Back in September, Goldman Sachs published an equity research report called, “The Internet of Things: Making sense of the next mega-trend.”
Below are a few key highlights.
The IoT has the potential to connect 10X as many (28 billion) “things” to the Internet by 2010, ranging from bracelets to cars. In the below graphic, you’ll see the kind of impact these connected devices can have.
Making S-E-N-S-E of the Internet of Things:
Goldman Sachs sees the Internet of Things manifesting across five key adoption verticals:
- Connected Wearable Devices
- Connected Automobiles
- Connected Homes
- Connected Cities
- Industrial Internet
Why is there such an IoT explosion now?
A number of significant technology changes have come together to enable the rise of the IoT. These include the following:
Cheap sensors – Sensor prices have dropped to an average 60 cents from $1.30 in the past 10 years.
Productivity and cost savings – Businesses are also embracing the IoT to improve productivity and save costs, such as capex, labor, and energy. For example, Verizon is saving more than 55 million kWh annually across 24 data centers by deploying hundreds of sensors and control points throughout the data center, connected wirelessly. The result is a reduction of 66 million pounds of greenhouse gases per year.
Cheap bandwidth – The cost of bandwidth has also declined precipitously, by a factor of nearly 40X over the past 10 years.
Cheap processing – Similarly, processing costs have declined by nearly 60X over the past 10 years, enabling more devices to be not just connected, but smart enough to know what to do with all the new data they are generating or receiving.
Smartphones – Smartphones are now becoming the personal gateway to the IoT, serving as a remote control or hub for the connected home, connected car, or the health and fitness devices consumers are increasingly starting to wear.
Ubiquitous wireless coverage – With Wi-Fi coverage now ubiquitous, wireless connectivity is available for free or at a very low cost, given Wi-Fi utilizes unlicensed spectrum and thus does not require monthly access fees to a carrier.
Big data – As the IoT will by definition generate voluminous amounts of unstructured data, the availability of big data analytics is a key enabler.
IPv6 – Most networking equipment now supports IPv6, the newest version of the Internet Protocol (IP) standard that is intended to replace IPv4. IPv4 supports 32-bit addresses, which translates to about 4.3 billion addresses – a number that has become largely exhausted by all the connected devices globally. In contrast, IPv6 can support 128-bit addresses, translating to approximately 3.4 x 1038 addresses – an almost limitless number that can amply handle all conceivable IoT devices.
If you’d like to learn more about the IoT space, we highly suggest reading through Goldman Sachs’ research report. It’s thorough and helps deconstruct what’s happening quite well.