEincreasesthereturnonR&Dinvestments,reducestime tomarket,andcreatesadditionalrevenuestreamsfromnewbusinessmodelsandopportunities.

ThefactthateachoftheseareashasroughlythesameamountofValueatStakesuggeststhatfirmsmustexaminehowIoEcan impacteveryaspectoftheirbusinessprocesses—includingbothcost-cuttingandrevenue-raisingactivities.

Inaddition,tobenefitfromIoE,firmsmustcombinetechnology-enabledsecuritycapabilities(bothlogicalandphysical)withpolicies andprocessesdesignedtoprotecttheprivacyofcompanyandcustomerinformation.IoE’sgrowthpotentialintheprivatesectoroverthenextdecadewillrelyheavilyuponthesuccessofcompanies’securityandprivacyefforts.9

WhichConnectionsMatterMost?Bydefinition,IoEincludesthreetypesofconnections—machine-to-machine(M2M),person-to-machine(P2M),andperson-to-person(P2P).Combined,P2MandP2Pconnectionswillconstitute55percentofthetotalIoEValueatStakeby2022whileM2Mconnectionsmakeuptheremaining45percent(seeFigure3).ItisimportanttonotethatwhileM2Mconnectionsarefastbecomingasizablesourceofvalue,theendresultoftheseconnectionsisultimatelytobenefitpeople.ThebottomlineisthattheIoEEconomyisaboutenablingpeopletobemoreproductiveandeffective,makebetterdecisions,andenjoyabetterqualityoflife.


Figure 3. P2M and P2P Still Make Up the Majority of Internet Connections.

Connectedhealthcareandpatientmonitoringprovideagreatexample(moredetailsintheuse-casesectionbelow).Byenriching theconnectionsbetweenmedicaldevicesandbothpatientsanddoctors(M2P),andamongpatientsanddoctorsthemselves(P2P), betterhospital-levelcarecanbeprovidedatpatients’homes.Thisimprovesqualityoflife,increasespositivemedicaloutcomes, andreducescostsforbothprovidersandpatients.



ValueatStakebyGeographyandIndustryItisalsointerestingtolookatValueatStakebygeographyandindustry.Bygeography,theamountofValueatStakeiswell distributedacrossthemajorgeographies(seeFigure4).Figure4alsoshowsthedegreeofbeneficialimpactforeachgeographicregion,asdeterminedbydividingtheValueatStakebythesizeofeachregion’soutput.Thegeographicandindustrydistributions ofValueatStakeareveryheavilydrivenbyeachregion’srelativeeconomicgrowthrateandbytherelativesizeofeachindustry sectorineachregion.Forexample,China’sValueatStakeisveryheavilyderivedfromitsrelativelyrapideconomicgrowthandits largeshareofthisgrowthinthemanufacturingsector.IntheUnitedStatesandEurope,ValueatStakeopportunitiesaremore prevalentintheservicesareas.

Figure 4. Value at Stake Is Well Distributed Across Geographies, Yet Impacts Regions Differently.


Fromanindustryperspective,fouroutof18industriesmakeupmorethanhalfthetotalValueatStake(seeFigure5).10Theamountincludesmanufacturingat27percent,retailtradeat11percent,informationservicesat9percent,andfinanceandinsurance,alsoat 9percent.Theremaining14industriesrangebetween7percentand1percent.


Figure 5. The Top Four Industries Make Up More than Half of the Total Value at Stake.



TheindustrydistributionofValueatStakeisveryheavilydrivenbyspecificusecases.Forexample,muchoftheValueatStakeformanufacturerscomesfromgreateragilityandflexibilityinfactories,andfromtheabilitytomakethemostofworkers’skills.Additionally,alargeamountoftheValueatStakeforretailerscomesfromconnectedmarketingandadvertising.ThetopfiveindustriesintermsofpotentialIoEimpactrepresent63percentofthetotalValueatStake.

Real-WorldUseCasesShowtheImpactandPotentialofIoEToreceivethemostvaluefromIoE,businessleadersshouldbegintransformingtheirorganizationsbasedonkeylearningsfromusecasesthatshowhowIoEworksintherealworld.Theeightusecasesfeaturedinthispaper,whichrepresent$6.17trillionofthe $14.4trilliontotalValueatStake,wereselectedfortheirusefulnessinhelpingbusinessleadersdeterminehowtomoveforwardwithregardtotheircompanies.11

Eachoftheseusecasesincludesageneraldescription,theamountofcontributiontothetotalValueatStake,andacomparison ofthekeyuse-caseattributesinboth2013and2022tohighlighttheimpactofIoE.Inaddition,eachusecasedescribesthevalue ofconnections,topIoEdrivers,typesofconnections,IoEtechnologyenablers,andwhethervalueiscreatedormigrated.

1.Smartfactories:$1.95trillionoftotalValueatStakeAddingconnectivitytomanufacturingprocessesandapplicationsincreasesfactoryproductivity,reducesinventorieswithreal-timeinventorysupplies,andcutsaverageproductionandsupply-chaincosts.

SmartfactoriesrepresentoneofthetwolargestusecasesintermsofValueatStake.Thevalueislargelyderivedfrommore intelligentmachinesthatincorporatebettersensors,improvedconnectivitytoothermachines,andmoreintuitiveinterfaceswithpeople.Thesenewcapabilitiesallowmachinestobeprogrammedmoreeasilyandmakethemmoreadaptabletotheirconditionssotheycanbemoreefficientatdoingtheirwork.Inaddition,back-endconnectionstothecloudforanalyticsenablemoreeffectiveintegrationoflabor,capital,andtechnology.

2013 Current state (without IoE) 2022 Potential with IoE

Automatedassemblymachinesareexpensiveandcomplicatedtocreateandinstall

Reducedcostsasautomatedtoolsbecomelessexpensivetomanufactureandimplement

Ofteninflexibleandcostlyproduct-linechanges Revenuesincreasewithabilitytoproducemultipleproductswithvariationsininputs.

Allowsforgreatercustomizationofproductsandsmallerproduct-lineruns.

Qualitycontrolsrelyonhumanperceptionanddexterity Sensorshelpworkerstoimproveproductquality

Relianceonlow-costmanufacturingcountries.EmployeeswithITanddatainterpretationskillsarecostly,scarce.

Inefficientuseofkeyinputsforproduction.Lackofflexibilityamongassemblylocations.

Socializationofknowledgeflattenstheskillscurve;IoEmaximizesaccesstohumantalentpoolsatlowercost

Reducedwaste(materials,energy).Greaterfreedomandagilitytoreallocateproductionandoptimizeinputs.



•IoEvaluecreated:Moreintelligentdesignofmachines;greatercontrolofinstrumentationandproductionconditions

•MainIoEdriver(s):Assetutilization,supplychainandlogistics

•TypeofIoEconnection(s):Machine-to-machine

•IoEtechnologyenabler(s):Machinedesigntools,productionsensors,employeetraining

•Valuecreatedormigrated:Migratedfrominefficientproducersandcountries

Valueinsmartfactoriesisobtainedfromcost-cutting,revenuegrowth,andbetterworkforcecollaboration.Withthisinmind,manufacturingleadersshouldaccelerateadoptionofIoEtechnologiesandconsiderinitiativesthatfocusonimprovedcollaborationamongworkerstomakeemployeesmoreefficient.

2.Connectedmarketingandadvertising:$1.95trillionoftotalValueatStakeBroadITandsocialapplicationsformarketingandadvertisingtransformthewaycompaniesengagewithcustomers, analyzetheirbehavior,andoptimizetheimpactoftheirinteractions.Examplesincludelocation-basedservices,viralmarketing, andmobileadvertising.

Today,itisverydifficulttocreateandimplementcohesivemarketingandadvertisingstrategiesacrossnumerousanddisparatechannels(TV,radio,Internet,pointofsale).IoEwillenablecompaniestohaveacompleteviewoftheircustomers(behaviors,preferences,demographicprofile)anddeliverindividuallytargetedmessagesandofferstothemonanydeviceatthetimeandlocationwheretheywillhavethemostbeneficialimpact.Withinthisnewparadigm,companiescanreactmorequicklybyassessingandreacting totheirmarketsinrealtime;increaseprofitsbyofferingpricingbasedoncustomers’situationandabilitytopay;andgrowrevenuesbybundlingtheirofferingswithotherproductsandservicesbasedonaholisticassessmentofcustomers’wantsandneeds.


Missedorunidentifiedsalesopportunities Increasedsalesfromreal-timemarketassessments andreactions

Inefficientgeographicalselling Increasedsalesfromlocation-basedselling

Inflexibleproductlines IncreasedsalesfrombetteruseofInternet-driven“freemium”marketsegmentations

Lostsalesduetoshiftingcompetitivepressuresandpoortiming Increasedsalesbydirectlytyingpricingtocurrentsellingsituationandcustomers’abilitytopay

Littleholisticassessmentofcustomers’wantsandneeds Increasedsalesfromimprovedcoordinationwithotherproductsandservices(two-sidedmarkets)

•IoEvaluecreated:Assimilationandanalysisofcustomerdemographicandpurchasehistoriesfrommultiplesources

•MainIoEdriver(s):Customerexperience,innovation

•TypesofIoEconnection(s):Machine-to-machine,person-to-machine,andperson-to-person

•IoEtechnologyenabler(s):Cloudcomputing,BigData,real-timedecisiontools,security

•Valuecreatedormigrated:Both



Data-drivenbusinessagilityisatthecoreofachievingtheValueatStakefromconnectedmarketingandadvertising. LeadersshouldfocusonIoEinitiativesthatuseBigDataandcloudcomputingtoimprovedecisionmakingacrossthe company.Tosucceed,everycustomer-facingdepartment,includingmarketing,sales,service,andsupport,mustbe abletoadaptmorequicklytorapidlychangingcustomerdemandsintheIoEEconomy.

3.Smartgrid:$757billionoftotalValueatStakeAneffectivesmartgridusesnetworkconnections—fromproductiontocustomers—tobetterunderstanduserbehavior andimprovethereliability,economics,andsustainabilityoftheproductionanddistributionofelectricity.

Utilitycompaniestodaytypicallyoperateona“besteffort”infrastructure:theygenerateandplaceenergyontheelectricalgrid withouttakingfulladvantageoftheirassets.Thismakesthegridvulnerabletofaultsandallowsonlyforaone-wayflowofelectricity—fromproducerstoconsumers.Inaddition,thesystemisinefficientbecausepowergenerationcannotbeeasilyadaptedtofast-changingenergyusagecycles.IoEwillimprovetheelectricgridbyautomaticallydetectingandrepairingproblems,controlling electricalflowsbasedonreal-timedemand,improvinggeneratorutilization,andenablingmoresustainableenergysourcessuch aswindandsolarpower.


Vulnerabletobreakdownsandsecuritythreats Automateddetectionandself-healingimprovesreliabilityof theelectricitynetwork

One-wayelectricityflow Abilitytoshapetheflowofelectricityenablesmoreflexibility anddistributedpowergenerationcapabilities

Productioncalibratedonlyforpeakdemand,requiringreservesandcausinginefficiencies

Demand-sidemanagementimprovesgeneratorutilization andgridefficiencies

Variabilityinrenewableenergysourcesprevents widespreadadoption

Enablesmoresustainableenergysourcessuchaswindand solartocontributetothepowergrid

•IoEvaluecreated:Connectssensing,measurement,andcontrolsinrealtimetoimprovesupplyanddemandalignment, increasereliability,andreducecosts

•MainIoEdriver(s):Supplychainandlogistics

•Typeofconnection(s):Primarilymachine-to-machine

•IoEtechnologyenabler(s):Integratednetworkarchitecture,smartsensorsandmeters,privatecloudcomputing,security

•Valuecreatedormigrated:Netreductioninenergycostsforallprivatesectorstakeholders



ValueatStakefromthesmartgridwillcomemostlyfromimprovedefficienciesandincreasedreliabilityoftheelectricaldeliverysystem.Forthistohappen,however,significantregulatorychangesarerequired.Assumingthesechangestakeplace,utilitycompanyleadersmustbereadytoimplementinitiativesthatallowformoreflexibility,improveddemand-sidemanagement,andtheenablementofmoresustainableenergysources.

4.Connectedgamingandentertainment:$635billionoftotalValueatStakeThisusecaseincludesserviceprovider(SP)andsoftwarevendorrevenuesandcashflowsfromallapplicationsofonlinegaming andentertainment;itdoesnotincludenon-revenue-generatinggamingactivities(suchassubsidizedadvertising).

Connectedgamingandentertainmentencompassesawidespectrumofproductsandservices,includinggamessuchasFarmVillefromZynga,streamingvideofromNetflix,andgamblingfrombwin.partyintheUnitedKingdom.IoEwillprovideawholenewwayforconsumerstoentertainthemselvesbyallowingthemtoplaywithothersremotely,selectwhattheywanttouseondemand, andchoosethedevicetheywanttouse(anydevice,anytime,anylocation).


Asset-heavy,dedicatedhardware Asset-light,anyInternet-enableddevice

Payforownership Payforaccessorfree

Offlineordedicatednetworks(cableandTV) On-demandstreaming

Considerablespacerequirements(casinos) Digital

Aloneorco-located Together:collaborative,remote,andsocial

•IoEvaluecreated:Enhancegamingandentertainmentexperiencewithremotecollaboration,richmedia, andon-demandprograms

•MainIoEdriver(s):Innovation—increasedrevenuefromnewbusinessmodels

•TypesofIoEconnection(s):Person-to-machineandperson-to-person

•IoEtechnologyenabler(s):Next-generationnetwork,includingintelligence,video,collaboration,BYOD,security

•Valuecreatedormigrated:Mixofnewvalueandvaluemigrationfromtraditionalproviders



Forleadersinthegamingandentertainmentindustries,thisusecasehighlightstheimportanceoffocusingonthedeliveryofcontenttoanydevice,anywhere.ItalsoshowsthatclosepartnershipswithSPsarecriticaltodeliveringtheseamless,high-qualityexperiencecustomerswillexpect,andevendemand,intheIoEEconomy.

5.Smartbuildings:$349billionoftotalValueatStakeSmartbuildingscompriseanintelligentandconvergedIPnetworkofelectronicdevicesthatmonitorandcontrolfacilitiesservices,includingmechanical,electronics,HVAC,andlightingsystemsinabuilding,toachievegreaterenergyefficienciesandcostsavings,alongwithanimprovedexperienceforoccupants.

IoEallowsbuildingstocreatevaluebybringingtogetheroperationsthatarecurrentlysiloedintoasingleIP-basedplatform. IoEreduceswaste(energy)bygreatlyincreasingtheefficiencyofbuildingmanagement(HVAC,lighting,safety).Smartbuildings alsomakemoreefficientuseofavailablespacebymaximizingoccupancy.Forexample,CiscoestimatesthatIoEcanreduce spacerequirementsforthesamenumberofemployeesby40percent.


Inefficientuseofenergyleadstohighamountofwasteandincreasedcosts;energyusenotbasedontruedemandorbuildingoccupancy

Reducesenergycostsbyusingsensorsand energy-efficientsystems

Physicalmonitoringofbuildingsystems Laborsavingsandincreasedstaffproductivityfrom remotemonitoring

Noscalingofbuildingmanagementinfrastructureacrossfacilities Costssavingsbyutilizingsharedinfrastructureand openprotocols

Inconveniencetotenantsduetofrequentbreakdownsandrepairs Improvedequipmentlifefromcontinuous,proactivemonitoringandtimelymaintenance

“Onesizefitsall”occupantexperience Buildingautomationdeliversapersonalizedexperience foreachoccupant

•IoEvaluecreated:Lowerenergycosts,lowermanagementandmaintenancecosts,lowercapitalexpenses

•MainIoEdriver(s):Assetproductivity


•IoEtechnologyenabler(s):Sensors,cloudcomputing,video,physicalsecurity

•Valuecreatedormigrated:Valuecreatedfromnext-generationnetworkedsystems;valuemigratedfromstand-alone systemsandlowerstaffingrequirements



Thisusecasewillhaveatremendousinfluenceonthecommercialrealestateandconstructionmarketsinthenext10years. AsSmartBuildinginitiativescometofruition,loweroperatingcostsshouldleadtoreducedrents,providingbenefitsforbothbuildingownersandtenants.TheIoEEconomyshouldleadtomorebuildingrenovationandnewconstruction,whichwillalsoleadtofasterbuildingobsolescence.Commercialrealestateandconstructionleaderswillneedtobeginpreparingforthesesignificantshiftsin theirrespectiveindustries.

6.Connectedcommercialgroundvehicles:$347billionoftotalValueatStakeThisusecaseisbasedoncommercialfleet(ground)vehiclesthatuseanintegratedplatformofcontrolsystemstoautomate taskssuchasnavigation,pathoptimization,andlogisticsimprovements.

Asvehiclesbecomemoreconnectedwiththeirenvironment(road,signals,tollbooths,othervehicles,airqualityreports, inventorysystems),efficienciesandsafetygreatlyincrease.Forexample,thedriverofavending-machinetruckwillbeable tolookatapanelonthedashboardtoseeexactlywhichlocationsneedtobereplenished.Thisscenariosavestimeand reducescosts.


Losttime,money,andfuelduetotrafficcongestion Reducedcongestionfromtrafficmanagementandoptimization oftransportationinfrastructure

Reducedfuelefficiencyduetosuddenaccelerationandbraking Improvedfuelefficienciesfromvehiclesintelligentlyadjustingdrivingspeeds

Highaccidentrateduetohumanerror Loweraccidentratesduetovehicle-to-vehicleandvehicle-to-infrastructurecommunication

Highvehicleinsurancecosts Insurancepremiumsbasedonactualdrivingpatterns

Ad-hocroutingofvehicles Lowerfuelandmaintenancecostsduetooptimized deliveryroutes

•IoEvaluecreated:Reducedtimelostincongestion,loweraccidentrates,lowerfuelandrepaircosts

•MainIoEdriver(s):Supplychainandlogistics,assetutilization


•IoEtechnologyenabler(s):Telematics,sensors,cloudcomputing,security




Whilethemainbenefitsfromconnectedcommercialgroundvehiclescomefromimprovedlogistics,thereisalsoanopportunity forbusinessleaderstoimproveservicequalityandconsistency,andtorealizeenvironmentalbenefitsthroughlowerenergyconsumptionandcarbonemissions.

7.Connectedhealthcareandpatientmonitoring:$106billionoftotalValueatStakeIoEwillenablebetter-connecteddevicesanddata-drivenpatientmanagement,resultinginimprovedhealthcareeffectiveness andefficiencies.

Manyoftheinefficienciesinhealthcaretodayaretheresultofsiloedsourcesofknowledgeandinformation—itisdifficulttoaccess alloftherelevantknowledgeavailableatthepointofcare.Inaddition,manymeasurementsandtestsareadministeredmanually. ThegreaternumberofsensorsandconnectionsinIoEwillallowforshorterhospitalstaysduetosmarterhomemonitoringsystems andimprovedcarefromstandardizedtreatmentsthatconformtoallknownbestpractices.


Longhospitalstaystoensurepatientscanthriveathome afterdischarge

Reducedcostsandimprovedqualityoflifefromshorterhospitalstays,withhomemonitoringsystemsthatensurehealth

Limitednumberofhealthconditionswithhomemonitoring capabilities

Widernumberofhealthconditionswithhome monitoringcapabilities

Uncoordinatedandmanualcollectionofpatienttestrecords Improveddecisionmakingfromsingleelectroniccollectionofpatientrecords

Ad-hocinterpretationofmedicaltestresultsandconditions Improvedpatientcarefromstandardizedtreatmentsthat conformtobestpractices

Multipledoctorsoffercareinanuncoordinatedmanner Improvedpatientcareandhealthoutcomesfromconsolidated,patient-centricviewsofalltreatmentaspects

•IoEvaluecreated:Continuousmonitoringofhealthconditionsinaless-expensivehomesetting;allcareaspects consolidatedandcoordinated

•MainIoEdriver(s):Assetutilization,supplychainandlogistics,andcustomerexperience

•TypesofIoEconnection(s):Machine-to-machineandmachine-to-people

•IoEtechnologyenabler(s):Medicaldevices,homeITconnections,security


Connectedhealthcareandpatientmonitoringinvolveafundamentalshiftinhowhealthcareprovidersdelivertheirservices. BillingandinsuranceprocesseswillalsohavetochangeforthisValueatStaketocometofruition.Giventhesechanges, businessleaderswillneedtofocusonbothnewtechnology-driveninitiativesandchangemanagement,whileaddressing patients’privacyconcerns.



8.Connectedprivatecollegeeducation:$78billionoftotalValueatStakeBetterapplicationoftechnologieshelpsscaleteachers,faculty,andeducationalcontent;increasesnewwaysoflearning; andtransformstheeducationalmodel—givingstudentscurriculumflexibilitytolearnattheirownpace,anywhere,anytime, usinganydevice.

Today,educationismostlya“physical”experiencewhereprofessorsteachstudentsinclassroomsusingbooks.IoEwillallow privatecompaniestochallengethistraditionalmodel.Evennow,earlyadoptersarebreakingdownphysicalbarrierstomake educationavailabletopeoplewhopreviouslydidn’thaveaccess.IoEwillenablenewbusinessmodels,extendprofessors’ reach,andreducetextbookcosts.


Physicalclassroomenvironment Improvedaccesstoeducationbyscalingprofessorsand highest-qualitycontenttoanydevice,anywhere

One-timeinstructioninasinglelocation Greateraccessibilityfromscalingcontentandprovidingrecordableandreplicableinstructionanytime,atanyvenue

Static,linearcontentwithlimitedcontrol Improvedqualityofeducationbylearningatyourownpace,focusingonlyonrelevantcontent,andviewingricher, interactivematerial

Accessibleonlyduringuniversityandlibraryhours Improvededucationfromgreateravailabilityofprofessors andcontent

Searchforcontent(pullvs.push);costlytextbooks;designedforone-size-fits-all

Improvededucationfromproactivecontent(pushvs.pull), freematerials,andabilitytocustomizecurriculum

•IoEvaluecreated:Extendprofessors’reachandscale;enablenewbusinessmodels:scalegloballywithoutphysical venueconstraints;reducetextbookcosts

•MainIoEdriver(s):Customerexperience,assetutilization

•TypesofIoEconnection(s):Person-to-personandmachine-to-machine

•IoEtechnologyenabler(s):Video,mobility,BYOD,collaborationtools,security

•Valuecreatedormigrated:Increasedpenetrationoftheonlineeducationmodel(migration)

TheIoEEconomywillgiveprivateeducationalinstitutionstheabilitytoscaleinstructionandprovideitatasignificantlylowercost thannot-for-profitinstitutions,whichwillgivefor-profitorganizationsasignificantcompetitiveadvantageovernot-for-profitestablishments.Andwhilevideoandonlinemediaarenotnewtoeducation,intheIoEEconomy,theywillofferremarkablenewcapabilitiesbothtoimproveacademicoutcomesandextendthereachofqualityeducationtopeoplewhohavenothadaccess toit.Thiswillhaveasignificanteconomicimpact,forexample,byhelpingaddressthemoretechnicalskillsthatwillberequired intheIoEEconomy.



HowToGetStartedWhilethescopeofIoEmayseemdaunting,thereareactuallysomeverysimplestepsyoucantaketobegincapturingyourshare oftheIoEValueatStake:

•DeterminewhereyourbusinessistodaywithregardtoIoE.Withthehugenumberofconnectionsthatneedtobemade amongpeople,data,andthings,companiesmustassesstheirstrengthsandweaknessesintheareasoftechnologyskills, businessprocessmanagement,dataanalytics,connectedness,andsecurity.

•UnderstandtheroleofITinenablingyourcompanytobenefitfromIoE.UsingITtoreducecostshasdiminishingreturns; investinginITtostrengthenandgrowthecustomerbasehasgreaterupsidepotential.

•Takestepsnowtomaximizeyourfirm’scapabilitiesintheareasofsecurityandprivacy:Asmentionedpreviously, securityandprivacyareessentialenablers—andpotentialinhibitors—ofIoE’sValueatStake.IoEsecuritywillbeaddressed throughnetwork-poweredtechnology:devicesconnectingtothenetworkwilltakeadvantageoftheinherentsecuritythat thenetworkprovides(ratherthantryingtoensuresecurityatthedevicelevel).Privacy,ontheotherhand,willrequirethat companiescombinetechnologywitheffectiveprocessesandpolicies.TobenefitfromIoE,firmswillneedtoidentifynew privacymodelsthatmeetcompanyandcustomerexpectations.

Mostimportant,firmswillneedtoconsidertheirowninternalculturalchangesthatarenecessarytoembraceIoE.ThevalueofanyITinvestmentwillbedeterminedbythecapabilitiesitenablesoutsidetheITdepartment.TheIoEValueatStakeemanatesfromthemarketing,HR,finance,production,sales,andothercorporatedepartments.Therefore,acompany’sITdecisionsmustconsidertherequirementsofthesedepartments.Corporatepoliciesonemployment,input-sourcing,andincustomer-facingareasmayneedadjustmenttoembracetheseIoE-drivenbestpractices.

TheGameIson...Challengesaboundfortoday’sbusinessleaders.Therapidpaceofchangecreatesconfusionandmisinformation,whichoftenleadstopoordecisionmakingor,worse,inaction.Whencombinedwithpricetransparencyandglobalsupplychains,manyofthesametechnologytrendsthatareusheringintheIoEeraarealsoenablingnewentrantstobecomeviablethreatsinjustweeksandmonthsratherthanyears.

Inthisenvironment,winnersandlosersaredeterminedfasterthaneverbefore.With$14.4trillionValueatStake,IoEpresentsanimportantopportunitytoincreasemarketshare,gaincompetitiveadvantage,strengthenandgrowyourcustomerbase,andincreaseprofitability.Andbecausethestakesarehigh—over10years,companiesstandtolosemorethanayearofprofitsiftheydonotembraceIoE—thetimetoactisnow.

The authors would like to acknowledge Michael Adams, Dave Evans, Jeremy Hartman, Jeff Loucks, James Macaulay, Bob Moriarty, Ewan Morrison, Andy Noronha, Kathy O’Connell, Noelle Resare, and Cisco IBSG’s industry practices for their valuable contributions to the development of this paper.

Jointheconversation:#InternetofEverything#IoE

https://twitter.com/search?q=%23internetofeverything&src=typd

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Endnotes1.Source:CiscoIBSG,2013.

2.Ibid.

3.Ibid.

4.CiscodefinestheInternetofEverythingasbringingtogetherpeople,process,data,andthingstomakenetworkedconnectionsmorerelevantandvaluablethaneverbefore—turninginformationintoactionsthatcreatenewcapabilities,richerexperiences,andunprecedentedeconomicopportunityforbusinesses,individuals,andcountries.

5.ValueatStakediffersfromInternetMarketSize,ortotaladdressablemarket(TAM).ValueatStakeisaforecastofthepotentialbottom-linevaluethatcanbecreatedorthatwillmigrateamongcompaniesandindustriesgloballybasedontheirabilitytoharness theInternetofEverythingoverthenextdecade(10-yearnetpresentvalue).Ciscoestimatesthisvalueat$14.4trillionoverthenext 10years.Bycontrast,theInternetMarketSize,orTAM,isprojectedtoreach$4.1trillioninannualrevenueforallparticipatingvendorsby2016.Beyondrelevantinformationandcommunicationstechnologies(ICT),itincludese-commerceandadvertising.Ciscowilladdress$258billion(6percent)ofthisInternetmarket(source:CiscoSMO,2012).ValueatStakeincludesshiftsofbenefitsamongcompetingfirmsinanindustry;shiftsofbenefitsamongdifferentindustries;new-to-the-worldrevenuegrowthfrominnovation; costsavingsfrommoreefficientprocesses;andallowancesforimplementationcosts.ValueatStakedoesnotincludeextentoflosses atfirmsthatdon’ttransform;consumerorgovernmentbenefits;socialbenefits;andvalueestimatesforreducedriskofoperations.

6.Weselectedaperiodof10yearsbecauseitisareasonableamountoftimeforcompaniestoidentify,design,andimplementchangestocapturetheirshareoftheIoEValueatStake.The$14.4trillionnumberisthenetValueatStake.ThegrossValueatStakeis$18.7trillion.Inotherwords,aninvestmentof$4.3trillionisrequiredtoachievethenetValueatStakeof$14.4trillionover10years.Inaddition,Ciscoestimatesthatthe$14.4trillioninValueatStakerepresentsanincreaseinaggregatecorporateprofitofabout21percentover10years.

7.Ciscoestimatesthat59percentofValueatStakewillbenewvalueresultingfromtechnologyinnovation,while41percentwill begeneratedbycompaniescapturingmarketsharefromthecompetition.

8.ToillustratehowValueatStakewascalculated,we’llusetheexampleofthe“ConnectedCommercialGroundVehicles”usecase.Cisco’sanalysisconsideredtwofactors:1)lowercostsforfleetownersand2)thepotentialrevenueincreaseforserviceproviders.Wealsoprojectedthepenetrationofcommercialgroundvehiclesasapercentageofthetotalglobalcommercialfleet—fromlowerpenetrationtoday(6.3percent)toestimatedpenetrationof24.5percentby2022.Usingresearch,wethenestimatedtheIoEbenefitspercommercialvehicle(includingfuelefficiencyanddriverproductivity)at$970annually.Fromthesebenefits,wedeductedone-timeandrecurringcosts.WealsoconsideredSPrevenueopportunities.Basedonthesamepenetrationnumbers,theanalysisalsoconsiderednewrevenueopportunitiesforSPs,includingconnectivityandvalue-addedservices.ToestimatetheValueatStakeforSPs,weassumedaconservativeaveragemarginof$12-$15monthly.TheoverallValueatStakenumber—$347billion—reflects thecombinednetpresentvalueofthebenefitsforfleetownersandserviceproviders.WebelieveCiscoistheonlycompanytotakethiskindofuse-case-driven,bottom-upapproachtoevaluatetheopportunityofferedbytheInternetofEverything.

9.ThecriticalneedforsecurityandprivacyinIoEisunderlinedbyU.S.PresidentBarackObama’sexecutiveorderoncybersecurity,signedonFebruary12,2013,whichencouragesallnetworkoperators,companies,andconsumerstobecybersmartandcybersecure(http://www.whitehouse.gov/cybersecurity).



10.Sources:GlobalInsight,AmericanProductivityandQualityCenter,U.S.BureauofEconomicAnalysis,U.S.BureauofLaborStatistics(all2012),andCiscoIBSG,2013.The18industriesmeasuredfortheamountofValueatStake,inorderofsize,include: 1)manufacturing;2)retailtrade;3)informationservices;4)financeandinsurance;5)healthcare;6)educationalservices;7)professional,scientific,andtechnicalservices;8)administrativeandwastemanagementservices;9)wholesaletrade;10)arts,entertainment,andrecreation;11)otherservicesexceptgovernment;12)agriculture,forestry,fishing,andhunting;13)construction;14)transportationandwarehousing;15)managementofcompaniesandenterprises;16)realestate,rental,andleasing;17)mining;and18)utilities.

11.The$14.4trillioninValueatStakecomprisesthefollowingusecasesandvalues:1)smartfactories,$1.95trillion;2)connectedmarketingandadvertising,$1.95trillion;3)smartgrid,$757billion;4)connectedgamingandentertainment,$634billion;5)smartbuildings,$349billion;6)connectedcommercialgroundvehicles,$347billion;7)connectedhealthcare/patientmonitoring,$106billion;8)connectedprivatecollegeeducation,$78billion;9)innovativepayments,$855billion;10)wealthmanagement,$451billion;11)improvedtimetomarket,$1.03trillion;12)businessprocessoutsourcing,$742billion;13)virtualattendants,$163billion;14)supplychaincostsavings,$697billion;15)smartfarming,$189billion;16)digitalsignage,$38billion;17)next-generationworkers(BYOD,mobilecollaboration,telecommuting,VDI),$2.16trillion;18)travelavoidance,$980billion;19)physicalandlogicalsecurity,$1.09trillion;20)next-generationretailbankbranches,$20billion;21)next-generationvendingmachines(digitalmalls),$49billion.

Executive Summary - Cisco...IoE Creates $14.4 Trillion of Value at Stake for Companies and...

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