For many people, talk about the Internet of Things (IoT) conjures images of household applications like smart toasters talking to smart kettles. While one day there will no doubt be very useful consumer IoT applications, I’d like to turn our attention to the world of enterprise IoT, or what some call the Industrial Internet or Industry 4.0. By this I mean the Things – or machines – that are the backbone of the planet’s power, water, agriculture, transportation, healthcare and construction infrastructure. The dramatic cost reduction in hardware: sensor, compute, storage and communications technology driven by the rise of the cell phone is now making it possible to use software to transform our physical world.
All of our attention up until now has been focused on Internet of People (IoP) software. Whether that’s an ecommerce, sales force tracking, recruiting or purchasing applications, the focus has been on applications for people. But Things are not people. This may seem obvious, but let’s discuss three fundamental differences.
The first generation of enterprise application software from SAP, Oracle, Siebel, PeopleSoft and Microsoft leveraged the availability of low-cost, client-server computing to automate key financial, HR, supply chain, and purchasing processes. The business model was based on licensing the application software, with the purchasing company left with the responsibility (and cost) of managing the security, availability, performance and change in the software.
In 2000, the second generation of enterprise application software began. It was largely differentiated by a fundamental shift in the delivery model. In the second generation, the software provider took on the responsibility of managing the software; and with that change also came a change to the business model. Rather than an upfront licensing fee, a software-as-a-service (SaaS) model emerged, which allowed customers to purchase the service monthly or annually. You’ve probably heard of many suppliers from this era including Salesforce.com, WebEx, Taleo, SuccessFactors, NetSuite, Vocus, Constant Contact and Workday, to name a few.
As a result, most of the basic function – sales, marketing, purchasing, hiring, benefits, accounting – have been automated. While you can debate effectiveness, it’s largely a solved problem; however, these improvements in operational efficiency through CRM or ERP software are good, but hardly transformative.
Perhaps now, with the changing economics of computing, the continued innovations in communications technology and decreasing cost of sensors, we can move to the third generation of enterprise software and tackle the challenges of precision agriculture, power, water, healthcare and transportation, and fundamentally reshape businesses and our planet.
For more information about IoT and how it might reshape your business check out Precision: Principles, Practices and Solutions for the Internet of Things. The book contains 14 case studies and is now available from Amazon.
How do you see ‘Industry 4.0’ emerging? Let us know in the comments below.