By Straight Talk Editors

No doubt about it: The “next big thing” of 2014 is the Internet of Things, or IoT. Forty-five years in the making, the IoT has finally arrived, solidifying its place in the public consciousness. This network will ultimately connect every point of human intelligence on the planet, from our brains to the bits of software code we put in shoes, TVs, tablets, thermostats, cars, traffic lights, supermarket shelves, hospital beds, shipping containers, and gas turbines, and that we put on cows, dogs, ourselves, and countless other animate and inanimate things.

But all of these connections are only a means to an end, a technology in the service of something much bigger: creating phenomenal experiences for consumers and workers, experiences that move us to embrace and adopt new ways of improving our work activities and life outside of work. Success in our interconnected world depends on how much technology recedes to the background and on the value provided by relevant data and its timely analysis. Welcome to the Internet of Experiences.

What Just Happened?

The IoT has been the star of the show at the three big tech shows of the year so far—CES (Consumer Electronics Show), in Las Vegas; World Mobile Congress, in Barcelona; and CeBIT, in Hanover, Germany. Jointly opening the CeBIT technology trade fair in March with German Chancellor Angela Merkel, British Prime Minister David Cameron pledged hundreds of millions of pounds for projects that increase Internet speeds and  develop new IoT  applications. “We need to change the Internet of Things from a slogan to reality,” he said.

In fact, the Internet of Things has been a reality for many people and enterprises for quite some time. 2014 marks the 45th anniversary of the Internet and the 25th of the World Wide Web. The term “Internet of Things” was coined in the late 1990s. So what has brought about its sudden prominence, the excited talk, and the increased investment from the private and public sectors?

Hal Varian, the Chief Economist at Google, points to the lower prices for sensors, processors, and networking. He also notes the impact of the recent mobile computing revolution on the abundance of network connections. “Since WiFi is now widely deployed, it is relatively easy to add new networked devices to the home and office,” he says. Janus Bryzek, known as the “Father of Sensors,” also points to technological advancements. Bryzek, the organizer of the Trillion Sensor Summit and the Vice President of Development, Microelectromechanical Systems (MEMS) and Sensor Solutions at Fairchild Semiconductor, ascribes the surge in interest in the IoT to the possibilities presented by the new version of the Internet Protocol, IPv6, which has approximately 3.4×1038 addresses and enables an almost unlimited number of devices to connect to the Internet.  Increasingly deployed over global networks, IPv6 offers more than 7.9×1028 times as many addresses as the previous generation.

The media has also played a role, notes Bob Metcalfe, inventor of the Ethernet and currently Professor of Innovation at the University of Texas at Austin. “Technologies and standards and products and markets emerge slowly, but then suddenly, chaotically, the media latches on and boom! It’s the year of the IoT,” he says.

All those forces-the mobile revolution, the increasing number of Internet addresses, and media attention-have converged in 2014 to form a tipping point for the Internet of Things. But is it a passing fad? Haven’t we just gone through at least two years of breathless pronouncements about the revolutionary potential of yet another big thing, “Big Data”?

When we talk about big things, it’s always advisable to look at the big picture. To understand the true potential of the IoT and what may sustain and even accelerate its development in the near future, it’s important to place it in the larger context of the forces that have given rise to new technology-related markets over the past 50 years.

The Exponential Twins: Digitization and Networking

Two forces have rapidly expanded the universe of opportunities created by the invention of the modern computer - digitization and networking.

Digitization can be described as the representation and augmentation of our physical world in ones and zeros. Multiple waves of digitization have turned all that is analog to new entities capable of processing information in digital form, joining in a growing ecosystem of “things” that speak the same language. Film-based cameras have turned into digital ones, analog telephones switched from sending continuous sound waves to digital audio signals, and the entire TV industry has transformed itself into a vast collection of digital broadcasting devices.

The IoT represents a new digitization wave. But if in previous waves, digitization was applied to devices that were either producing or communicating (or both) analog information, this wave is mostly about digitizing previously “dumb” devices and non-networked things. The “democratization of data,” a term Hal Varian coined to describe the 1990s shift from enterprises to individuals as the creators of most digital data, now includes not just individuals but all things. In their 2000 report summarizing the first study to estimate the amount of information created in the world annually, Varian and his colleagues at the University of California, Berkeley, wrote:

“A century ago the average person could only create and access a small amount of information. Now, ordinary people not only have access to huge amounts of data, but are also able to create gigabytes of data themselves and, potentially, publish it to the world via the Internet, if they choose to do so.”

To this we may add today: Now, ordinary things not only have access through the Internet to the data created by individuals and enterprises, but they are also able to create terabytes of data themselves and transmit them to other things, individuals, and enterprises. The IoT is expanding participation in the democracy of data to include every sign of intelligence (that is, software) in the world.

Democracies are characterized not only by individuals’ ability to create and consume information, but also by their active participation and engagement with one another. This brings us to the second force expanding the opportunities to improve how we live and work - networking.

The network effect specifies that the value of a product or service depends on the number of people using it.  This  principle was first associated with the telephone—the more people who own telephones, the more valuable the telephone is to each owner—and recently has been applied to social networks such as Facebook. When Bob Metcalfe cofounded 3Com to develop and sell Ethernet cards, he expressed this principle in what later became known as “Metcalfe’s Law.” In 1983, answering his sales force’s need to convince customers that they should buy additional $1,000 Ethernet cards, he argued that “if a network is too small, its cost exceeds its value; but if a network gets large enough to achieve critical mass, then the sky’s the limit.”

While the network effect has  recently been discussed mostly in terms of  numbers of users (as reflected in the stock valuations of large social networks such as Facebook, Twitter, Instagram, and WhatsApp), the IoT brings us back to the notion of compatibly communicating devices. Says Metcalfe: “Billions of embedded microcontrollers are shipped every year and most of them are not the new technologies and the hype surrounding them encourage many new entrants to develop technology for technology’s sake.

[Read Part 2]

Originally published in CTO Straight Talk, No. 1 (August 2014)