Next Downturn Could Have Silver Lining for IoT

Although nearly every research study and industry survey suggests the Internet of Things market is growing rapidly, plenty of companies are holding back from pursuing IoT opportunities, for a variety of reasons. Ironically, the possibility of a long-overdue financial downturn in the next few years could force executives to put aside their apprehensions and finally launch new IoT initiatives.

The vast majority of current IoT deployments are limited in scope and are mostly in trial or development phases, according to a recent Strategy Analytics report.

More than 70 percent of current U.S. IoT deployments involve 500 devices or less, and two-thirds of U.S. businesses are spending less than US$100K on their IoT projects, researchers found.

A common set of strategic and technological concerns have inhibited many corporate executives from taking advantage of today’s IoT opportunities — an observation I’ve made in this column on numerous occasions. These include privacy and security concerns, as well as IoT technology selection, integration, implementation and management challenges.

Underlying all of these concerns and challenges is uncertainty about the immediate economic return on today’s IoT investments. This is not a unique situation. A new technology innovation always faces an uphill battle demonstrating its business value. As a result, most new technologies don’t gain mainstream acceptance and adoption until real-world success stories reach critical mass.

From Time-Sharing to Cloud Computing

However, macroeconomic events also have a significant impact on new technology adoption cycles. For instance, a variety of new technologies were born during the recessions of the past 50 years, and major technological trends took off.

The 1960s saw the rise of the mainframe, but many companies couldn’t afford to acquire their own computers. Economic constraints drove them to take advantage of new “time-sharing” services to access compute power.

Time-sharing expanded into shared computer services in the 1970s, as the financial pressures created by the oil crisis prevented many companies from capitalizing on a new generation of mid-range systems.

The emergence of personal computers created more technological challenges in the 1980s. At the same time, the U.S. was struggling through another recession that fueled the growth of systems integration services.

The advent of client-server computing coincided with the recession of the early 1990s and sparked a new era of IT outsourcing.

Of course, everyone is well-aware of the overinflated expectations of the dot-com era. However, few people remember that the idea of Software as a Service, or SaaS, gained credibility during the recession that followed the dot-com bust in 2001, as many organizations sought new ways to gain greater economic value from their enterprise applications.

The Great Recession of 2007-2009 forced organizations to take a closer look at the economic benefits of “utility computing,” which Amazon Web Services recast with the new “cloud computing” moniker.

We’re Overdue

The prospect of a financial crisis unfolding anytime soon may seem unlikely, given the current surge in the stock market, renewed hiring, and general optimism about the prospect of possible tax cuts and deregulation clearing the way for more business.

However, many economists believe that it is just a matter of time before the inevitable downturn takes place. There have been more than 10 economic cycles since 1945, with each market expansion lasting an average of 57 months, or 4.75 years, according to the National Bureau of Economic Research.

Since the Great Recession of 2007 –2009 concluded almost eight years ago, it is easy to see why it isn’t a matter of if but when we’ll experience another downturn.

While very few people are looking forward to another recession, I’m willing to bet that it will push many corporate executives to put aside their current apprehensions and finally push forward with their IoT initiatives, just as we saw in the previous down cycles.

The next recession will force corporate executives to confront their fears and pursue opportunities to gain the operating efficiencies, achieve the greater customer engagement, and capitalize on the new markets created by IoT.

Jeffrey M. Kaplan

Jeff Kaplan has been an ECT News Network columnist since 2009. His focus is on cloud computing, SaaS, IT management, managed services and the Internet of Things. He is managing director of THINKstrategies. Email Jeff.

1 Comment

  • Retailers will definitely need to invest in supply chain efficiencies if they want to compete in this increasingly automated world. Instant fulfillment is becoming the norm as consumers demand faster deliveries at cheaper costs.

    However, the IoT is just one way retailers can automate cumbersome processes related to tracking, replenishment and repricing. It all starts with effective warehouse management – how you lay the foundation for fulfillment excellence will affect long-term success.

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