What Is IoT? Characteristics, Models, Benefits, Example, Architecture, Challenges in Managing

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What Is IoT?

IoT stands for “Internet of Things” and refers to the network of physical devices, vehicles, home appliances, and other items embedded with electronics, software, sensors, and connectivity which enables these objects to connect and exchange data. The IoT allows for the collection and transfer of data from devices over the internet, thereby creating smart and connected systems.

The term ‘Internet of Things (IoT)’ was coined by Ashton in 1999. In recent years, it has been a growing technological trend.

In academia as well as in industry, we can see significant usage of IoT in the past decade. From the perspective of the Industrial Revolution, IoT is termed Industry 4.0 as it includes the Internet of Things, cloud computing and cyber-physical systems. IoT presents a world where all smart things are connected and can communicate with each other.

IoT can be very useful and it can be used to improve and benefit the lives of people all over the world. People will be able to monitor their vital signs and eating patterns and habits so they will be healthier. They will be safer as they can remotely secure their homes.

The businesses will be enormously benefitted by implementing IoT-based solutions. They can make their business strategies more effective and their products smarter.

IoT is considered to be the next evolution of the Internet, as it can collect and analyze data. We can derive insight from the data that will help us to make critical decisions that can even save someone’s business or life. IoT can make almost any process simpler, safe and more useful.

We can see the roots of IoT at the Auto-ID center of MIT. A research group was founded in 1999 to work on RFID.

Let’s see the basic architecture of an IoT system. It consists of some smart devices, an embedded system, such as a microcontroller with network connectivity capability, and some gateway/local networks all connected to the Internet.

Characteristics of IoT Data

The data that we are considering under IoT should possess certain characteristics. These can be termed as:

  • Accuracy: By accuracy, we mean that the data which is being collected accurately reflects its source of generation.

  • Consistency: By consistency, we mean that the data being collected is consistent with the context in which it was produced by each device. For example, if we report multiple events that are tagged with some information such as geolocation, then by consistency, we expect that those geolocations be the same or approximately close to each other.

  • Completeness: By completeness, we mean that all the data which has been generated or generated gets recorded. There should not be any data missing. By timeliness, we mean that the data we are capturing gets recorded in the stipulated time frame. If there is an unforeseen delay in capturing, the data may lose its significance.

  • Timeliness: By timeliness, we mean that the data we are capturing gets recorded in the stipulated time frame. If there is an unforeseen delay in capturing, the data may lose its significance.

Communication Models for IoT

There are various approaches to connection and communication for IoT. These are not standardized. The selection of a particular approach is problem and domain-dependent. The different models for IoT can be listed as follows:


In Device-to-Device communication, two or more devices are connected and can communicate with each other. Communication can be done over any type of network. In most cases, we use the protocols like Bluetooth, Z-Wave, ZigBee, etc.

Applications like home automation, wearable IoT, etc. commonly use this type of model. The amount of information to be sent in such types of applications is very small. Examples can be temperature data, room brightness data, etc.

In this model, the security is simplified because of the short range of communication and mostly one-to-one device interaction. This model is also popular among wearable IoT devices. For example, we can have a heart rate monitor paired with a smart watch. Several standards are being developed around Device-to-Device IoT model.

Here we can specifically mention one of the several standards for data communication, Bluetooth Low Energy. It is popular among wearable and portable devices. It has the characteristics such as low power requirements, which means devices can operate for months without replacing the battery. The size and cost of the device could also be further reduced due to its lower complexity.


In the Device-to-Cloud model, an IoT device is directly connected to the cloud. The data is sent from the device to the cloud and most of the data processing is done on the cloud. From the cloud, the result of the processing/insight can be shared with the concerned person/device. Most often, this model uses wired Ethernet or Wi-Fi. Cellular technology can also be used for communication.

This model offers remote access to services and provides on-the-air software updates. From a security point of view, this model has more complexity than the Device-to-Device model. It is so because of the involvement of the following two credentials:

  • Network access credentials

  • Cloud access credentials


In this model, an intermediary device is used as a gateway to connect the IoT devices to the cloud. An intermediary device can be a hub or a smartphone. We can provide security and other functionality through this gateway. For example, if we have a smartphone as a gateway, then we can have an app on a smartphone that pairs with the IoT device and communicates with the cloud.

In the other scenario, we can have multiple devices connecting to a gateway. This gateway can work as a data aggregator.

It can then send this data locally to different devices/controllers or it can send that data to the cloud. It is common to have devices with different communication standards. A gateway can bridge the gap of interoperability among the devices. This is another advantage of having a gateway.

Backend Data Sharing

This model can be thought of as an extension between the device to a cloud model. Here authorized third parties can access the sensor data and the IoT devices. With the Backend Data Sharing model, we can export and analyze smart object data from a cloud in addition to the data from other sources.

We can also send this data to other services for aggregation and further analysis.

The selection of a particular IoT model depends on the application and the domain area. There is, as such, no clear IoT deployment model. This makes the work of IoT developers quite complicated. This is so because they have to make decisions regarding the device connectivity and how to integrate different devices, whether the data should be aggregated or sent it directly to the cloud.

It is not just a matter of convenience of implementation. We have to take into consideration various factors like limitations of the different wireless technologies, security, small size considerations, low energy consumption, cost cutting, etc.

Technology Roadmap of IoT

In 1991, the World Wide Web, popularly known as www, was introduced. It made the Internet more popular. It also stimulated the rapid growth of the Internet in all spheres. Then, in the early 2000s, various mobile devices getting connected to the internet. Thus, it formed the mobile-internet. In the mid-2000s, people got connected over the Internet through the use of social networking sites.

In the early 2010s, people started connecting more and more to such devices and it started the era of IoT – the next big thing in the technology landscape. Figure 1.7 shows the Technology Roadmap of IoT1960s, the computer network made it possible for the two computers to communicate. In the late 1980s, the use of the Internet was widespread. This was made possible due to the introduction of TCP/IP in the early 1980s.

Benefits and Example of IoT

The benefits of implementing IoT can be listed as follows:

  • Task automation
  • Process optimization
  • Behavior tracking
  • Optimised resource consumption
  • Contented computing
  • Intelligent service
  • Cost-cutting
  • More accurate and fast data collection

Some examples of the possible advantages that can be leveraged out of IoT can be explained below:

Inventory Management

In any industry, inventory management is one of the major and most essential tasks. Here IoT can be used to track the inventory level. Accordingly, the stock can be maintained in advance, the orders can be placed automatically and alerts can be raised for some unforeseen stoppages due to insufficient inventory. It increases the overall efficiency in managing the inventory.

Supply Chain

In the supply chain, it is always desirable and, in some cases, almost essential to track the location or movement of the vehicle/goods. By tracking, we can know the exact status of the consignment to be delivered. Earlier, tracking was being done using GPS.

Now the use of IOT not only eases the tracking of things but also simplifies the entire process by using sensors. All this is done in real-time. It eases the overall operational and monitoring process.

Promotional Ads

It can be used to send mobile promotions to potential customers. For this, the customer’s previous buying patterns/interests are analyzed, and, accordingly, the offers are given automatically.

Identifying Potential Customers

IOT can be used to find potential customers by tracking their online presence. By observing their social media usage, likes, comments, and clicks, a better understanding of their interests and possible shopping/spending can be made. It proves to be a very useful analysis to identify the key customers and their preferences. It truly justifies the proper use of the already constrained marketing budget.

Enhanced Services

Businesses can enhance their service offerings by using IoT. It enables them to track product performance.

By observing the product usage pattern, they can predict the possible failure/maintenance needs much before they emerge as a problem. Accordingly, they can inform their customers in time, which, in turn, increases the satisfaction level of the customers. The businesses can also make some good offers for product replacement/upgradation.

Another advantage that we can get is the product-tracking in case of loss/theft. All this helps in building a loyal relationship with the customers. These are just a few of the benefits IoT offers. It is also equally essential that we tap into the right spots to make better use of this technology to work best for all of us without causing any damage to the environment.

The availability of day-to-day operational data, when combined with analytics, can give a huge competitive advantage. This surely enables businesses to incorporate new functionalities, features, and capabilities in the overall product cycle.

Businesses can analyse the data which they obtain from the connected products, operational en- vironment and business assets and use this insight to innovate, bring new ways to serve, reduce costs, save time and improve quality.

Impact of IoT on Business

The impact of IoT on businesses is huge all over the world. Those businesses which are implementing IoT-based solutions are getting some significant benefits, which involve increased efficiency, better product control, enhanced operations and services, cost cutting, etc. IoT makes each device capable to communicate with other devices directly or over the internet. Shortly, this is going to change the business processes drastically.

Thus, it becomes essential for businesses to start thinking in terms of IoT very seriously In almost all companies, we can have assets that could be tracked. By implementing IoT for this, businesses can improve efficiencies, make better use of the intelligence obtained from the connected assets, improve business operations, etc. All this helps a business to increase the satisfaction of its valuable users/customers.

All businesses, in general, and industrial companies, in particular, lose money when equipment/machinery fails. With the new data collected from sensors, IoT can help a company save money by avoiding or minimizing equipment/machinery failure.

This can be achieved by planning and performing the much, needed maintenance just in time. As the saying goes, “A stitch in time saves nine”. For example, sensor data that records the abnormalities in equipment vibration can be used to predict and avoid equipment failure.

Let’s discuss some of the areas of the businesses where IoT will have a major and more relevant, direct impact:

Minimum Downtime

As more and more devices are getting IoT-enabled, businesses can now do predictive maintenance in time.

As machines interact with each other, the system will be able to predict any probable fault/failure and inform/alert the concerned department/person and avoid major downtime. Thus, by continuously analyzing the machine’s operation and performance, businesses can avoid or minimize any downtime.

Targeted Marketing

Marketing has always been an integral and very important area of any business. Unless and until you do proper marketing, the chances of selling your product/service are low. At the same time, it is also a fact that the budget for marketing is also limited. So, it has to be spent very carefully such that it leads to sales. But the question remains how to decide where to invest the marketing budget? Here the IoT comes to your rescue. IoT-based solutions will help you in identifying target customers.

Improved Business Intelligence

IoT makes it much easier and simpler to collect and extract relevant information from the data. This helps the businesses to examine and get insights that are required for the improvement of the businesses. With the adoption of IoT-based solutions, the business can create a data-driven infrastructure. It enables businesses to get product feedback, performance reviews, track loyalty, observe customer behavior, etc. in real-time.

New Service Oriented Approach

With the increasing adoption of IoT in businesses, some of them are moving from product-based to service-oriented solutions. Now, instead of focussing on product sales, they are focussing more on renting the product.

New business models, such as freemiums, subscriptions, bundles, etc. are gaining more attraction in the business community, making their services more and more flexible and scalable. All these will give businesses multiple opportunities for revenue generation.

Enhanced Customer Experience

Nowadays, customers are more connected and also more demanding. Thus, it becomes a priority for businesses to fulfill their expectations in the right perspective and also on time. So, businesses are now leveraging IoT to access consumer data in real-time and listen to their complaints, fulfilling their requirements immediately, troubleshooting their problems, and, thus, giving them an enhanced personalized experience.

Creation of New Demands

IoT is all set to create new business opportunities. In the IoT era, new business models are being generated because of the new demand and availability of products and enhanced services that are compatible with the changing business landscape.

The requirement of improved services on top of regular products, effective supply chain management, access to real-time product and customer data, and the resulting intelligent operations will all give impetus to the new businesses to emerge and the existing businesses to go for diversification.

With the adoption of IoT in businesses, the benefits realized will not only be from a financial point of view but also operational and strategic perspectives.

IoT is not a simple landscape. It is complicated. There are numerous categories and many vendors/suppliers in each category. The four main categories of an IoT solution landscape are as follows:

  • The sensor that often resides in devices
  • Machine-to-Machine (M2M) device management platform
  • Solution delivery platform
  • Apps that enable IoT devices to report or act on the collected data

Although there are many vendors and solution providers, no single vendor can offer a completely packaged solution. They have to build a strong ecosystem of partnerships. As a business wants to start its IoT journey, it should build a cross-functional team. The team should consist of IT and business managers, who will evaluate strategic partnerships.

It should also take into consideration various factors like the financial position of the vendors, domain knowledge, partnership ecosystem, range and breadth of offerings, etc. To understand the true potential and value of IoT, businesses have to understand that IoT does not mean the same thing for everybody.

It will depend on the context, the product, the services, and the business problems they want to address.

As more and more devices get connected, we can see exponential growth in IoT. According to Robert Metcalfe, founder of 3.com, the network value increases in proportion to the square of the number of network users. The value will increase incredibly large as more and more devices and people get interconnected.

Businesses can now face their challenges effectively by putting together processes, people, and products. They can now provide exceptional services to the end-users as well as to the partners. We can, thus, conclude that IoT has become more prevalent and useful today and it is the need of the hour to embrace IoT in every field.

Examples of IoT

Logistics Management With IoT

Radio-frequency identification (RFID) tags are used widely to mark inventory and to identify them quickly. These tags are of low cost and through a radio signal can reveal information embedded in them. In a factory environment, they are very useful in tracking material. When goods are brought into a factory, say on a truck, RFID tags are read for every item in the consignment and also for the pallet or casing on which they are brought. The systems at the gate can record the time, date, and exact quantity of input materials.

Once inside the factory, machine readers identify where each item or item group has to be stored and conveys this to devices on forklift trucks. Human operators, along with machine controllers, may then move the items to their storage areas or bins. The RFID information is used along with current inventory status information to determine both the exact location of the new inventory and also the path by which the forklift truck has to move and place the material.

The factory systems are updated with the new input material information. As the material is consumed, their RFID tags are removed and the material balances are updated. RFID tags are also deployed on finished goods, which when being moved out of the factory premises are scanned, and their exact time and quantity of movement are recorded with the systems. When the paperwork has to be carried with the packaged goods, these may be scanned by human operators wearing virtual reality (VR) glasses. The scanned documents are digitally stored along with information about the goods consignment.

Healthcare With IoT

Modern healthcare devices include wristbands and health bands that measure body parameters such as heartbeat rate, blood pressure, and blood oxygen level. These parameters are relayed, using the Bluetooth wireless protocol, to smartphones that forward them to control applications. Hospitals use such devices to constantly monitor chronic care patients.

The Giraff project in Sweden is another example of the use of the IoT for healthcare. Giraffe is a telepresence robot that is placed in homes where people need monitoring and round-the-clock care. The robot has a screen display and cameras on it, and the whole assembly is mounted on wheels.

The robot can be remotely controlled by an operator to move it about in the house of the patient. Its cameras provide a feed about the activity of the patient and, if there is a need, enable the patient to speak to an operator or nurse using a teleconferencing facility like Skype.

The operator or nurse can move the cameras about and check the vicinity of the patient, zoom in on details, provide voice feedback, and have the robot move back to a position from where it can monitor the location and be charged from an electrical connection. The sensors on this device are the cameras and microphones that convey information via the Internet about the patient.

Challenges in Managing IoT Solutions

The examples discussed above show that there are numerous possible ways in which IoT systems can be used for providing innovative services and products. There are also significant challenges in providing IoT solutions. Some are discussed below:

Massive Data Flows

Industrial IoT systems require thousands of sensors fitted to machines and other devices that sense their environment, possibly, many times per second, and convert this into data packets, which consist of sensor readings, a time stamp, and location information, and send this out over the Internet to the controlling software.

This amounts to thousands of readings per second that have to be moved onto the system to be collected, stored, and analyzed. This requires architecting the system in a manner that can handle the massive load without causing delays or breaking down.

Massive Volume of Data

Once the data is generated by the sensors and shipped to the central system, the problem of storing such massive quantities of data arises. In earlier systems, in the 1990s and 2000s, data emanating from such sensors were sampled, some data was stored and the rest was discarded. With modern IoT systems, however, managers are prone to keep all the data on cloud servers as they have access to advanced algorithms that can process all the data and make sense of it.

Variety in Data

Sensors in industrial systems are made by different manufacturers belonging to vastly different industrial groups, who use a variety of standards and formats in which the data is generated. When data is acquired in different formats and standards, the challenge is to process them coherently, to make the analysis useful and relevant. The challenge for managers is to translate the many protocols of data and standards into a useful format.

Sensors and Actuators


Sensors and actuators are key elements of the IoT. A sensor is a device that detects events or changes in its physical environment and provides an electronic output. Simple sensors collect the changes and report them as data. Smart sensors do some additional processing – they filter out duplicate data and send out data when specific conditions are met.

Sensor technology has advanced rapidly and there are many types and varieties of sensors available in the market. The choice of which sensor to use is driven by its characteristics, some of which are as follows:

  • Data Filter: Whether the sensor can filter out redundant data, to remove noise from the analysis. Sensors with such facilities are known as smart sensors.

  • Power Consumption: Sensors require a power source to function. Typically, the lower the power they consume, the more preferable they are.

  • Size: Sensor sizes determine how and where they can be inserted into devices. Many sensors are small enough to be used in a wide range of devices.

  • Sensitivity and Accuracy: Sensitivity and accuracy – sensors should be able to accurately and reliably record changes in their environment. The sensitivity range of sensors often limits and determines the applications for which they can be used.


Actuators are tools or mechanisms that can change their state or the state of other devices and machines. They are often motors that respond to electrical or data signals and change the state of something they are connected to. Actuators can be mechanical or hydraulic devices also, and change their state depending on the physical signal they receive.

Actuators may act locally, where they respond autonomously to changes detected by nearby sensors, or they may respond to changes as directed by the IoT system.

IoT Architecture

Given the complexity of IoT systems, analysts and designers have proposed several architectures that enable a comprehensive view of the entire stack of devices and software that constitutes an IoT system. At a very basic level, IoT is viewed as having three layers – the perception layer at the bottom, the network layer connecting to it, and the application layer on top of that.

The perception layer consists of sensors and actuators, the things of IoT, that are placed in the physical world and sense events and changes. The data from these sensors is passed on to the network layer through Internet-connected devices, such as gateways, which collect, store and distribute the data to allocated sites. The application layer analyses the data and provides control directions that are sent back to the perception layer devices via the network layer.

The four layers are as follows:

Device Layer

This layer consists of the sensors and actuators, just as in the perception layer, which generates data from the environment and surroundings. Some frameworks depict a fifth, physical, layer below this layer from which information is collected.

Network Layer

The layer consists of gateways, routers, and switches that connect the devices to the Internet. This layer also has devices for wired and wireless connectivity that are based on protocols such as Bluetooth and Zigbee. These enable the perception devices to connect to and exchange data with other devices and software on the network. Many times specialized hardware is deployed at this layer to manage the speed, volume, and intensity of data that is generated by the sensors.

Management Services Layer

This layer hosts the software that manages the entire IoT system. The function of this layer is to monitor and control the IoT devices, ensure that they are functioning, provision or remove their services if needed and ensure that they are responding properly within the network. This layer relies on the network layer to receive data from and provide data to the devices.

Applications and Business Management Layer

This layer analyses data for high-level business applications and ensures that the system is functioning according to the management priorities. For example, if the IoT is being used for an industrial application, such as inventory logistics, it is at this layer that the business rules for control of the devices are determined.

This information will measure whether there is an excess or shortage of inventory, for instance, and how this situation can be addressed. The data being generated by the numerous devices is abstracted at this layer to understand how the underlying operations are functioning and to convey any changes that may be required.

The layered approach to managing IoT systems, such as the framework enables the layers to be managed independently. Changes and upgrades in a given layer, say the devices layer, need to be conveyed only to the layer above, the network layer, whereas the upper layers may continue to function as before. On the other hand, changes at the topmost layer, for business management, need not reflect in changes in any lower layers. This independence of layers enables designers to make changes and innovations at a given layer without disturbing the entire system.

Challenges of Cloud Computing and IoT

Cloud computing and IoT present immense opportunities for innovation in products and services. However, they also present challenges for the manager. Some of these management challenges are highlighted below.


Since its inception, cloud computing has always been questioned about security. Those adopting cloud services were doubtful about the security of their organisational and personal data being hosted on servers not within their control. Cloud service providers assured their clients of security, and also drew up contracts and warranties for assuring protection of their data. As cloud services grew and the market matured, security practices also matured and the risk for clients also reduced.

For IoT, too, security is a concern. IoT devices and gateways remain points of entry, if unprotected, for malicious software to be inserted into the organisation. There are instances where IoT devices have been compromised to disrupt industrial processes for competitive reasons and also as acts of warfare. In some cases, monitoring of IoT devices is undertaken as a form of industrial espionage. Managers of IoT systems have to ensure that devices at the device and network layers remain secure.


Privacy and surveillance are the other issues that have grown with the use of cloud computing and IoT. Devices that monitor individual parameters, for healthcare or fitness, invariably store data on cloud servers. This data is mined for insights on how the product and services can be enhanced and for design of new products. Privacy becomes an issue in such cases where explicit consent has not been sought for such analysis, and also where the data is used for purposes beyond what was specified in contracts with users.

Privacy and surveillance issues also crop up in industrial IoT where worker performance is monitored along with machine performance. Managers will have access to a host of data on minute aspects of work that may violate applicable privacy laws. The challenge for managers is to ensure transparency and inform both employees and clients about potential privacy breaches and about the possibility of surveillance. Contractual obligations about data protection have to be maintained also.

Internet access

A major concern for many areas and regions is access to the Internet. This is especially true for developing countries, like India, where, outside of urban areas, Internet access through wired or wireless means is unreliable. This presents a severe challenge for cloud-based services and for the continued functioning of IoT systems that are installed in these regions. Managers have to ensure reliable connectivity through redundant access and backup systems.

Article Source
  • Dourish, P. (2014). Divining a digital future: mess and mythology in ubiquitous computing. Cambridge, MA: MIT Press.

  • Guinard, D.D., & Trifa, V.M. (2016). Building the web of things: with examples in Node.js and Raspberry Pi. Shelter Island, NY: Manning Publications.

  • The Internet of Things (IoT) is a Key Enabling Technology for Digital Businesses. (n.d.). Retrieved February 06, 2023 from http://www.gartner.com/technology/research/internet-of-things/

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