ACCELERATING BUSINESS TRANSFORMATION

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1 Opportunities and Challenges in the Internet of Things INNOVATORS START HERE.

2 EXECUTIVE SUMMARY The ability of intelligent devices to perceive and respond to the environment around them makes them highly valuable for complex, automated decision making in a broad range of industries. The growth potential is explosive: Billions of units are generating more than $1 trillion in revenue today, and according to technology analysts IDC, the market for intelligent systems will reach nearly 4 billion units by 2015, representing more than $2 trillion in revenue. IDC further predicts that there will be anywhere from 20 to 50 billion connected devices by Yet significant challenges remain for this Internet of Things (IoT) in particular, an absence of standardized recipes that would allow IoT solutions to scale across multiple industries. As a global leader in embedded technology, Wind River delivers the solutions that make IoT and the devices that run on it intelligent, reliable, manageable, and secure. We work closely with device and system developers, manufacturers and integrators, network operators and end customers in a variety of industries to understand business needs and identify IoT solutions. This paper draws on that experience to outline some of the major opportunities we see for business as well as some of the challenges to unlocking the full potential of IoT. TABLE OF CONTENTS Executive Summary The End of Business as Usual... 3 Retail... 3 Energy... 3 Buildings and Homes Automotive... 4 Healthcare Transportation Big Opportunities, Big Challenges... 5 The Search for Standards White Paper

3 THE END OF BUSINESS AS USUAL Sometimes also referred to as the Industrial Internet or Industrial Revolution 4.0, IoT is shaking up traditional business models in a wide variety of sectors. Not only does it have the power to transform existing operations through dramatic productivity gains and economies of scale, but it also makes possible entirely new lines of business and services that would not otherwise exist. The compelling driver behind connecting smart devices via IoT is, as is often the case, economic advantage. For example, it typically costs at least three times more for a human being than a device to service a machine, read a utility meter, or adjust the heating and cooling to manage energy usage in a building. Another important driver is the real-time demand for Big Data to make faster and more precise decisions. As data becomes the new currency of business, IoT architectures can supply both the raw and structured data material and the sophisticated real-time analytics that shape and guide more intelligent business decisions. IoT architectures also provide both a ramp to the cloud and a means of exploiting the cloud s potential, enabling businesses to develop new business-to-business or business-to-consumer services that create new efficiencies and economies. IoT has produced two key operational benefits across multiple industrial sectors: Real-time analytics: Enabling predictive maintenance and selfdiagnostics, real-time analytics are performed autonomously by intelligent machines and devices in IoT. For example, systems can extend the life of components that are near failure by reducing mechanical load, or request service calls autonomously. Predictive maintenance eliminates the time and labor costs associated with scheduled inspections and preventive maintenance, and increases efficiency by better managing parts inventories and decreasing stock costs. The performance data supplied by intelligent devices also informs R&D, enabling engineers to address recurring issues in future iterations of the product Adaptive analytics: Converting the vast data sets generated by IoT into a source of rich and actionable information, adaptive analytics can help identify the trends that will transform your business. By enabling large-scale, real-time decision making to improve the behavior of devices and systems, adaptive analytics actually makes smart systems smarter, so systems can more precisely diagnose and resolve issues as they occur. Industries are also exploring ways to adapt IoT capabilities to their everyday operations. Retail With IoT technology, vending machines can communicate via radio-frequency identification (RFID) for inventory replenishment, cutting the cost and inefficiency of restocking based on schedule rather than need. The same technology also enables modern payment concepts through emerging mobile phone payment standards. Or it can provide alerts for unplanned downtime caused by power outages, vandalism, or equipment failure. From the consumer s perspective, the distinction between online and in-store shopping experiences will continue to blur, as touchscreen monitors and kiosks proliferate in store aisles, and shoppers can download discount coupons onsite via their smartphones. The data collected from swiped and scanned loyalty cards enables retailers to make highly customized offers to their best customers. Energy Distributed energy sources such as solar and wind power account for a growing percentage of total generated power, and maintaining quality power will become difficult without a dynamic demand mechanism to manage customer consumption in response to supply conditions, market prices, or demand. Given the unpredictability of solar and wind power, utilities need the ability to plan for contingencies. The solution lies in intelligent grid automation and a vastly growing number of sensors that generate, collect, and analyze massive volumes of data to make distribution decisions. 3 White Paper

4 Machine-to-machine (M2M) monitoring and control enable the smart grid to adjust to ever-changing conditions autonomously with higher reliability, security, and performance than ever before. The smart energy grid will integrate traditional and emerging power sources and make the delivery of energy cleaner, safer, and more economical. Operators will have the transparency and visibility to monitor and analyze the flow of energy, and two-way communication with consumers smart meters to analyze consumption patterns. Smart IoT devices will manage the distribution of energy based on real-time data and provide situational awareness. Predictive maintenance capabilities will help mitigate the impact of outages or downtime resulting from environmental conditions, malfunctioning transformers, or other distribution equipment. Intelligent energy distribution and management also pay an environmental dividend. Connected devices can perform powermanagement tasks with finer precision and faster response times than manual, human-dependent systems, thereby saving energy, prioritizing usage, and setting policies for response to outages. Buildings and Homes Integrated with the smart energy grid, smart buildings and homes represent a huge opportunity to reduce power consumption by businesses and families. Power providers can take advantage of efficiencies based on the schedules and usage patterns of building inhabitants. Building operators and residential consumers will be able to monitor utility consumption and control heating, lighting, and security systems remotely. Smart power meters and appliances will communicate with intelligent power sources to help balance supply and demand. And structures that generate their own power, through such means as solar panels or backyard wind turbines, will have the ability to feed energy into the utility grid, creating a truly bidirectional system of energy distribution. As demographics change in our societies, with populations aging and life spans extending, the modern building will need to support independent living for older individuals. With its sensors, controllers, and intelligence, smart buildings can provide telemedical solutions or other technical assistance for aging people, enabling true ambient assisted living. IoT concepts will play a significant role not only in buildings of the future, but also in increasingly interconnected, interoperable cities. Extending today s building automation through intelligence, security, modularity, and intuitive interfaces that allow autonomous operations, smart buildings and facilities have the potential to transform our living and work experiences. Automotive Today, modern cars with dozens of electronic control units (ECUs) connecting to a wealth of sensors provide a foundation for intelligence that makes cars ripe for IoT concepts. ECUs and onboard computers in cars already alert drivers to potential mechanical problems. But in IoT, the connected car will leverage telemetry services to transmit that information to service centers. Operators will be able to acquire and normalize data and collaborate with other parties around that information. Thus equipped, service technicians will be able to give customers better, more personalized service and develop loyalty among their clientele. Garages will be able to optimize their parts inventories, ordering only those parts they know they will need based on data from their customers cars. With access to information from cars on the road, car manufacturers will be able to expedite and improve R&D. On the streets and highways, car-to-car communication will alert drivers to traffic jams or accidents ahead. Communication between cars and traffic management systems operated by municipalities will provide a smoother driving experience in areas with everincreasing traffic density, making life easier for drivers. With the increasing number of assistance systems in today s cars, connecting clusters of cars through car-to-car communication will make cars increasingly autonomous devices, further improving safety and security and generating efficiencies for car owners and entire fleets. The automotive industry will see new economic opportunities through cost reduction and new, untapped revenue streams. The foundation for success is a reliable, secure, manageable, and intelligent connectivity experience in cars, enabling analytics and predictive maintenance when integrated with the business infrastructure. Healthcare There are hundreds of IoT-based healthcare service opportunities in hospitals, doctors offices, and homes, as well as through mobile applications. Smart devices enable healthcare professionals to better understand patients conditions and make accurate, timely, and realistic recommendations. 4 White Paper

5 Machines will manage medication dosages and X-ray radiation levels. Hospitals will be able to leverage the data generated by CT scanners, X-ray machines, and other equipment to monitor and audit their usage, protecting patient safety while meeting FDA compliance requirements. For example, infusion pumps today need to be continuously monitored for patient safety. When pumps connect to intelligent system architectures, doses could be preset or connected to electronic medication systems and bar codes. Intelligent infusion pumps are on the near horizon. Transportation All modes of mass transportation whether air, rail, or urban transit increasingly rely on data and automated decisions to ensure safe and predictable service, as well as optimal equipment utilization. Positive Train Control (PTC) in North America and the European Train Control System (ETCS) are two examples where IoT affects entire ecosystems and their operational procedures, from the transportation department to the operator to the supplier. Multi-tenant concepts, which allow all parties to collaborate more closely and get access to critical information, will enable transportation systems to operate more reliably and safely. Vehicles will be able to communicate with each other plane-to-plane to report turbulence, or bus-to-bus to report traffic delays as well as with cloud-based central control systems tracking their movements. Rather than simply alerting operators, vehicles will also transmit defect data in real time directly to engineers, allowing extended analyses. Predictive maintenance will identify assets in need of repair, reducing downtime for inspections and optimizing equipment in service. System operators will have real-time visibility into ontime performance, energy consumption, usage, and maintenance needs all the operational parameters that affect their business. A highly visionary concept is the integration of systems-ofsystems, such as automotive with rail or urban with extra-urban transportation, through IoT-enabled intelligence. Combining the business intelligence from different transportation sectors will create a totally new experience of seamless mobility for consumers. BIG OPPORTUNITIES, BIG CHALLENGES These examples of real-world applications whether already deployed, in development, or on the drawing board are truly transformative. IoT can enable and accelerate many new business and service opportunities, as well as revenue generation. Enthusiasm about the possibilities, however, is tempered by the real challenges that could slow adoption and impede scalability both within and across vertical markets. Companies with a stake in IoT have to address a series of questions. What is the best way to connect the wealth of new applications, systems, and devices to complex and often fragile networks? How can Big Data inform and guide the design of systems and devices for a better connectivity experience? How can data be exchanged among siloed vertical markets, systems, and applications? How can the operational efficiencies of IoT-enabled systems be scaled to create higher profit potential? And how can successes and lessons learned be leveraged more broadly across multiple vertical markets? Operators and device or system manufacturers have very different perspectives on the opportunities, but all are looking to develop solutions that will scale efficiently, increase average revenue per device, and create competitive differentiation, while responding to the needs of specific vertical industries. 5 White Paper

6 THE SEARCH FOR STANDARDS A major challenge to widespread adoption is market fragmentation. The market is composed of many different vertical industries, and their applications tend to have little overlap, making it difficult to scale solutions. Furthermore, the technologies involved in creating intelligent systems are extremely broad and complex; most solutions do not provide a seamless end-to-end experience between the business backbone and the system or device domain, and thus must be customized to some degree. There is also a lack of specialized skills and expertise, as the skills required to build intelligent devices, in addition to the requisite market strategies, typically reside outside the core competency of operators and device manufacturers. Wind River is actively working with a variety of industry partners and customers to address these challenges, eliminate barriers, and bring IoT concepts to life. With deep experience in a broad range of sectors and mission-critical applications, we understand end-user requirements and help design intelligent components from the ground up to be reliable, manageable, and secure. We are perfectly positioned to help companies in any industry leverage IoT to improve performance, launch new services and businesses, and generate new revenue streams. Slowly evolving standards in technology or application deployment are another challenge. Much development is taking place in isolation. The core components of IoT architectures have often been implemented in an ad-hoc fashion, using multiple competing standards in development and deployment. Few operators or device manufacturers can create IoT-based solutions without significant assistance from partners, who may as yet be outside of their current ecosystem. The market potential of IoT is enormous, but actual benefits achieved by businesses have been thus far constrained by the complexity of producing real-world applications. This will change rapidly as standards coalesce, market needs and business cases become more sharply defined, and operators and device manufacturers are freed to focus on the true value they can deliver: innovative new services and applications. Wind River is a world leader in embedded software for intelligent connected systems. The company has been pioneering computing inside embedded devices since 1981, and its technology is found in nearly 2 billion products. To learn more, visit Wind River at Wind River Systems, Inc. The Wind River logo is a trademark of Wind River Systems,Inc., and Wind River and VxWorks are registered trademarks of Wind River Systems, Inc. Rev. 01/2015