What does the internet of things mean for businesses?

Q&A: McKinsey & Company on how the internet of things will impact the CIO

What skills will CIOs need to nurture to ensure they can capitalise on the internet of things?
I think the number one set of skills and competencies are around being a closely aligned business partner - so that's absolutely number one and essential.

On the technical side, there are some technology learnings around understanding how to deal with, in many cases, mobile networks with different characteristics, so there's certain networking skills.

And then thirdly there is some interesting understanding around the actual sensors and actuators that would be embedded in physical systems, again which are not traditionally part of the CIO's toolkit or the IT function's toolkit and something the IT function will have to learn about.

What will the internet of things mean for data management and data storage?
It's absolutely going to drive a tremendous amount of data generation as well as data analysis.

Many times in fact we find that companies have instrumented their businesses and collect a lot more data than they're able to effectively derive value from; that gap is going to become even more pronounced as the internet of things generates even more data.

So [the internet of things] will drive data storage requirements but perhaps more importantly it will drive data analysis requirements which is not only a technology question but also a talent question in making sure that you have people who can actually extract business value from the tremendous amount of data that will be generated.

How might the internet of things transform datacentres?
Over the lifetime - or the lifecycle - of a datacentre perhaps as much as half of the total cost of the datacentre actually comes from its energy consumption.

As we all know, datacentres are often not optimally energy efficient. . . many times you have servers that are underutilised.

Virtualisation is one way to deal with it but another interesting thing about it is most datacentre managers don't know where the energy in a datacentre's actually being used and so having the internet of things applied to sense where data is actually being used can help you optimise the energy consumption of the datacentre itself.

If you understand that in fact a lot of energy is being drawn through a whole set of underutilised servers, many times you don't even have to shut those servers down physically but rather just shift the loads to the most energy efficient configuration.

Another thing you can do is understand that a lot of the energy costs for a datacentre come from the HVAC [heating, ventilating and air conditioning] cooling requirements. Again, if you can shift the load in a datacentre in order to balance the HDHC requirements, you can reduce the overall energy footprint of the datacentre.

What kind of privacy concerns arise from this sensor-driven world - and will new legislation be required to police deployments?
Privacy is definitely an issue with some of the applications of the internet of things - ones that deal with personally identifiable information etc[. . .]

It is very clear that for certain applications policy frameworks will have to be put in place. Whether or not they be legislation or self monitoring, it's not clear. . . but certainly for certain applications it'll be important to work through those issues.

Is the internet of things likely to have an impact on companies' organisational structures?
One of the things it's definitely going to impact is IT's relationship to the rest of the business - particularly those businesses that have a lot of physical stock or physical assets out there, because they will have to be much more closely linked.

Again, it depends on the application - for instance, for some of these closed-loop applications, you might find organisations that will have to adjust their internal [modus operandi] - the way they think about managing some of these processes.

Does the rise of the internet of things pose any particular risks for businesses?
Certainly this adds a whole new set of demands around understanding data and being able to leverage it appropriately.

It brings in a new set of competencies but also likewise risks around the integration of the physical world as part of the information system - something that perhaps not everyone has dealt with before.

[In addition] some policy decisions will have to be made around the legal liability of systems that are relatively autonomous.

What should companies and CIOs be doing now to prepare the ground for the internet of things?
There are a couple of these applications which we think are quite right for initial deployments and so companies can take all of these six different categories but perhaps emphasise two of them at least in the near term as 'can we do this today?': one of them around process optimisation and the other one around optimised resource consumption.

Those are two applications which many companies can think about applying today and then furthermore starting to understand, devote some amount of resources to experiments around the other different categories and understand where they might be able to develop business value.

Perhaps some technology pilots, perhaps some studies in terms of where the business value might come from - all those things will be valuable and then also starting to address some of the questions around talent and capabilities in order to successfully use these technologies.

What was the most surprising finding of this research?
It's the degree to which the future's actually becoming the present.

Some of the stuff that just used to show up in movies - remember the Tom Cruise movie Minority Report where there was the billboard that changed what it was showing based on who was in front of it? Well, there is a company selling a box that does that now.

The degree to which the future's actually becoming the present in this stuff was what we found to be surprising in this research.