Skip to Content
Istanbul from sky

What is IoT and how does it work?

 

In the most general of terms, the Internet of Things includes any object – or “thing” – that can be wirelessly connected to an Internet network. But today, IoT has more specifically come to mean connected things that are equipped with sensors, software, and other technologies that allow them to transmit and receive data – for the purpose of informing users or automating an action. Traditionally, connectivity was achieved mainly via Wi-Fi, whereas today 5G and other types of network platforms offer the promise of handling huge data sets, almost anywhere, with speed and reliability.

 

Once IoT devices collect and transmit data, the ultimate point is to learn as much as possible from it, and make it deliver increasingly accurate and sophisticated outputs and insights. This is where AI technologies come into play: augmenting IoT networks with the power of advanced analytics and machine learning.

History of IoT

In 2021, there were over 10 billion IoT devices in the world, and by 2025, the IDC expects global data generation to exceed 73 zettabytes – which is equal to 73 trillion gigabytes. Although we can’t really quantify digital data in physical terms, we can say that if all that data were converted into 1990s floppy disks – and they were laid out end to end – they could go to the moon and back over 5,000 times.

 

In just a few decades, IoT data has grown exponentially, and that’s likely to continue. So what set off this Internet of Things boom? For IoT to evolve, a specific set of technologies had to come together and advance concurrently.

 

 

  • Connectivity: Evolving from humble modem-based beginnings, today’s Internet and cloud connectivity is now sufficiently fast and robust enough to send and receive enormous volumes of data and support the IoT’s exponential growth. 
  • Sensor technology: With the steady rise in demand for IoT sensor innovation, the market went from a few costly, niche providers to a highly globalized and price-competitive sensor manufacturing industry. Since 2004, the average price of IoT sensors has dropped by over 70%, accompanied by a demand-fueled rise in better functionality and diversity in these products.
  • Computing power: There will be two times more data created in the next five years, compared to since the start of digital storage. To use and leverage all that data, modern businesses demand ever-increasing amounts of memory and processing power. The race to achieve this has been fast and competitive and has driven the growing relevance and applicability of IoT.
  • Big Data technology: Since the 1980s, the world’s data, as well as the computer technology needed to store it, has grown exponentially. Advances in databases and analysis tools have allowed massive volumes of data generated from IoT devices, smart vehicles, and equipment to be processed and analyzed in real time. This speed and capacity is essential for the Internet of Things.
  • AI and machine learning: These technologies provide the ability to not only manage and process vast amounts of IoT data, but to analyze and learn from it. Big Data is the favorite food of artificial intelligence and machine learning. The bigger and more diverse the data sets, the more robust and accurate the insights and intel that AI-powered advanced analytics can deliver. The rise in IoT devices has very much grown alongside the advancement of artificial intelligence and its appetite for the data they deliver.
  • Cloud computing: Just as connectivity was integral to the development of the Internet of Things, the rise of cloud computing has also been closely tied to its evolution. With the ability to deliver processing power and high-volume storage on demand, cloud IoT services paved the way for IoT devices to gather and transmit increasingly large and complex data sets.

How does IoT work... and why?

IoT devices are our eyes and ears when we can’t physically be there – capturing whatever data they are programmed to gather. That data can then be collected and analyzed to help us inform and automate subsequent actions or decisions. There are four key stages in this process:

How IoT technology works

Four key stages in the internet of things

 

  1. Capture the data. Through sensors, IoT devices capture data from their environments. This could be as simple as the temperature or as complex a real-time video feed.
  2. Share the data. Using available network connections, IoT devices send this data to a public or private cloud system (device-system-device) or to another device (device-device), or store it locally as directed for processing at the edge.
  3. Process the data. At this point, software is programmed to do something based on that data – such as turn on a fan or send a warning.
  4. Act on the data. Accumulated data from all devices within an IoT network is analyzed. This delivers powerful insights to inform confident actions and business decisions.

What are the industrial uses of IoT data?

Of the trillions of gigabits of data we generate each year, Industrial IoT (IIoT) data is the largest (and fastest growing) producer of data. Much of it comes from the almost one billion surveillance cameras around the world. Huge amounts are also generated by connected cars and manufacturing and transportation applications. Today, IIoT data is generated, gathered, and leveraged across virtually every industry, from supply chain management to healthcare.

 

One of the areas in which IIoT technology is growing the fastest is within manufacturing and supply chains. In a smart factory, sensors can detect and even predict mechanical issues to keep things running smoothy. They can also collect and analyze operational data to find workflows and processes that are the fastest and most efficient – which can then be automated via a central system. In supply chains, IoT solutions help to streamline operation from end to end. Raw goods and supplies can be tracked for safety and provenance. Cargo, shipping, and last-mile logistics can be monitored in real time. And customers can have live updates about the state of their orders or the origin of their products.

Learn more about industrial IoT

Discover how IIoT data helps improve industrial operations from end-to-end.

The future of IoT

What we can look for in the future, is a more seamless integration between technology and human experience. While the metaverse may still be a few years away, 3D audio, advanced virtual reality, haptic sensations, and AI-powered real-time personalization will mean that our interaction with the devices around us, will allow for increasingly “real” sensory experiences. Furthermore, with the rise of 5G and globally ubiquitous fast connectivity, humans will have a quantum-like ability to share these experiences across any distance. The implications of this are vast and have the potential to change how we approach some of our most fundamental activities and institutions such as workplaces, surgical and medical care, real estate, shopping, travel, and human relations in general.  

Transformative outcomes with the IoT

Explore IoT data services and use your embedded sensor data to transform.

SAP Insights Newsletter

Subscribe today

Gain key insights by subscribing to our newsletter.

Further reading

Back to top