CES 2014: The Internet of Things Inflection Point

Peter Jarich

Peter Jarich

Summary Bullets:  

  • CES 2014 presented no shortage of signs that the Internet of Things is becoming a reality.
  • Monetizing the Internet of Things, however, can’t be taken for granted.

Video has typically been one of Cisco’s primary talking points at CES. It makes sense.  Video is a core component of the triple-play consumer service offer and Cisco maintains a deep portfolio of video assets.  Oh, and it gives the company a solid excuse to host a reception where it shows the BCS championship college football game.  Savvy, huh?

This year, however, the company’s primary messaging revolved around the Internet of Things (IoT) – or, taken more broadly, the Internet of Everything (IoE).  By now, you probably know what these things are.  If not, we can start with Cisco’s definition: “the networked connection of people, processes, data and things.” Or, you can check out highlights from Cisco CEO John Chambers’ keynote.  Or, you can just take away one key comment, “2014 will be the transformational, pivotal point, for the Internet of Everything.”

Like the focus on video, messaging around IoE makes sense for Cisco.  It stands to benefit from the increasing number of network connections IoE represents.  It stands to benefit from the system integration that IoE requires.  IoE plays to Cisco work in mobility, video, and security.  For its part, Cisco has some nice IoE references with customers like the city of Barcelona and AT&T.  Yet, as much as the Cisco angle is clear, expecting 2014 to truly move the ball forward on IoE may be setting ourselves up for disappointment. 

Why?

Let’s think about monetization.  Nobody, after all, is going to move forward on a massive IoE project unless they think there’s money to be made (or saved).  Cisco’s latest thought leadership piece, quantifying the money at stake for the public sector is nice.  Any time you can point to a dollar value in the trillions, you’re bound to get attention.  Yet if Cisco is helping to lead the charge on educating the public sector, should we really expect the company to move forward in a meaningful way over the next year?  Projects might get queued up, but completed in time to have lots of additional case studies come CES 2015?  How about service providers, then?  Clearly they get the value prop, right?  Well, talking with some operators at the show around the wearables opportunity, the monetization thinking seemed fairly limited.

  • Sales bump from high-margin accessories – you don’t think Samsung’s Galaxy Gearsmart watch costs operators $300 or more, did you?
  • New data plans – you know, to handle all of this new traffic.
  • Potential B2B2C plays with a third party paying for connectivity– think AT&T’s sponsored data.

All of this is valid, don’t get me wrong.  There are also great examples of operators like AT&T who are looking to monetization via a broader stake in enabling the connected car or supporting IoE data storage and analysis via its M2X platform.  These are noteworthy developments.  However, they’re only noteworthy because they’re the exception, not the rule.

The final message, however, isn’t meant to be a negative one. Personally, I’d love to see 2014 be an inflection point for IoE deployments, not to mention monetization.  That’s going to require vendors, however, to deliver solid use cases and business cases, along with ready-made solutions tailored to specific industries.  (If the logic of what Cisco was doing with its public sector research didn’t make sense before, it probably does now.) It’s also going to require operators to get proactive, think innovatively about what they can do to enable IoE models and then engage with vendors to put a plan into action.  Traditional M2M platform players are a good place to start but conversations need to include almost every vendor in the network and, again, should take a vertical-by-vertical approach, all of which will take time.

And that may be the most important thing to remember.  Chambers’ keynote called out 2015 as the year when we’ll see the digital city conversation turn into a conversation around digital countries.  That’s optimistic, sure.  Even if accurate, however, that means executing on the conversations could be a 2016 or 2017 phenomenon.  That’s years and years after initial M2M and IoT conversations kicked off.  Solid monetization schemes will help to move things along.  Absent them, we need to be prepared for people to potentially turn negative on IoT as a promise that never materialized.

About Peter Jarich
Peter is Vice President for the Current Analysis Consumer and Infrastructure services. Peter and his analyst team monitor and evaluate activities in the markets for Consumer Services and Devices, Digital Media, Fixed Access, IP Services, Mobile Access, and Transport and Routing Infrastructure, Telecom Vendor Services, and overall coverage of the Mobile Ecosystem.

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