Internet of Things (IoT)

DEFINITION of 'Internet of Things (IoT)'

The Internet of Things (IoT) refers to a network comprised of physical objects capable of gathering and sharing electronic information. The Internet of Things includes a wide variety of “smart” devices, from industrial machines that transmit data about the production process to sensors that track information about the human body. Often, these devices use internet protocol (IP), the same protocol that identifies computers over the world wide web and allows them to communicate with one another. The goal behind the internet of things is to have devices that self report in real time, improving efficiency and bringing important information to the surface more quickly than a system depending on human intervention. 

BREAKING DOWN 'Internet of Things (IoT)'

The term “Internet of Things” is attributed to Kevin Ashton of Procter & Gamble, who in 1999 article used the phrase to describe the role of RFID tags in making supply chains more efficient. At the time, the idea of electronically gathering data in a production facility or warehouse and linking it to computers for analysis was still very new. In recent years, the number of smart sensors has exploded. By one estimate, there will be 50 billion devices connected to the Internet by the year 2020.

The Power of the Internet of Things

The Internet of Things promises to transform a wide range of fields. In medicine, for example, connected devices can help medical professionals monitor patients inside and outside of a hospital setting. Computers can then evaluate the data to help practitioners adjust treatments and improve patient outcomes.

Another area that’s also experiencing a transformation is urban planning. When sensors that have an IP address are placed under a busy street, for instance, city officials can alert drivers about upcoming delays or accidents. Meanwhile, intelligent trash cans are able to notify the city when they become full, thus optimizing waste collection routes.

The Internet of Things and Businesses

The use of smart devices will also likely mean a competitive advantage for businesses that use them strategically. For instance, by tracking data about energy use and inventory levels, a firm can significantly reduce its overall costs. Connectivity may also help companies market to consumers more effectively. By tracking a consumer’s behavior inside a store, a retailer could theoretically make tailored product recommendations that increase the overall size of the sale. Once a product is in a consumers home, that product can be used to alert the owner of upcoming service schedules and even prompt the owner to book the appointment. 

As with all questions of personal data, there are many privacy concerns that have yet to be addressed when it comes to the Internet of Things. The technology has advanced much faster than the regulatory environment, so there are potential regulatory risks facing companies that are continuing to expand the range of internet connected devices.