Bus Inf Syst Eng

DOI 10.1007/s12599-015-0383-3

CATCHWORD

Internet of Things
Technology and Value Added

Felix Wortmann • Kristina Flüchter

Received: 29 January 2015 / Accepted: 2 March 2015

Ó Springer Fachmedien Wiesbaden 2015

Keywords Internet of things
Technology stack
origins of the term date back more than 15 years and have
Platforms been attributed to the work of the Auto-ID Labs at the
Massachusetts Institute of Technology (MIT) on networked
radio-frequency identification (RFID) infrastructures (At-
1 Introduction zori et al. 2010; Mattern and Floerkemeier 2010). Since
then, visions for the Internet of Things have been further
It has been next to impossible in the past months not to developed and extended beyond the scope of RFID tech-
come across the term ‘‘Internet of Things’’ (IoT) one way nologies. The International Telecommunication Union
or another. Especially the past year has seen a tremendous (ITU) for instance now defines the Internet of Things as ‘‘a
surge of interest in the Internet of Things. Consortia have global infrastructure for the Information Society, enabling
been formed to define frameworks and standards for the advanced services by interconnecting (physical and virtual)
IoT. Companies have started to introduce numerous IoT- things based on, existing and evolving, interoperable in-
based products and services. And a number of IoT-related formation and communication technologies’’ (ITU 2012).
acquisitions have been making the headlines, including, At the same time, a multitude of alternative definitions has
e.g., the prominent takeover of Nest by Google for $3.2 been proposed. Some of these definitions exhibit an em-
billion and the subsequent acquisitions of Dropcam by Nest phasis on the things which become connected in the IoT.
and of SmartThings by Samsung. Politicians as well as Other definitions focus on Internet-related aspects of the
practitioners increasingly acknowledge the Internet of IoT, such as Internet protocols and network technology.
Things as a real business opportunity, and estimates cur- And a third type centers on semantic challenges in the IoT
rently suggest that the IoT could grow into a market worth relating to, e.g., the storage, search and organization of
$7.1 trillion by 2020 (IDC 2014). large volumes of information (Atzori et al. 2010).
While the term Internet of Things is now more and more The fields of application for IoT technologies are as
broadly used, there is no common definition or under- numerous as they are diverse, as IoT solutions are in-
standing today of what the IoT actually encompasses. The creasingly extending to virtually all areas of everyday. The
most prominent areas of application include, e.g., the smart
industry, where the development of intelligent production
Accepted after one revision by Prof. Dr. Sinz. systems and connected production sites is often discussed
under the heading of Industry 4.0. In the smart home or
Ass.-Prof. Dr. F. Wortmann (&)
building area, intelligent thermostats and security systems
Institute of Technology Management, University of St. Gallen,
Dufourstrasse 40a, 9000 St. Gallen, Switzerland are receiving a lot of attention, while smart energy appli-
e-mail: [email protected] cations focus on smart electricity, gas and water meters.
Smart transport solutions include, e.g., vehicle fleet track-
Dr. K. Flüchter
ing and mobile ticketing, while in the smart health area,
Institute of Information Management, ETH Zurich,
Weinbergstrasse 56/58, 8092 Zurich, Switzerland topics such as patients’ surveillance and chronic disease
e-mail: [email protected] management are being addressed. And in the context of

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 F. Wortmann, K. Flüchter: Internet of Things, Bus Inf Syst Eng

smart city projects, solutions like the real-time monitoring The impact which IoT technologies can have is however
of parking space availability and intelligent lighting of not limited to the value created by individual connected
streets are being explored (Atzori et al. 2010; Fleisch 2010; products. Instead, the functions of one product may be
Vermesan et al. 2014). further enhanced if it is connected to related products and
thus becomes part of a product system. For instance, a
connected tractor may form part of a larger farm equipment
2 Value Creation in the Internet of Things system, which could include, e.g., additional tractors, har-
vesters, balers, or drills, and monitor the location as well as
At its core, innovation in the Internet of Things is charac- key performance indicators of the machines to optimize the
terized by the combination of physical and digital compo- overall equipment efficiency of the larger fleet. And going
nents to create new products and enable novel business beyond even such product systems, the combination of
models. Thanks to increasingly efficient power manage- multiple, previously disparate product systems, e.g., farm
ment, broadband communication, reliable memory and equipment systems, weather data systems, seed optimiza-
advances in microprocessor technologies, it has become tion and irrigation systems, may lead to systems of sys-
possible to digitalize functions and key capabilities of in- tems, which have the capacity to expand existing industry
dustrial-age products (Yoo et al. 2010). Consequently, a boundaries and shake competitive dynamics (Porter and
range of opportunities is unfolding for companies to gen- Heppelmann 2014).
erate incremental value in the Internet of Things. Figure 1
illustrates the logic of such value creation. It demonstrates
that IoT solutions typically combine physical things with IT 3 Technology Stack and Platforms for the Internet
in the form of hardware and software. As a result, the pri- of Things
mary thing-based physical functions of a thing can be en-
hanced with additional IT-based digital services, which can From a technological perspective, the implementation of a
be accessed not only on a local basis but at a global level. connected product typically requires the combination of
For instance, the primary thing-based function of a light multiple software and hardware components in a multi-
bulb is to provide light in a specific location. If the light bulb layer stack of IoT technologies. As illustrated in Fig. 2,
is however enhanced with IoT technology, it may addi- such an IoT technology stack is usually composed of three
tionally detect human presence and serve as a low-cost core layers, i.e., the thing or device layer, the connectivity
security system, which in the event of an intrusion activates layer and the IoT cloud layer. At the device layer, IoT-
a flashing light mode and sends an alert to the owner’s specific hardware, such as additional sensors, actuators, or
smartphone. Similarly, the primary thing-based function of processors can be added to existing core hardware com-
a bin is to provide storage capacity. But when the bin is ponents, and embedded software can be modified or newly
enriched with IoT technology it may moreover measure and integrated to manage and operate the functionality of the
monitor its own weight, thus detect levels of low stock and physical thing. At the connectivity layer, communication
offer an automatic replenishment service. And while the protocols such as MQTT enable the communication be-
primary thing-based function of a tractor may be to tow tween the individual thing and the cloud. And at the IoT
other farm equipment, a connection of the tractor to the IoT cloud layer, device communication and management soft-
could facilitate IT-based predictive maintenance and opti- ware is used to communicate with, provision, and manage
mization services (Fleisch et al. 2014). the connected things, while an application platform enables

Fig. 1 IoT-product-services
logic (based on Fleisch et al. Hardware Thing-based Physical IT-based Digital
2014) THING + IT = +
Software function Local service Global

Bulb IoT stack Light Security

Storage Automatic
Bin IoT stack
capacity replenishment

Towing Predictive maintenance,

Tractor IoT stack
vehicle optimization

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IoT cloud
IoT application
Software that coordinates the interaction of people, systems and things/devices
in the context of a given propose.

Analytics and data management Process management

Software components to store, process and Software components to define, execute, and
analyze a vast amount of monitor processes across people, systems and
time series-based machine data things/devices

Application platform
A fundamental application development and execution environment to createIoT applications

Identity and Thing/device communication and management Integration with

External
security Software components to communicate with as well as provision, and manage things/devices. business
information
Software systems
sources
components that Software
Software
mange user components that
components that
authentication integrate data
enable the
and access, as Connectivity from core
integration of
well as assure enterprise
external, third
security across systems such as
Network communication party
the different ERP, CRM and
Protocols that enable communication between thing/device and cloud information
layers PLM

Thing/Device
Thing/device software
Embedded software that runs on the physical thing to manage and operate its functionality

IoT components
Embedded sensors, actuators, processors, and connectivity port/antenna

Thing/device hardware
Core hardware components of the physical thing

Fig. 2 IoT technology stack (based on Porter and Heppelmann 2014)

the development and execution of IoT applications. stack and correspondingly include diverse sets of func-
Moreover, analytics and data management software is tionalities in their offerings. Hence, there is no standard
employed to store, process, and analyze the data generated configuration of an IoT platform, but a multitude of IoT
by the connected things, and process management software platforms exists, which address specific needs and areas of
helps to define, execute and monitor processes across application. While some IoT platforms, e.g., Eclipse, are
people, systems and things. Ultimately, IoT application rather thing-focused and offer mainly functionality to de-
software coordinates the interaction of people, systems and velop and operate embedded applications on things, other
things for a given purpose. In addition, cutting across all IoT platforms, e.g., Xively, focus on IoT-specific func-
layers, software components manage identity and security tionality to complement potentially existing non-IoT plat-
aspects, as well as the integration with business systems, forms. And a third type of IoT platforms seeks to provide a
e.g., for ERP or CRM, and with external information set of functionalities which is as comprehensive as possi-
sources (Porter and Heppelmann 2014). ble, going beyond core IoT technologies in an all-in-one
In the context of discussions about IoT technologies, a IoT platform approach. Examples of this third type of IoT
frequently-used concept is that of IoT platforms. In com- platforms currently include, e.g., ThingWorx and the
puting, the term ‘‘platform’’ itself is a relatively broad Bosch IoT Suite.
concept, which has, e.g., been defined as ‘‘a group of
technologies that are used as a base upon which other ap-
plications, processes or technologies are developed’’ 4 Challenges and Future Directions
(Janssen 2015). Within the Internet of Things, IoT plat-
forms are essentially software products, which offer com- As the future for the Internet of Things is bright and ex-
prehensive sets of application-independent functionalities pectations rising, significant challenges remain to be solved
that can be utilized to build IoT applications. The nature of not only from a technological point of view but also from a
individual IoT platforms therein may vary considerably as business perspective, where the introduction of connected
providers focus on different aspects of the IoT technology products raises a number of important operational as well

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as strategic questions. For example, at a strategic level, technologies not only as a support function but as a core
executives are now forced to evaluate the opportunities and element of value creation and as a source of competitive
threats which the emergence of the IoT might present to advantage. In order to enable the implementation of such
their companies. As a result, existing business models may new digital innovation strategies, corporate IT infrastruc-
have to be adapted or re-defined based on a new posi- tures will be in need of new governance principles, tools,
tioning of products in the Internet of Things, and even and processes in order to effectively and efficiently man-
entire industry boundaries may need to be re-assessed as age, coordinate, and connect the required resources within
competition starts to shift and expand. At an operational and beyond the boundaries of individual corporations (Yoo
level, fundamental managerial challenges are for instance et al. 2010). Hence, a multitude of new opportunities is
likely to arise as rigorous hardware and agile software again emerging for IS researchers to contribute to the so-
cultures start to clash not only within companies but even lution of demanding real-world challenges and create direct
at early product development stages. After-sales service value for practitioners.
processes may have to be modified to meet the require-
ments of connected products. New marketing tools could
become relevant as connected products enable a more di-
rect or extended communication with customers. And new References
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