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Internet of Things: Ecosystem viewpoint

TIES410 Future Internet

January 17, 2012

Oleksiy Mazhelis 

Software Industry Research Team, Dept. CS & IS

University of Jyväskylä, Finland

What is the Internet-of-Things?

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What is the Internet-of-Things

The term of IoT was initially introduced by Kevin Ashton in 1999, in relation to the networked radio‐frequency identification (RFID) technologies developed at MIT Auto‐ID Center

The basic idea of the IoT is that virtually every physical thing in this world can also become a computer that is connected to the Internet (Fleisch 2010)

IoT is thus connecting the physical world with the digital world

Evolution towards “connecting things”

50 BTHINGS

Inflection

Personal Mobile

Digital Society Sustainable World

1875       1900       1925       1950       1975       2000      2025

5.0 B

~0.5 BPLACES

PEOPLEInflectionpoints

Global Connectivity

Source: Ericsson

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Internet-of-Things: Definition

A global network infrastructure, linking physical and virtual objectsthrough the exploitation of data capture and communication capabilities.This infrastructure includes existing and evolving Internet and networkdevelopments. It will offer specific object‐identification, sensor (andactuation?) and connection capability as the basis for the development ofindependent cooperative services and applications (Casagras 2009).

Is an integrated part of Future Internet and could be defined as a dynamicglobal network infrastructure with self configuring capabilities based onstandard and interoperable communication protocols where physical andvirtual “things” have identities physical attributes and virtualvirtual “things” have identities, physical attributes, and virtualpersonalities and use intelligent interfaces, and are seamlessly integratedinto the information network (CERP‐IoT 2009).

IoT "Worlds"

Tagging world. It is about Identifying things. Identifiers such asRFIDs are attached to things, e.g. packages, to enable theirautomatic identification and tracking. Based on ID, theinformation about things can be accessed from a database orfrom the Web.

Sensors world. It is about Sensing things, that is “second‐hand”access to properties of things, that can be perceived from theoutside using a variety of available sensors.

Embedded systems world It is about Reading things that is Embedded systems world. It is about Reading things, that is“first hand” access to data possesses by things, e.g. industrialmachines or home electronics, already embedded with someprocessing and data storage capabilities.

Source: IoT SRA 

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IoT current adoption

Tagging world: Largest RFID deployments are in US DoD (active) and retail(passive)

Sensing world: The most progressive field is M2M, with MNO extendingtheir business to connect sensors, meters, etc.

Embedded systems world: Solutions are vertical specific (for example,transportation sector uses CAN bus interface; in healthcare differentinterfaces are used to connect equipment)

These three worlds still have little in common

Market opportunities: M2M

IoT solutions are already found in a number of segments. The number ofpotential applications is huge

http://m2m.com/docs/DOC‐1221

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Growth forecast: M2M

M2M is expected to account for the largest proportion of Connected Liferevenue ‐ €714 billion ($950 billion) in 2020.

Growth forecast: RFID

The overall RFID market is expected to exceed $8.25 billion in 2014, upfrom $4.47 billion (without automobile immobilization) in 2010

14% compound annual growth rate (CAGR) over the next five years

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Challenges

Fragmented solutions specific to vertical industry applications, with littleor no interoperability resulting in a lock‐in for the customers

Scattered standardization efforts and the general lack of standardizedinfrastructure/middleware, making the costs of IoT solutions high

Sound business models are still missing

IoT Standards

RFID– EPCglobal (AutoID Labs, GS1) – unique

identifiers, Electronic Product Code

IETF WGs– IPv6 for Low Power Wireless Personal

Area Networks (6LoWPAN)identifiers, Electronic Product Code(EPC)

– CEN (with GS1 & ETSI; GRIFS project) –tags, readers, spectrum, privacy, security

– ISO – frequencies, modulation, anti‐collision protocol

M2M– ETSI M2M TC (along with CEN,

CENELEC)– Goal – e2e M2M architecture, sensor

Area Networks (6LoWPAN)– Routing Over Low power and Lossy

networks (ROLL) WG – RoutingProtocol for Low Power and LossyNetworks (RPL)

– Constrained RESTful Environments(CORE) – Constrained ApplicationProtocol (CoAP)

Other– IEEE 802.15.4 and ZigBee– NFC Forum

network integration, naming,addressing, location, QoS, security,charging, management, applicationand HW interfaces

– Still in early phase (Smart meteringuse case only)

– W3C– 3GPP– ITU: IoT Global Standards Initiative

(IoT‐GSI) and Joint CoordinationActivity on IoT (JCA‐IoT)

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Early vs. Late Standard Emergence

Standard emergence – the earlier the better

– Competing standards paralyze markets – everyone waits for a dominant toappear

– Incomplete or poorly specified standards may result in incompatible solutionsto which customers will be locked in

Premature standard adoption is dangerous

– Time is needed for the dominant technology to emerge

– Let technology evolve before implementing stringent standards

– ISO‐IP was declared a standard, but is only used in optical equipment

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What is a (business) ecosystem?

Natural vs. Business Ecosystem

A natural life ecosystem is defined as a biological community of interacting organismsplus their physical environment. According to Moore (1996), the actors “co‐evolve theircapabilities and roles”.capabilities and roles .

In the same way, a business ecosystem is "the network of buyers, suppliers and makers ofrelated products or services” plus the socio‐economic environment, including theinstitutional and regulatory framework.– “An economic community supported by a foundation of interacting organizations

and individuals—the ‘organisms of the business world’. This economic communityproduces goods and services of value to customers, who themselves are members of theecosystem”. (Moore, 1996)

Biological ecosystem is a useful metaphor for understanding a business network, sinceboth the species in a bio ecosystem and firms in a bus ecosystem have to interact and co‐p y yevolve: the survival of each is related to the survival of others thus supporting a balance ofboth cooperation and competition (Corallo and Protopapa 2011).– In Moore’s BE, firm's capabilities co‐evolve around innovations (compared to species'

evolutionary paths)

– Evolution of organizations occurs through natural selection (fittest survive; routines asgenes) and niche construction (through their actions, species modify each other's niches)

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Business ecosystem

Organizations form an ecosystem around a core (Talvitie 2011)

– A business ecosystem is a collection of businesses and companies collaboratingor competing by utilizing a common and shared set of assets

– Is founded on an ecosystem core – platforms, technologies, processes,standards or other assets common to and used by members of the ecosystemin their businesses

Ecosystem is an abstraction; either a whole industry or a small consortiumof companies could be seen as an ecosystem (Nachira 2007). Two models:

– Keystone model implied by Moore (1996), elaborated by Iansiti and Levien(2004) with the ecosystem dominated by a large firm interacting with a large(2004) with the ecosystem dominated by a large firm interacting with a largenumber of small suppliers. The health of the ecosystem depends on the healthof the keystone firm. Matches the typical structures in the US.

– Flat model more typical for Europe – composed of mainly small and mediumfirms, accommodating also large ones. More dynamic, well‐adapted for theservice and the knowledge industries (Corallo, 2007).

Example of keystone ecosystem: Apple

Source: http://obamapacman.com/2011/09/time‐magazine‐apple‐ecosystem‐infographic/

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Example of flat ecosystem: M2M ecosystem

Source: Harbor Research, Inc.

Ecosystem: Level of analysis

Industry vs. Ecosystem vs. Firm level– Industry/market – verticals, customer 

needs evolution phaseneeds, evolution phase

– Ecosystem – players and roles, core and auxiliary products

– Firm – business model, role in ecosystem(s)

Example:– PC Industry: Microsoft vs Apple

– Smartphone industry: Apple vs Android

Ecosystem vs. Value network vs. Core 

value networkvalue network

business– Value network: Includes partners 

providing complementary products needed to deliver the "whole product"

– Ecosystem adds to the value network the stakeholders, government agencies, and competitors

http://www.provenmodels.com

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Why shall IoT Ecosystems be studied?

Example: sensor-based system

Consider a sensor‐based system for controlling the climate inside agarden/green‐house (e.g. Viherlandia)

Challenge: Reading temperature, humidity, lighting, etc. from an array ofsensors

– A few hundred sensors

– Automatically querying

– Aggregating and processing

http://fi.wikipedia.org/wiki/Viherlandia

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Example: Alternative solutions

1. Using external proprietary end‐to‐end solutions and/or services e.g. Vaisalaweather stations

C t (li f ) IETF i t f (802 11b Eth t USB)– Connects over open (license‐free) IETF interfaces (802.11b Ethernet or USB)

– May need customization, tailoring, configuration, specific infrastructure

– Maintenance and support is needed; requires vendor‐specific knowledge

2. Using external M2M services with standard protocols/interfaces,e.g. Temperature@lert– Connects over GSM/3G/LTE

– Operators’ equipment for connecting is needed

– Aggregation and processing may need to be developed

– Subscription requiredSubscription required

3. In‐house solution– Acquiring COTS sensors from e.g. IndustrialEthernet and potentially computing

infrastructure unless Pachube or another platform is used

– Implementing communication, aggregation and processing

– Maintenance with in‐house resources

Example: Shortcomings of solutions

All three alternatives may have problems:

Lock‐in into a single‐provider's solution is likely, especially if thecomponents are incompatible with future de‐facto standards

Solutions are expensive

Solutions are not future‐proof, since it is unknown whether

– i) the vendor becomes a dominant market leader

– ii) the interfaces used become de‐facto standards enabling compatibility andsimplifying maintenance and future development

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Customers’ and vendors’ possible decisions

Customer side: Waiting for the dominant design to appear

– May take too long

– Business suffers, esp. if betting late on a wrong candidate

Vendor side: Embrace some of the standards as a basis

– Immature technology that is not adopted later (ISO IP) may be selected

– Resistance from stakeholders may result in non‐adoption (WiMax)

– Incompatible technology may still result

Importance of looking at the ecosystem

Being a customer, When selecting the alternative and vendor, one needs to

– Predict, where the market (of M2M solutions) will go in future ‐ vertical silos vs.open horizontal layers

– Predict, which of the solutions will be either dominant, or relatively compatiblewith the dominant – i.e. which ecosystems will emerge

– Predict, which companies are likely to be the leaders

Being a vendor, When deciding on the alternative architecture andinterfaces, one needs to

– Predict, where the market (of M2M solutions) will go in future ‐ vertical silos vs.h i t l lopen horizontal layers

– Predict, which solutions will be dominant, i.e. which ecosystems will emerge

– Devise and implement the architecture compatible with future state of the art

In essence, it is important to predict the likely ecosystem development, andact accordingly

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Example: Utility company using Smart meters

Current: Smart meter with integrated GSM/GPRS modem 

Future: Gateway‐mediated communication with service providers

How to communicate with the gateway?ZigBee, BT, WiFi, MBus?

Source: NXP

IoT Ecosystems

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New IoT Ecosystems

The “things” in IoT expand existing Internet applications and services andenable new ones. This new functionality creates and requires newtechnical components and roles and enables the configuration of newbusiness models in ecosystems.

New roles

Source: SENSEI Deliverable D1.4 Business Models and Value Creation

Main concerns

How is the IoT field (market, ecosystems) going to develop?

How shall a company act to adopt to the expected developments?

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Role of studying IoT ecosystem

Realizing where IoT is going to

– What technology is going to get the dominance

– Considering core, value chain/network, ecosystem

– Considering time frame, customer base, resulting cost structure

Realizing how the companies should act, e.g. for vendors

– In early market – focus on the business customers with critical needs

– In bowling alley – focus on the niches with unserved demand

– In tornado – focus on the whole market

– After tornado – serve your existing customer basey g

– Taking into account time, expected dominating technology, expected customerbase and cost structure

IoT field development: Core

Core of the IoT ecosystems

– Formed around an innovation: innovative ways of connecting physicalworld to the virtual world

– Involves common platforms, technologies, processes, standards orother common assets

Examples of a core:

– Tagging, sensing, communications technologies (RFID databases)

– Mediating platform (Pachube/LogMeIn)

– Supporting systems and services

https://pachube.com/

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IoT field development: Core (ctd)

Current IoT market is fragmented: different verticals may have differentecosystems (and hence cores) with little overlap.

Therefore, we shall consider different verticals and their specific needs:

– Transportation (logistics, ticketing), healthcare (patient monitoring): often mobility,often real‐time, reliability

– Building/home automation (lighting, heating, cooling, security): often real‐time,reliability

– Energy (smart meters): reliability

– Retail (smart tags): real‐time, low cost, energy‐efficiency, scalability

Match the above against the characteristics of available technical alternatives:

– ETSI – M2M/3G: mobility, reliability, low energy efficiency, high cost, relatively badscalability

– IETF – roll, 6loWPAN, core: low cost, no mobility, scalability

– EPCglobal – RFID: low cost, real‐time; identification only, sensing capabilities are notstandardized yet

IoT field development: Value networks

In addition to core, a VN includes partners providing complementaryproducts needed to deliver the "whole product“, as well as relevantstandard bodiesstandard bodies

Source: SENSEI Deliverable D1.4 Business Models and Value Creation

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IoT field development: Value networks (ctd)

Example: On‐Star provides "subscription‐based communications, in‐vehiclesecurity, hands‐free calling, turn‐by‐turn navigation, and remotediagnostics systems throughout the United States, Canada and China"

Partners:

– GM (vehicle, distribution)

– EDC (sys development)

– HWmanufacturers (Hughes, now LG)

– MNO (Verizon Wireless)

– Emergency Call Centers

– Roadside assistance: dealerships, towing service, gas stations

– Insurance companies

Standard bodies:

– Society of Automotive Engineers, ISO ‐ CAN bus

– CDMA 2000 ‐Wireless link (CDMA)

– GPS positioning

http://www.onstar.com

IoT field development: Ecosystems

Different verticals/segments may host different ecosystems. 

Competing organizations with shared products and service 

In addition to value network ingredients, these include:

Government agencies 

– FP7 IoT European Research Cluster (IERC)

– Artemis JU

– IPSO Alliance

attributes, business processes, organizational arrangements.For the case of OnStar example, competing organizations include

– Ford (Sync)

– Volvo (OnCall)

– BMW (Assist)

– Mercedes‐Benz (mbrace)– ZigBee Alliance

Stakeholders

– Investors 

– Trade unions

– Toyota (G‐book)

– Honda (Internavi)

– Nissan (CarWings)

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Research questions

Industry:

– Are there possibilities for horizontalization in IoT field through standards andopen interfaces?

– What is the cost structure of possible IoT applications using the technology andmethods available today?

– Where can the biggest impact on price be made with common platforms,standardized building blocks, self‐configuration, optimized communication, etc.?

– How to describe and quantify the forces affecting the adoption of newIoT applications, services and protocols?

Ecosystem/value network: Ecosystem/value network:

– What is an IoT ecosystem, who are the relevant players in it, and what are rolesof the players in the IoT ecosystems?

– How to identify, describe and evaluate the alternative technical architectures andcorresponding value networks of the IoT services?

– What is the role of platforms, standards, open interfaces in an IoT ecosystem?

– How will an IoT ecosystem emerge, and what may hamper this process?

How shall a company act to adopt to the expected developments?

A business model defines how the organization operates in the market andthe basis of its value creation, delivery, and capture.

– Business models are evolving as the organizations and their ecosystem(s)evolve.

– The analysis of business model and its development needs can be made withthe help of a reference framework, such as business model canvas.

http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf

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Research questions

What business models are suitable for IoT ecosystem firms?

How to design and/or re‐align business models for an IoT ecosystem?

How will business model change and evolve in an IoT ecosystem?

What are business model development needs for different roles?

SIRT – Software Industry Research Team

Web:/ / / / / / /www.jyu.fi/it/laitokset/cs/en/research/sirt/

Prof. Pasi Tyrväinen +358 14 260 3093pasi.tyrvainen@jyu.fi

Oleksiy Mazhelis+358 40 515 0641mazhelis@jyu fimazhelis@jyu.fi

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Thank you!