Reaping the Benefits of the Internet of Things

Reaping the Benefits of the
Internet of Things
Ubiquitous Internet connectivity and devices present organizations
with tremendous opportunity to create innovative products and
services, drive down operational costs and serve up additional
revenue streams. Before IoT’s potential can be realized,
organizations must deal with shortcomings in IT standards,
skill sets, and data and infrastructure management capabilities.
• Cognizant Reports
cognizant reports | May 2014

cognizant reports 2
value potential, organizations must overcome
key challenges, such as the lack of interoperable
technologies and standards, data and informa-
tion management issues, privacy and security
concerns, and the skills to manage IoT’s growing
complexity.
These steep challenges, however, are surmount-
able. Organizations need to take an integrated
and holistic view of IoT, examine the opportuni-
ties it offers and build strong business cases for
enhancing revenue, increasing efficiencies and
improving asset management. They also need
to master IoT’s growing intricacy and identify
initial business areas and operations where
IoT can deliver significant benefits. Developing
robust data management and analytics capa-
bilities will be crucial for organizations to mine
valuable insights from the data generated by the
transactions and interactions that occur within
Executive Summary
The Internet of Things (IoT)1
is a fast-emerging
ecosystem of IP-connected devices with the
potential to deliver significant business benefits
valued at trillions of dollars in the coming decade
across industries. Organizations can use IoT to
drive considerable cost savings by improving
asset utilization, enhancing process efficiency
and boosting productivity. More importantly,
IoT-driven innovations are expected to increase
return on R&D investments, reduce time to mar-
ket, and open up additional sources of revenue
from new business models and opportunities.
IoT is driven by a combination of forces, includ-
ing the exponential growth of smart devices,
a confluence of low-cost technologies (sensors,
wireless networks, big data and computing
power), pervasive connectivity and massive
volumes of data. Even though IoT offers huge
Internet of Things: A Transformational Force
Industry Key Change Potential Benefits
Automotive and
Transportation
Real-time driving behavior, traffic and vehicle
diagnostics.
Improved customer experience, reduced
pollution, increased safety and additional
revenue streams.
Healthcare Remote monitoring of staff and patients
ability to locate and identify status of
equipment.
Improved employee productivity, resource
usage and outcomes that result in efficiency
gains and cost savings.
Manufacturing Quick response to fluctuations in demand;
maximized operational efficiency, safety and
reliability, using smart sensors and digital
control systems.
Enhanced agility and flexibility, reduced
energy consumption and carbon footprint.
Retail Stock-out prevention through connected
and intelligent supply chains.
Ability to predict consumer behavior and
trends, using data from video surveillance
cameras, social media, Internet and mobile
device usage.
Supply Chain Real-time tracking of parts and raw materials,
which helps organizations preempt problems,
address demand fluctuations and efficiently
manage all stages of manufacturing.
Reduced working capital requirements,
improved efficiencies and avoidance of
disruptions in manufacturing.
Infrastructure Smart lighting, water, power, fire, cooling,
alarms and structural health systems.
Environmental benefits and significant
cost savings with better utilization of
resources and preventive maintenance of
critical systems.
Oil and Gas Smart components. Reduced operating costs and fuel
consumption.
Insurance Innovative services such as pay-as-you-go
insurance.
Significant cost savings for both insurers
and consumers.
Utilities Smart grids and meters. More responsive and reliable services;
significant cost savings for both utilities
and consumers resulting from demand-based
and dynamic pricing features.
Source: Ericsson, M2M Magazine 2013, Zebra Consulting/Forrester Research, IBM, McKinsey & Co.,
Data Informed, ZDNet
Figure 1

cognizant reports 3
the IoT ecosystem. We call this rich data source
a “Code Halo™” – the information that surrounds
people, organizations, processes and products.
Increasingly, Code Halos are forming the new
basis for competition, as they contain a rich-
ness of business meaning that today’s high-flying
companies are using to dominate their sectors.2
Further, managing the IoT ecosystem, the myriad
technologies that underlie it, and the data it
generates – not to mention developing use
cases to improve business – will require organi-
zations to hire, recruit and train skilled talent,
which is in short supply. Because IoT ecosystems
comprise numerous technologies and devices
running on different networks, organizations will
need to partner with third-party specialists to
complement their in-house capabilities. These
partner organizations should be evaluated on
their strength of expertise, industry knowledge
and ability to address the complexity of connect-
ing a wide array of technologies and platforms on
which the devices will run.
The state of IoT remains fluid. However, the
forces driving it are gaining momentum.
Winning organizations will be those that master
and hone the ability to manage a pervasive,
IP-aware infrastructure for a diversity of devices
and sensors. From there, organizations that
can apply Code Halo thinking to the torrent of
resulting interactional and transactional data in
ways that drive more informed (perhaps even
clairvoyant) decision-making will achieve new
thresholds of performance.
Cross-Industry Transformation
IoT is already heralding transformation across
Four Industries with Most to Gain
from IoT
(Total value: $14.4 trillion)
Figure 2
Source: Cisco
Others
($6.3 trillion)
Information
Services
($1.3 trillion)
Finance and
Insurance
($1.3 trillion)
Retail Trade
($1.6 trillion)
Manufacturing
($3.9 trillion)
27%
11%
9%
9%
44%
(see Figure 3), including cost savings, improved
revenues and opportunities to innovate.
• Cost savings: Costs can be reduced through
improved asset utilization, process efficiencies3
and productivity. Customers and organizations
can benefit from improved asset utilization
(e.g., smart meters that eliminate manual
meter readings) and service improvements
(e.g., remote monitoring of patients in clinical
settings).4
General Electric has estimated that
if intelligent machines and analytics caused
even a tiny reduction in fuel, capital expen-
ditures and inefficiencies, it would result in
billions of dollars in cost savings (see Figure 4,
next page).
• Improved asset utilization: With improved
tracking of assets (machinery, equipment,
tools, etc.) using sensors and connectivity,
businesses can benefit from real-time insightsindustries, and it will bring about even more
significant change in the coming years (see Figure 1,
previous page).
IoT can help organizations utilize their business
infrastructure and assets in innovative ways to
offer new services and deliver additional revenue.
Moreover, deriving meaningful information from
the huge volumes of data that IoT produces can
improve decision–making and enable proactive, pre-
dictive insights. While the scope and potential of
IoT is vast, four industries are best poised to reap
the benefits (see Figure 2).
Compelling Benefits of IoT
IoT offers compelling business benefits and
value that organizations cannot afford to ignore
IoT Levers that Unlock Value
(in$trillions)
Figure 3
Source: Cisco
$3.0
$3.7
$2.5Asset Utilization
$2.5Employee Productivity
$2.7
Supply Chain
and Logistics
Innovation
Customer Experience

cognizant reports 4
and visibility into their assets and supply
chains.5
For instance, they could more easily
locate assets and run preventive maintenance
on critical pieces of infrastructure and machin-
ery to improve throughput and utilization.6
• Efficient processes: Organizations can use
real-time operational insights to make smarter
business decisions and reduce operating costs.
They can use real-time data from sensors and
actuators to monitor and improve process
efficiency, reduce energy costs and minimize
human intervention.
• Improved productivity: Productivity is a critical
parameter that affects the profitability of
any organization. IoT improves organizational
IoT introduces innumerable opportunities for
innovative services that can be offered using
smart devices, machines and products. Organi-
zations can benefit from new revenue streams
generated by new business models and services,
as well as reduced time to market and increased
returns from their R&D investments. According
to some forecasts, the sale of connected devices
and related services (such as pay-as-you-drive car
insurance) could result in $2.5 trillion in revenues
by 2020.8
Further, IoT’s value to organizations
Improved gas-generation efficiency through
integration of natural gas and power grids.
Power
$66 billion
Gas
generation
efficiency
Identify equipment issues and improve resource
usage and outcomes to drive down the cost of clinical
and back-office operations.
Healthcare
$63 billion
System
inefficiencies
Commercial Aviation
Improved flight planning
and operational changes.
$30 billion
Jet fuel
Rail Transportation
Reduced maintenance costs through
real-time diagnostics and predictive
analytics, and elimination of waste in fleet
scheduling through fleet instrumentation.
$27 billion
System
inefficiencies
Oil and Gas
Increased availability of key equipment sets,
reduced fuel consumption, enhanced production rates
and reduced costs.
$90 billion
Capital
expenditures
Figure 4
Source: GE
How IoT Generates Value
Estimated cost savings (cumulative) in five industries over 15 years, propelled by a 1% reduction in fuel,
capital expenditures and inefficiencies.
productivity by offering employees just-in-time
training, reducing the mismatch of required vs.
available skills and improving labor efficiency.7
Opening New Revenue Streams with
Innovation

cognizant reports 5
across industries is estimated to reach $14 trillion
in the coming decade, which will likely result in a
21% increase in global corporate profits by 2022.9
IoT Futures
The acceleration of IoT from lofty concept to real-
ity is predicated on the projected exponential
growth of smart devices and the confluence
of low-cost infrastructure, connectivity and
data. Declining device costs, widespread and
pervasive connectivity, and an ever-increasing
focus on operational efficiency and productivity is
leading to wide deployment of IoT solutions. In a
2012 survey by Zebra Consulting and Forrester,
only 15% of organizations had an IoT solution
in place, but more than half (53%) had plans
to implement one in the next two years, and an
additional 14% planned to implement in the next
two to five years. Roughly 21% of respondents
from the transportation and logistics sector
indicated that an IoT solution was already in place.10
• Billions of smart devices are becoming
connected: The number of connected smart
devices is exploding, with 50 billion devices
possible by 2020 (see Figure 5). Similarly,
machine-to-machine (M2M) connections – which
are a key part of the fabric of IoT – are also
on the rise. Machina Research estimates that
M2M connections will grow to 18 billion by
2022, up from two billion in 2011.11
• Confluence of low-cost technologies, con-
nectivity, data and sensors: Declining sen-
sor costs, a dramatic increase in computing
and processing power, low-cost data storage
and widespread low-cost, high-bandwidth con-
nectivity has brought IoT to a tipping point.
For instance, services that require connectiv-
ity are becoming affordable as cellular M2M
module costs have declined at a rate of 15%
per year, and the cost of connectivity has
plummeted, with 1GB now costing $1.50.12
Aiding the connectivity needs of the exploding
universe of smart objects is the new standard
Internet Protocol (IPv6), which uses a 128-bit
address to offer 340 undecillion (or 3.4 x 1038
)
unique IP addresses, enough to connect the
billions of smart objects that humankind will
be using in the years to come.
Issues and Challenges
Notwithstanding IoT’s tremendous potential,
organizations must overcome numerous issues
and challenges that are inhibiting IoT’s growth.
To get grounded in and eventually master IoT,
organizations will need to work closely with
mature vendors to overcome key hurdles, such as:
• A lack of standards and interoperable tech-
nologies: The sheer number of vendors, tech-
nologies and protocols used by each class
of smart devices inhibits interoperability.
Estimated number
of connected devices in
2020
30
billionWirelessly connected devices**
All connected devices*
24
billion
Mobile connected devices*
12
billion
Connected autonomous things***
30.1
billion
Connected devices****
50
billion
Figure 5
Source: * GSMA, ** ABI Research, *** IDC and **** Cisco
IoT Drivers: Exponential Growth of Smart Devices and Sensors

cognizant reports 6
Thelackofconsensusonhowtoapplyemerging
standards and protocols to allow smart objects
to connect and collaborate makes it difficult
for organizations to integrate applications
and devices that use different network tech-
nologies and operate on different networks.13
Further, organizations need to ensure that
smart devices can interact and work with
multiple services.14
• Data and information management issues:
Routing, capturing, analyzing and using the
insights generated by huge volumes of IoT
data in timely and relevant ways is a huge
challenge with traditional infrastructures.15
The sheer magnitude of the data collected
will require sophisticated algorithms that can
sift, analyze and deliver value from data.16
As
more devices enter the market, more data
silos are formed, creating a complex network
of connections between isolated data sources.
The lack of universal standards and protocols
will make it even tougher for organizations to
eliminate data silos.
• Privacy and security concerns: Deriving
value from IoT depends on the ability of
organizations to collect, manage and mine
data. Securing such data from unauthorized
use and attacks will be a key concern. Simi-
larly, with many devices used for personal
activities, many users might not be aware of
the types of personally identifiable data being
collected, raising serious privacy concerns.
And because most devices involve minimal
human interference, organizations need to be
concerned about hacking and other criminal
abuse. A far bigger potential for risk in the
future is a security breach or a malfunctioning
device that induces catastrophic failures in the
IoT ecosystem.17
• Organizational inability to manage IoT
complexities: While IoT offers tremendous
value, tapping into it will demand a whole
new level of systems and capabilities that can
harness the ecosystem and unlock value for
organizations.18
For instance, making sense of
the flood of data generated by sensors every
millisecond will require strong data manage-
ment, storage and analytics capabilities. Simi-
larly, policy makers will need to address data,
security and privacy concerns. Organizations
will also need to develop skills to preempt
potential component failures and replacements,
using preventive servicing and maintenance
practices to ensure business operations run
effectively and efficiently.
Taking Advantage of IoT
The steep business and technological challenges
on the path to IoT can be surmounted by
taking an integrative and holistic view of the
opportunities that IoT offers to build potential
business cases. To start with, organizations should
consider the choice of integrating traditional
infrastructures with the new intelligent assets or
building new enabling infrastructure to support
them. Organizations should focus on how their
ability to manage, control and monitor intelligent
remote assets can result in material and measur-
able improvements in profitability and revenue.19
• Understand IoT complexity and identify
areas where it can offer significant benefits.
As organizations brace for digital disruption
in their industries, decision-makers from mul-
tiple business functions – including finance,
sales, marketing and supply chain – should
identify and prioritize the resulting opportuni-
ties and risks. Similarly, organizations should
focus on developing technology-agnostic solu-
tions to help mitigate threats and capitalize on
opportunities. Further, leaders should identify
key elements that will be required to develop
effective solutions to deal with potential
scenarios. CIOs should be encouraged to gain
a deep understanding of IoT to take advantage
of its benefits.
• Develop robust data management capabilities.
CIOs can play a crucial role in identifying the
data types deemed most valuable for improv-
ing operational efficiencies. This starts with
specifying the equipment and machines that
provide such data and determining how that
data should be captured, stored and analyzed
to gain insights that can lead to operational
improvements.
With data holding the key value in the IoT
ecosystem, organizations need to harness the
intelligence generated by connected products
to transform their businesses.20
This involves
leveraging a combination of social, mobile,
analytics and cloud technologies (or the SMAC
Stack™) to produce actionable insights and
derive more value from IoT.

cognizant reports 7
• Develop strong analytics capabilities. Deriv-
ing value from IoT requires the ability to man-
age and analyze large volumes of data. Doing
so requires more than basic data management
capabilities and traditional infrastructures.
Organizations will need to leverage the latest
developments in cloud, big data and analytics
to mine the large and fast-changing volumes
of data for insights.
• Recruit and train talent to manage IoT.
While technology and capabilities are impor-
tant, equally important are the skills to man-
age IoT complexity and large amounts of data
that IoT ecosystems will produce. For instance,
by 2020, the digital universe will reach
44 zettabytes – a 10-fold increase from 2013.21
On top of this, analysts will need deep domain
knowledge of the specific industries they
operate in to ensure they use the right data to
generate useful insights. Organizations will be
encumbered by the shortage of data scientists
expected in the coming years.22
• Seek help from specialists to complement
in-house capabilities. Organizations will
likely require help from external specialist
organizations to ensure that data is captured
and insights are acted upon in timely ways.
Specialist partners can offer strong industry
and domain knowledge, technical expertise,
customer service capabilities and help desk
expertise. Numerous surveys indicate that a
majority of organizations are planning to part-
ner with device manufacturers and solution
providers to implement and benefit from IoT.23
• Take advantage of network-centric opera-
tions. As the IoT ecosystem comprises smart
devices and connections between them,
organizations should build and take advan-
tage of network-centric operations. In this
setup, information is shared with users who
are provided with need-based access to
information. Network-centric operations with
strong system interoperability and enterprise
management features will allow users to
overcome the limits of organizational barriers
to access real-time data and eliminate location
dependency.
• Integrate machine data with enterprise
systems to optimize business processes.
The real value of the IoT lies in integrating
data produced by devices with business pro-
cesses to optimize critical functional areas
and improve operational performance. Orga-
nizations should also focus on how the data
produced by the IoT ecosystem can be used to
improve products, services and processes or
develop new ones. For instance, organizations
can improve inventory management by using
the real-time data generated by M2M commu-
nications to eliminate the manual collection of
information on stock levels.
• Use Code Halos to establish new thresholds
of business performance. The IoT ecosystem,
with its billions of connected smart devices,
continuously produces and shares digital infor-
mation. Businesses can use these Code Halos
to create unprecedented levels of insights and
business value.
Looking Ahead
By mastering and honing their ability to create
and manage Code Halos, industry leaders are
establishing new thresholds of performance and
delivering highly personalized customer experi-
ences, products and services, while achieving
high efficiency levels. Organizations can only
expect to witness faster transformation and dis-
ruption of their traditional business models given
the rate at which digital technologies, devices,
connectivity and networks are evolving. Clearly,
the winners will be companies that weave Code
Halos into the fabric of their business to compete
with new entrants to keep growing their business.

cognizant reports 8
Footnotes
1
An intelligent network of interconnected objects with unique identities that have the ability to sense,
interact and communicate with each other about their states and environment using embedded com-
munication and processing capabilities/technology.
2
Code Halo is the coded information surrounding people, companies and things. For more on this
topic, see Code Halos: How the Digital Lives of People, Things, and Organizations are Changing the
Rules of Business, written by Malcolm Frank, Paul Roehrig and Ben Pring, and published by John
Wiley & Sons, March 2014, http://as.wiley.com/WileyCDA/WileyTitle/productCd-1118862074.html.
3
“The Internet of Everything: How More Relevant and Valuable Connections Will Change the World,”
Cisco IBSG, 2012.
http://www.cisco.com/web/about/ac79/docs/innov/IoE.pdf.
4
“GSMA Announces the Business Impact of Connected Devices Could Be Worth US$4.5 Trillion in
2020,” GSMA, February 2012.
http://www.gsma.com/newsroom/gsma-announces-the-business-impact-of-connected-devices-could-
be-worth-us4-5-trillion-in-2020/.
5
“Building Value from Visibility: 2012 Enterprise Internet of Things Adoption Outlook,” Forrester
Research and Zebra Consulting, October 2012.
http://www.zebra.com/content/dam/zebra/white-papers/en-us/zebra-iot-report-en-us.pdf.
6
“The Internet of Things,” McKinsey & Co., March 2010.
http://www.mckinsey.com/insights/high_tech_telecoms_internet/the_internet_of_things.
7
“Can the Internet of Everything Bring Back the High-Growth Economy?” Progressive Policy Institute,
September 2013.
http://www.progressivepolicy.org/wp-content/uploads/2013/09/09.2013-Mandel_Can-the-Internet-of-
Everything-Bring-Back-the-High-Growth-Economy-1.pdf.
8
“GSMA Announces the Business Impact of Connected Devices Could Be Worth US$4.5 Trillion in
2020,” GSMA, February 2012.
http://www.gsma.com/newsroom/gsma-announces-the-business-impact-of-connected-devices-could-
be-worth-us4-5-trillion-in-2020/.
9
“The Internet of Everything: How More Relevant and Valuable Connections Will Change the World,”
Cisco IBSG, 2012.
http://www.cisco.com/web/about/ac79/docs/innov/IoE.pdf.
10
11
“Machine-to-Machine Connections to Hit 18 Billion in 2022, Generating USD$1.3 Trillion Revenue,”
Machina Research, December 2013.
https://machinaresearch.com/news/press-release-machine-to-machine-connections-to-hit-18-billion-
in-2022-generating-usd13-trillion-revenue/.
12
“More than 50 Billion Connected Devices,” Ericsson, February 2011.
http://www.ericsson.com/res/docs/whitepapers/wp-50-billions.pdf.
13
“The Internet of Things Is Poised to Change Everything, Says IDC,” IDC, October 2013.
http://www.idc.com/getdoc.jsp?containerId=prUS24366813.
14
“More than 50 Billion Connected Devices,” Ericsson, February 2011.
http://www.ericsson.com/res/docs/whitepapers/wp-50-billions.pdf.

cognizant reports 9
15
“2013: The Year of the Internet of Things,” MIT Technology Review, January 2013.
http://www.technologyreview.com/view/509546/2013-the-year-of-the-internet-of-things/.
16
“What Is the Internet of Things and Why Is it Important?” Technology Guide, July 2013.
http://www.technologyguide.com/feature/internet-of-things/.
17
“The Internet of Things Has Arrived — And So Have Massive Security Issues,” Wired, January 2013.
http://www.wired.com/2013/01/securing-the-internet-of-things/.
18
“Disruptive Technologies: Advances that Will Transform Life, Business, and the Global Economy,”
McKinsey & Co., May 2013.
http://www.mckinsey.com/~/media/McKinsey/dotcom/Insights%20and%20pubs/MGI/Research/
Technology%20and%20Innovation/Disruptive%20technologies/MGI_Disruptive_technologies_Full_
report_May2013.ashx.
19
“The Internet of Things Is Moving to the Mainstream,” InformationWeek, February 2014.
http://www.informationweek.in/informationweek/perspective/287432/internet-moving-mainstream.
20
“Connected Product Maturity Model,” Axeda, 2012.
http://blog.axeda.com/Portals/514/docs/axeda_wp_connectedproductmaturitymodel_6_12.pdf.
21
“The Digital Universe of Opportunities: Rich Data and the Increasing Value of the Internet of Things,”
EMC and IDC, April 2014.
http://www.emc.com/leadership/digital-universe/2014iview/executive-summary.htm.
22
“Internet of Things Edges Closer to Reality,” Pinnacle Business Systems, July 2013.
http://www.pbsnow.com/internet-of-things-edges-closer-to-reality/.
23

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Credits
Author and Analyst
Aala Santhosh Reddy, Senior Researcher, Cognizant Research Center
Subject Matter Expert
Kevin Benedict, Senior Analyst, Digital Transformation,
Cognizant Emerging Business Accelerator & Center for the Future of Work
Design
Harleen Bhatia, Design Team Lead
Chiranjeevi Manthri, Designer

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