50B Devices by 2020: The Math Behind The Number

Internet of Things or IoT has been a megatrend worldwide for the last decade or so. I have seen a frequently quoted number from Cisco that indicates the number of connected devices will be 50B by 2020. But what is the math behind the number? How did Cisco arrive at that number? How many analysts, companies, presentations, and blogs have used that number?

I read through, again, the Cisco IBSG report which was published in 2011, and here is how the number was computed:

1. Cisco started with a report from Forrester (actually in the Cisco IBSG PDF Report – the reference is to a number quoted by George Colony of Forrester Research in a post published by InfoWorld – March 2003) that states there are 500m Connected Devices
2. Next take the number of connected devices in 2003, and get the number of devices per person – 500 Million divided by 6.3 Billion – resulting in 0.079 Devices per person.
3. Using data from US Census Bureau and their internal IBSG data for 2010 – the next step was to state the number of Connected Devices was 12.5 Billion, and dividing that by the world population (6.8 Billion) results in 1.84 devices per person. Please note that per Cisco the 12.5 Billion number includes Smartphones and Tablet PCs.
4. Cisco then used the work done by a team of researchers in China that showed the size of the Internet doubles every 5.32 years. The reference in the report is to the following: Internet Growth Follows Moore’s Law Too
5. Next step was very easy – multiply the number from 2010 every 5 years – you don’t even need a calculator now – you get 25 Billion for 2015 (double from 12.5 in 2010, and that leads to 50B in 2020.

The 50B number does not get into a bread down by categories on the devices. We cannot make out from this number the percentage of sophisticated devices such as Smartphones or the percentage or low-power, low-cost number.

This number probably (and anecdotally) is one of the most cited number to show the growth of IoT. The math behind it looks simple and abstract but it helped propel the market forward!

 

IoT Stories (Week Ending May 31st 2014)

Pew Research Center recently released a report titled The Internet of Things Will Thrive By 2025. This was, obviously, picked up by many news and blog sites. Washington Post’s Mohana Ravindranath wrote about it in a post titled “Some see possible drawbacks in ‘Internet of Things’”, and provides a good summary.  The post has one typo – it claims 1,900 people responded, whereas actually of the 12,000 people canvassed 1,606 responded. He has summarized inputs fromVint Cerf, Andrew Bridges, John Senall and Miguel Alcaine. Mohana has captured good set of quotes from one of the authors of the report – Lee Rainie, director of Pew’s Internet & American Life Project. Wired has good summary of the report as well.

Scot Stelter over at RFID Journal mentions the report but points out the lack of coverage in that report with respect to RFID, his post (RFID Stakeholders Need to Prepare for the Internet of Things) has good insight into how RFID will be important, and professionals in the RFID field need to be prepared for IoT.

Alain Louchez over at InformationWeek takes another Pew Research report and explains how the manufacturing in the US can benefit with the aging workforce and IoT.

Last week was the week before Apple’s WWDC – and lot of speculation on how Apple is going to play in Home Automation and IoT started out by Financial Times in Apple seeks to work Jobs magic on the internet of  things (paywall). GIgaOm’s Stacey Higginbotham explains it well in Here’s how Apple’s smart home program will work.  EETimes in “Apple’s IoT ‘Good Housekeeping’ Label: MFi “ gets into a little bit more detail and indicate that it involves around the MFi program (just as Stacey’s post) but indicate that it would support ZigBee protocol as well. Roger Kay at Forbes jumped in with “Will Apple Play Nice On The Internet Of Things?“. Roger makes the case that Apple won’t be in a position to dominate unlike the Smartphone or Tablet segment. While I agree with that analysis, Apple may continue to influence and benefit because Smartphones & Tablets will be an integral part of most IoT solutions.

The Economist gets into the over-hype around IoT – a very nice and thought provoking article titled The internet of nothings. It covers the chart put together by ZDNet on showing the surge in Google search aassociated with IoT, how the acquisition of Nest marks a tipping point. Two interesting observations:

#1. The post points out the real challenge is connecting the Cloud and the Node (Sensor or Actuator):

Devising sensors and algorithms to handle the front- and back-ends of the IoT are the easy part. Unfortunately, few developers are tackling the really difficult bit in the middle—the myriad infrastructural gaps that lie between the sensors in things at the edge of the internet, and the data collection and analysis performed by servers in the cloud at the centre.

#2. It questions the numbers being published (on number of connected devices) especially claims being made by Cisco:

…while Cisco Systems, a network-equipment firm in California, expects there to be no fewer than 50 billion. Cisco is so enamoured of the IoT that it has installed a “connections counter” on its website. On May 26th, the number of “things” connected to the internet was over 12.4 billion and counting.

The vast majority of the billions of things connected to the internet on Cisco’s website, for instance, are not the toasters, refrigerators, thermostats, smoke detectors, pace-makers and insulin pumps that the IoT’s true believers enthuse about. Almost exclusively, they are existing smartphones, tablets, computers and routers, plus a surprising number of industrial components used to beam performance statistics back to corporate headquarters.

Talking about Google, Business Insider is covering its rumor to buy DropCam (originally reported by The Information). It is probably pure speculation but if it bears fruit – Google could be really powerful in combining Dropcam, Nest, and Android (and YouTube/GoogleTV/Chromecast in the living room) and bringing order to Home Automation & Monitoring.  Dropcam cameras have motion detection, Nest has a proximity sensor and between the two they could make for a solid, self-managed security system as well.

This week’s links also has a story with a cliche headline “With ‘Internet of Things,’ your fridge will know when milk is low“. This resulted in an interesting exchange on Twitter which you can read here. The blog post title is misleading because the focus is more on security. It has been distributed over many different websites – for example you can find it here and here.

Intel, Qualcomm and Freescale are three semiconductor companies that tend to show up in IoT Articles. This week I came across a post by Lee Schafer that starts off going over the Texas Instruments Launchpad:

On the Texas Instruments eStore it takes only $19.99 to jump into “the Internet of things” by purchasing a Connected LaunchPad unit to bring an everyday device onto the Internet. Better be patient, however, because they are sold out.

Finally a post on Wired is definitely worth reading – ‘Beautiful mistakes’ will form groundwork for the internet of things. The essence of the post:

Similarly, it will take user-generated products and hacked physical connections for brands to make sense of the internet of things. It will be ugly, soldered-together networked devices (not the gamified toothbrush) that will light the way for them. Beautiful mistakes and unexpected outcomes that will form their strategies.

 

3 Internet of Everything Trends from 2013

We are well past the customary Happy New Year greetings timeframe into 2014, and on the heels of the first big acquisition in the IoT/IoE space, I wanted to recap key announcements and initiatives from 2013 that have set the stage for 2014:

Formation of Dedicated Divisions

One trend in 2013 was for major companies to re-organize themselves to create groups or divisions within for Internet of Everything – chief among them were Cisco Systems and Intel. They joined IBM, I think, was the pioneer to organize itself around the Smarter Planet initiative. It is not clear to me if the group is formed around Wind River which it had acquired or Wind River has been moved to this new group. GE made several announcements and is heavily investing in their initiative that they have tagged as Industrial Internet.

Bosch followed at CES 2014 with its announcement forming Bosch Connected Devices & Solutions.

Alliances & Standards

The second observable trend was groups forming as a part of Standards Development Organizations (SDOs) and Open Source Initiatives. Two major announcements were the formation of a Smarthome alliance by ABB, Bosch, Cisco and LG and Qualcomm releasing its AllJoyn framework to the Open Source Community and forming the AllSeen alliance.

IBM had open-sourced the MQTT standard and in 2013 it was adopted by Oasis and bunch of companies to be advanced as a reliable messaging protocol for IoT.

Money Flow: Crowd-funding, Exits & Investments

Corporate investors ranked high in investments made in the IoT/IoE space in 2013.

Crowd-funding sites like Kickstarter and Indiegogo continued to be major sources of funding for IoT startups likes Canary. Lifx which was funded in 2012 on Kickstarter, launched their bulbs in 2013.

Crowd-funded companies from 2012 brought in VC-led investments in 2013 – chief among them SmartThings and Variable Inc. (Node).

Tado, Revolv, Arrayent, Zoneoff, Ayla, Fitbit, Dropcam, Estimote, Withings, and Netatmo are some of the key startups in the IoT/IoE space raising money in 2013.

Sensinode was acquired by ARM – an interesting case signaling ARM wants to be in the IoT/IoE market beyond providing semiconductor IP. ThingWorx was acquired by PTC.

In summary, the three trends above will increase the momentum making 2014 a watershed year in IoT/IoE.

Peacetime & Wartime CEOs

Ben Horowitz @bhorowitz on the type of CEOs needed during expansion vs. war. Google is entering a “war” and that couldn’t be truer! Gives high accolades to Andy Grove & Steve Jobs for being great Wartime CEOs.

Amplify’d from blogs.forbes.com

Interestingly, most management books describe peacetime CEO techniques while very few describe wartime.

In peacetime, leaders must maximize and broaden the current opportunity. As a result, peacetime leaders employ techniques to encourage broad-based creativity and contribution across a diverse set of possible objectives. In wartime, by contrast, the company typically has a single bullet in the chamber and must, at all costs, hit the target. The company’s survival in wartime depends upon strict adherence and alignment to the mission.

Wartime CEO is too busy fighting the enemy to read management books written by consultants who have never managed a fruit stand.

John Chambers had a great run as peacetime CEO of Cisco, but has struggled as Cisco has moved into war with Juniper, HP, and a range of new competitors.

Be aware that management books tend to be written by management consultants who study successful companies during their times of peace. As a result, the resulting books describe the methods of peacetime CEOs. In fact, other than the books written by Andy Grove, I don’t know of any management books that teach you how to manage in wartime like Steve Jobs or Andy Grove.

Peacetime CEO aims to expand the market. Wartime CEO aims to win the market. Read more at blogs.forbes.com

 

See this Amp at http://bit.ly/e90Owo

Mastering M&A, The Cisco Way

A very old but gold blog post. Much has changed in the world since then but the efficiency of Cisco’s M&A and investment process continues to shine. Very proud of what Cisco has accomplished, and moving forward this expertise would be very useful.

Amplify’d from www.usnews.com

How has Cisco succeeded where so many others have failed? Simply put, experts say, it has professionalized a process that other companies turn to only on occasion–usually out of either greed or necessity. “My experience with most companies is that they do acquisitions infrequently and integration is somebody’s nighttime job,” says Brett Galloway, the former CEO of Airespace, a wireless networking company Cisco acquired last year. “Cisco has people who do this full time–it’s a core function of the company.”

As successful as Cisco has been in identifying hot new technologies and taking calculated risks in new markets, experts say, the true strength of its mergers-and-acquisitions operation lies elsewhere. Indeed, if there is a secret to Cisco’s success, it is this: Cisco has come to realize that the acquisition of technology really isn’t just about technology. “For us,” says Hooper, “the people are the most strategic asset.” If, after the acquisition, Cisco loses the technologists and product managers who created, say, the Linksys router, then it has lost the second and third generations of the product that existed only in those employees’ heads. That, says Hooper, is where the billion-dollar markets lie. And that is where Cisco’s acquisitions are aimed. “We need the expertise,” he says. “We need the people.”

SAN JOSE, CALIF.–Ned Hooper uses one word to describe corporate acquisition. “It’s traumatic–always,” says the vice president of business development at Cisco Systems, whose former company was acquired by the tech giant in 1998. “No matter how successful you’ve been and how much you make on the deal,” he says, “it’s traumatic because there’s change coming.” Read more at www.usnews.com

 

See this Amp at http://bit.ly/exL7Br

Consumers Influence Enterprise-Business

Many of us would have heard and are (anecdotally) aware of how Enterprises are accommodating employees with their “consumer” behavior. Several reports indicate how the Apple iPad and iPhone have changed, slowly and steadily, IT departments. This is the first step towards how Enterprise Products will be influenced by Consumer Products. Alan Cohen (@ascohen) is a VP at Cisco, and he posted his 5 Technology Predictions for 2011, I found the following most interesting:

 

Prediction 4: Consumer Experience for Business – For decades, technology migrated from the office to the home: video recorders, computers, printers, Internet access, email and many other commonplace fruits of applied science started in the working world and eventually followed us through the front door on the return commute.  Today, mobile and web-based applications, and simple, easy-to-use technologies like Cisco’s own Flip video camcorder are changing our expectations of how IT works.  Shoppers walk into stores with more powerful devices and apps than the retail associates trying to help them.  Expect business users to demand migration of consumer experiences to the workplace.

 

Coming from Cisco’s VP of Enterprise products – this is worth noting for a minute. And to connect the dots, a blog post from another VP of Security Technology Products at Cisco, Tom Gillis, talks about how consumer products are influencing the design of security products. He makes the observation:

 

That’s true. Consumer hits like the iPhone and iPad have sparked a user interface revolution and placed more emphasis than ever on usability. Now, the trend—which I see as downright “Jobsonian”—is working its way through the entire technology industry. It’s a dramatic shift in prioritizing how we present information over how we process information.

 

And he goes on to say how Cisco is taking this shift into account:

 

For the next generation of security products, usability will come to the forefront. Next-gen security devices need to understand the context of a situation—the “who, what, where, when and how” of security. This begs for a usability-driven design. Next-gen security solutions need to present business-relevant information to the user (or administrator) in an intuitive fashion. I think this trend extends well beyond security. More and more tech products are being driven by usability.

 

Bottom-line, the Consumer revolution is influencing and almost mandating how products are designed for the Enterprise.

 

The Dell Dilemma

I write this as Dell is about to announce their latest quarterly results on May 28^th. Dell’s struggles in the past few years are well documented in blogs (technical and financial) and their own financial results, even after the comeback of Michael Dell the struggle has continued. Here is a sampling:

1. Dell’s current revenues are steeped in PCs & Notebooks. The financial year ending January 31^st, 2009 had 60% of its revenues in Mobility & PCs – Mobility accounting 31% of the revenues.
2. Even though there are some predictions in the market that the business have quit slashing their IT budgets – it is difficult to envision how Dell is going to come out at the top. Year over year revenues are stagnant at $61.1 billion and the profit is down from $2.94 billion to $2.47 billion.
3. Dell still seems to be dabbling with no clear sense of strategy and direction. Dell has done business selling flat panel TVs and handheld devices.
4. And recently has been attempting to introduce a Smart Phone! Doing a Google Search on “Dell Cell Phone” results in the first entry indicating that they have been mulling a cell phone since 2007! But as you search and read on you find out that carriers have more or less rejected the Dell Cell Phone citing it as too dull. Oh and as I write this and run various Google searches I come across a post which says the Dell’s Cell Phone is Dead!
5. Dell also has recently launched the Adamo series to compete with the Macbook Air from Apple. It has been slow on the Netbook market trend as well. And, of course, like many others, Dell is also rumored to be tinkering with Android based Netbook!
6. Dell is going to face an interesting challenge on the server front thanks to Cloud Offerings by the likes of Amazon and Google in addition to the traditional competition from Sun, HP, and IBM. Not to make things easier even Cisco has entered the Server Market recently!
7. Net-net this lack of direction is well summarized here!

So what is Dell to do, IMHO:

As a recent investor in DELL and watching their stock price meander with no direction, I was prompted to write this post.

Dell needs to make radical changes on what and how they build their products. They need to enter product categories that allow them to create a Blue Ocean or Purple Cow. Simply speaking they need to out-compete their competition – introducing just another Smart Phone or a Netbook is probably not going to be a game changer.

The down-turn in the industry is a good time for Dell to re-invent itself.