By A McKinsey study attempts to quantify the economic impact of IoT
Predictions that the Internet of Things (IoT) will usher in a new era of prosperity get some backing in a new study by consulting firm McKinsey & Company.
The study estimates that the annual value of IoT applications may be equivalent — in the best case — to about 11% of the world’s economy in 2025. That’s based on a number of assumptions, including the willingness of governments and vendors to enable interoperability through policies and technologies.
IOT is expected to deliver improvements to the reliability of machines, as well as to individual health and life overall. But it may also be intrusive on privacy, and while the IoT will create new jobs, it will cost some as well.
Here are five major points from this report:
Business IoT applications, not consumer uses, will create more business value, according to McKinsey. No surprise here. Consumer applications such as connected toasters, coffee pots and home entertainment systems offer little in terms of real value — but they do get attention. Enterprise IoT is being used to predict and avoid failures in high-value machinery, such as locomotives and magnetic resonance imaging (MRI) devices. It also allows business to switch from scheduled maintenance programs to condition-based maintenance, where service is performed as needed,l not based on a calendar. This increases equipment reliability and efficient deployment of personnel.
A major share of the IoT’s financial gains are through avoided cost. For instance, doctors can use IoT to monitor a patient’s health. If the person is a diabetic, careful monitoring may prevent hospitalizations. This includes the use not only of wearables but of devices that can be implanted, injected and ingested.
Virtual reality is part of IoT. Virtual reality goggles will observe and guide you step-by-step through an installation process at home and work. This capability will likely arrive first on factory floors and equipment repair shops, but eventually it’ll be available at home.
McKinsey estimates that IoT’s potential economic impact at between $3.9 trillion and $11.1 trillion globally per year by 2025. But interoperability accounts for about 40% of this potential value. Equipment makers now collect data performance info from their own machines, but interoperability with other systems will give an integrated view and improve predictive analysis in environments that use multiple systems. In a municipal setting, for instance, interoperability means that video, cell phone data and vehicle sensors could be used to monitor and optimize traffic flow.
The efficiency gains delivered by IoT will deliver a mixed bag of benefits for human workers. Better equipment monitoring and ubiquitous deployment of sensors may reduce injuries. It could also help eliminate some travel for employees who have to go to remote sites. But McKinsey warns, “some IoT applications in worksite environments substantially reduce the number of employees needed.”
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