THE FUTURE OF THE INTERNET OF THINGSBy
The Internet of Things has grown drastically over the last few years and will only get bigger. As gatekeepers of company data, management accountants should learn how to connect the data and use it to their company’s advantage.
Here’s something for management accountants to think about: Why is the Internet of Things (IoT) a thing for us? First, let’s define this surging technology, which is the interconnectivity of a variety of remote devices via the Internet or internal networks that provide real-time information for analysis and decision making. Examples include RFID (radio-frequency identification) chips, smart building controls, and fleet monitoring devices. This technology made it onto the IMA® Technology Solutions & Practices (TS&P) Committee’s list of top emerging technologies (see the TECH Practices column in the July issue of Strategic Finance). We chose the IoT because of the impact that its connectivity has on data collection, analysis, and the decisions or actions that follow.
MAKING THE CONNECTION
All technology is implemented in a context, and convergence is one of these factors in which the IoT contributes to the tsunami of Big Data. What’s driving this flood of information? In “IoT represents the breaking down of silos—but not without open source thinking,” Gordon Haff, cloud evangelist at Red Hat, says, “A number of technology trends are coming together to make IoT solutions more practical: low-power and inexpensive processors for pervasive sensors, wireless networks, and the ability to store and analyze large amounts of data, both at the edge and in centralized data centers.”
As we retrieve more data from connected devices (including ourselves with wearable tech), how should management accountants and finance functions handle setting expectations, costs, and information? Our role as safekeepers of corporate assets doesn’t stop at the border of an information technology silo. We need to be an integrated part of the team that ensures data assets are kept safe by our IT governance and security. We have a duty to apply cost-benefit analysis in project decision making and have the financial analysis background to assist the organization in using the data that flows from these devices and their interrelatedness.
Communication between fleet vehicles and central operations can be highly valuable in logistic operations. Operational efficiency from the reporting from various machines in a manufacturing setting is a key benefit of the IoT. This aspect has been dubbed the “Industrial Internet” and has the potential for optimizing supply chains and the interoperability of connected but diverse industries. We all wish for the efficient use of assets, but the IoT has the real potential to optimize the use of PP&E (property, plant, and equipment). This technology will continue to encompass our business and personal spaces and impact the profitability of our companies. But there are also some challenges for security.
The key to implementing the IoT is the intelligence that goes into planning and optimizing the use of the ensuing data. To be most useful, the data needs to be structured for analysis and visualization. Just as devices are interconnected, technologies need to converge to get the most out of them, leading to tech bundles like IoT Big Data Analysis and Visualization. (That exact phrase may not have been written anywhere yet, but the idea is that multiple technologies will collaborate for users’ maximum benefit.) Some of us are just getting used to the idea of the IoT, so it may seem overwhelming to consider the near future of this technology. You can see the potential of these sensors and data at http://industrialinternetnow.com/the-future. These articles and videos in particular are exciting for the future of technology:
- “New renaissance in manufacturing”
- “Machinery becomes aware of its own condition”
- “New business instead of just new technology”
- “How to hack an industrial crane”
- “How will the Industrial Internet affect global material flows?”
HARNESSING THE INTERNET OF THINGS
To get the most value from the IoT, a multidisciplinary approach has the best chance of success. Just as devices interconnect, the developers and users of these sensors and data also need to cooperate in order to imagine and implement successful applications. Relationships between corporate functions are essential to rolling out the optimal solutions that take advantage of these mind-blowing, little digital vacuum cleaners and connections. The excitement engendered by the IoT and other new technology can be harnessed by us management accountants instead of quashed.
The plethora of possible implementations means we have to put on our thinking caps to assist in the evaluation of project priorities and get comfortable with the language of “Industrial Internet” thought leaders. A few well-placed questions will show that we know enough to be valuable members of our company’s IT Governance or Steering Committee. CFOs or controllers may find it easy to say “No” to these projects, but we should avoid hasty judgment and do what we do well: gather and evaluate relevant facts to find the technology most likely to bring the highest return on investment (ROI).
Optimal performance will depend on whether our finance and accounting teams, in collaboration with operational and IT functions, have both a good imagination and good analytical skills. These are exciting times with commensurate risks and rewards for those with the courage to grasp opportunities carefully. Allocating scarce resources effectively requires our best analytical skills to react swiftly to the latest digital trend.
The best outcome for the IoT and similar groundbreaking advances is a skillful application of these solutions to the right problems. If we do our job as accountants properly, the “numbers won’t lie,” and we’ll help guide our organizations profitably through the minefields of failed implementations and wasted resources. On the other hand, we may need to break away from the stereotypical risk-averse accountant to encourage rapid trial-and-error pilot projects to find the best use of the IoT and other emerging technologies before our competitors do. Ultimately, this money will be well spent as a way of filtering for the most effective (cost or otherwise) tools for modernizing existing processes.
FIVE HOUSEHOLD DEVICES IN THE IOT
The Internet of Things is a vast ocean of data. The “smart” devices that connect to the IoT enable you to control them from the palm of your hand. Here are a few examples:
- REFRIGERATOR Adjust the temperature, ensure the components are continuously running properly, and be alerted if someone leaves the door open.
- GARAGE DOOR Open and close the door from your smartphone, control the interior and exterior lights, and get alerts when you forget to close the door.
- THERMOSTAT These thermostats check the weather to adjust the house temperature automatically, or you can adjust the temperature remotely.
- DOORBELL When someone rings your doorbell, a small camera detects motion, allows you to see who’s there, and sends you an alert when you aren’t home.
- COFFEE MACHINE Schedule your morning coffee to start brewing before you wake up, and monitor your machine’s maintenance 24/7.