What is the Internet of Things (IoT)?

Time to read: 6 minutes

The Internet of Things (IoT) refers to everyday physical objects — mobile devices, vehicles, wearables, and more — that are connected to the internet to transmit data online. 

From the implantable loop recorder that allows a doctor to monitor their patient’s heart remotely to the fridge that announces when it needs restocking, business and consumer IoT applications continue to increase. 


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Table of Contents

Why is the IoT important?

The objective of the IoT is to improve efficiency. With devices automatically reporting data, information is available more quickly than relying on human reporting. Businesses can save time and money by automating processes and reducing human labour costs.

How does the IoT work?

For the Internet of Things (IoT) to work, computer chips and sensors connected to the internet are embedded in objects such as factory equipment, cars, buildings, and devices. These then share and receive data via the internet, typically reacting to predetermined event rules. Devices can also send the data gathered to cloud-computing services over the internet, Bluetooth, near-field communication (NFC) etc. In the cloud, software processing can determine if an action should be taken, such as sending an alert. In the long term, businesses can aggregate and analyse data to improve or enhance their services or determine bugs.

A complete IoT system has four distinct components:

  1. Devices gather data from their environments, such as temperature or even a video feed. 

  2. Connectivity gets the data gathered from the devices to the cloud. This connection is achieved through different methods such as WiFi, Bluetooth, satellite, or mobile networks. 

  3. Data processing occurs within the cloud, where software completes an action from the gathered data. For example, it could monitor the temperature.

  4. User interface refers to the action that can be taken after the data has been processed. Some actions can happen automatically, like a system lowering the temperature according to a predefined rule. Other times, a person can use the data to perform an action, like checking a smart home security system video feed.

What are the benefits of IoT?

The application of the Internet of Things has grown in the past few years. Businesses have used the IoT to: 

  • Improve productivity through the automation of processes

  • Reduce waste through smarter stock monitoring

  • Achieve less time wasted through equipment breakdown

  • Gain cost savings and green benefits from reduced energy consumption

  • Have more efficient production from real-time diagnostics

  • Improve levels of customer experience and service by pre-empting issues and responding proactively

  • Improve profitability

  • Make more informed strategic decision-making

One of the biggest advantages for businesses using the IoT is in using insights from big data. Usually, this can be hard to handle without the right automated processes. 

The IoT allows organisations to collect and analyse customer information immediately — without requiring a human intermediary to gather and enter it. This also avoids data volume limits. In turn, product design and marketing strategies can be informed by more exact, real-world data. 

For instance, if a new product isn’t performing as well as predicted, having the data more quickly puts organisations in a better position to decide how to react. This helps them save money by helping them to avert or modify a strategic misdirection. 

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Pros and Cons

There are many advantages to the widespread use of the Internet of Things in our daily lives.

The range of benefits includes:  

  1. Making life easier for consumers. The clearest benefit of the IoT is the automation of daily routines for consumers. They only need a smartphone connected to the internet to solve everyday problems. For example, smart ovens can be controlled via an app, allowing a person to preheat the oven on the way home from work. 

  2. Saving businesses time and money. Internet of Things automation boosts efficiency and productivity. By relying on IoT devices and processes, businesses don’t need to wait for human effort. Data is automatically available, saving companies time and money. 

  3. Offering a better understanding of the world. IoT devices provide an opportunity to gather information that otherwise would have been hard to get. For example, smart home systems make monthly energy usage easier to track and understand. The reports can even be broken down per device so that consumers can understand exactly where their energy usage comes from, allowing them to alter their habits and reduce energy consumption and waste.

  4. New business opportunities. There is a vast amount of data collected from consumers, giving manufacturers an opportunity to understand and anticipate their customers’ needs. This means that businesses can make predictions and develop solutions — potentially before they arise. For example, wearable healthtech (such as fitness watches) collects data on sleep patterns and exercise habits. Doctors can use this information to better understand their patients and accurately diagnose their problems. On a larger scale, the aggregation of this data can lead to a better understanding of a population’s health concerns. The application possibilities of the information are endless. 

Though the Internet of Things (IoT) is intended to make life easier, there are downsides too: 

  1. Privacy and security concerns. Thieves can target the personal data gathered from IoT devices for theft and misuse. 

  2. Incompatibility. IoT devices are manufactured around the world without standardisation. It can be hard for devices from different manufacturers to interact and communicate with each other. 

  3. Overdependence on technology. If every process is automated, a single bug could crash the entire system. In addition, connecting too many devices to the internet slows down the speed. 

  4. Increased monitoring time. Large corporations may find that tracking and monitoring a large volume of IoT devices can overwhelm IT operations. 

What are some Internet of Things examples?

Internet of Things (IoT) devices fall into two categories, depending on their usage. The first category is consumer IoT products:

  • Smart cars: from automatic maintenance reminders to parking availability features, cars are becoming increasingly connected to the internet and the cloud.

  • Smart cities: more cities are turning to IoT devices to manage their water, connect public transportation, and monitor and manage traffic. Smart traffic lights can adjust to traffic patterns, reducing wait times and vehicle emissions. 

  • Smart devices: Smartwatches are everywhere these days, as are smart home security systems. Smart fridge freezers, door locks, and bicycles are rising in popularity too. 

  • Healthcare: Wearable IoT devices can sense and track glucose levels or heart rates. The data gathered from these can lead to better patient outcomes. 

The second category of IoT devices is enterprise. The ability of IoT devices to reduce operational costs and improve efficiency are two significant motivators for IoT adoption. Now, businesses use IoT for a variety of functions:

  • Manufacturing: facility managers can monitor and manage machines remotely with IoT devices. The information from these connected devices also allows for waste reduction and energy conservation, giving managers better insight into operations to make informed decisions.

  • Retail: merchandise fitted with radio-frequency identification (RFID) tags can provide more accurate stock information. This is particularly useful as more customers shop online. 

  • Supply chain management: Global positioning systems (GPS), sensors, and tracking technology have increased the visibility of assets as they move. IoT technology also offers quality and safety controls. For example, maintaining a set temperature during transport or managing delivery requirements. The data gathered from IoT devices also provides analytics to improve shipping times or create more efficient routes. 

Privacy and security

Like anything connected to the internet, IoT devices are susceptible to digital attacks. There were over 10.8 million cyber attacks on IoT devices in October 2020 alone. However, the risks can be minimised through better security protocols, like secure user authentication and data encryption. 

Consumers are concerned about the privacy of their personal information too. The sheer amount of data generated by IoT devices creates opportunities for hackers to access sensitive information. Virtual invasions of individuals’ homes are also possible, with hackers listening to private conversations. Additionally, there are growing concerns about how companies use the data willingly gathered from consumers for other purposes. For example, could a life insurance company use data from a fitness tracker when estimating an insurance premium?

What industries can benefit from IoT?

The Internet of Things has opened opportunities for many businesses to reduce costs and improve efficiency. Many industries have already adopted IoT into standard business practices.


The Internet of Things has opened opportunities for many businesses to reduce costs and improve efficiency. Many industries have already adopted IoT into standard business practices.


The manufacturing industry is always looking to reduce costs and increase efficiency. That’s why IoT has been so helpful. Automated machinery has increased product quality. Predictive maintenance has helped decrease downtime. And widespread implementation has benefited resource allocation. All of this has led to the avoidance of problems that could potentially cause delays. 

Transport and logistics

Smart devices have made the transport and logistics industry more agile and efficient. Data from IoT technology has reduced overall costs, cut emissions, and increased safety. More visibility for traffic management has been an incredible benefit. For example, UPS installed IoT-enabled sensors to track priority deliveries for healthcare customers. This has led to a more precise and streamlined supply chain. 


The data gathered from IoT devices can provide retailers with updated information on consumer preferences and trends. Retailers can use this data to inform decisions and improve operations. Smart stores have enhanced the customer experience with tailor-made personalisations and recommendations.


Farmers can use IoT devices to monitor their fields’ temperature, humidity and light. Automated irrigation systems deliver the exact right amount of water to crops. These innovations have provided farmers with more efficient systems and increased productivity.


The finance industry has used data from IoT devices to improve how it manages customer relationships. Personalised marketing for customers offers products and services suited to their needs. Customers’ financial data has also been given more security through the use of IoT devices.

How big is the IoT?

The worldwide market worth of the Internet of Things was estimated to be around $389 billion USD in 2020. That revenue is forecasted to more than double by 2030, coming in at an estimated $1 trillion USD. The number of IoT-connected devices is also expected to triple in this time. 

Technology advancements have made the widespread adoption of IoT devices more accessible than ever. Large enterprises have consistently invested in IoT technologies for years, and now small and medium-sized companies have begun to use them too. 

The result of this growth is the opportunity for new revenue streams, increased business efficiencies, new business models, and improvements to existing models across various sectors.

Standards and framework


One of the biggest challenges for Internet of Things implementation is the lack of standards. Businesses can only achieve the benefits of IoT through seamless integration and interoperability. If enterprises rely on data sharing between devices and systems from different vendors that can’t communicate, then the advantages of IoT are lost. 

Universal standards would guarantee what an IoT device can do and its quality. This would eliminate inefficiencies in the marketplace and fuel global adoption. Additionally, flexible interoperability would help users avoid the commercial risks of single-vendor lock-in. 


The IoT framework is the technology that allows IoT-connected devices to communicate over the internet. Multiple connected devices create an environment that senses and exchanges data over the internet without human interaction. The main components of the IoT framework are:

  • Device hardware

  • Device software

  • Communication and cloud platform

  • Cloud application

IoT and the cloud

An IoT cloud is an essential infrastructure for efficient, flexible, and growable use of an IoT system. It is a large network of servers and storage needed for centralising, connecting, and managing IoT devices and applications. 

IoT and edge computing

The terms ‘IoT devices’ and ‘edge devices’ are sometimes used interchangeably, but there are differences between the two. In simple terms, an IoT device is a physical object connected to the internet and is a data source. An edge device is where the data from an IoT device is gathered and processed. It is a physical piece of hardware in a remote location at the edge of a network. An edge device contains the right amount of memory, computing resources and processing power to collect data, process it, and then act upon it without help from the larger network. 

Using edge computing and IoT together allows for faster response times, operational efficiency, improved network bandwidth, and other benefits.

IoT data and Artificial Intelligence (AI)

Many businesses are blending the benefits of artificial intelligence and the Internet of Things to create even smarter, faster and more efficient operations. AI can help IoT devices learn from the data they gather and experience. AI’s machine learning capabilities can help develop a better decision-making process for IoT devices. Businesses can improve their services by creating more value from their IoT-generated data.

IoT and 5G

As global operators continue to roll out the fifth generation of mobile communications, also known as 5G, this will improve performance and reliability for IoT devices. Data-transfer speeds will significantly increase with 5G, allowing IoT devices to communicate and share data even faster. Plus, 5G networks have a greater capacity for more connected devices, meaning more stability and reliability. This is especially crucial for IoT devices that rely on real-time updates, like smart locks and security systems.

What do you need to know about IoT?

Okay, that was a lot of info!

Here’s what you should take away from this article:

  • What is the Internet of Things? The Internet of Things (IoT) describes physical objects that have an internet connection and transmit data online.

  • What are some Internet of Things examples? Examples of IoT use include home-monitoring systems, smart cars, health and fitness apps, remote energy control, and machinery fault diagnostics.

  • How does the IoT work? The IoT uses embedded sensors and computer chips in everyday objects that transmit and receive data via the Internet.

  • How can businesses benefit? Businesses can benefit from big data to increase productivity, reduce energy consumption, and improve customer service.

  • What industries can use IoT? Many industries have benefitted from implementing IoT systems. Healthcare, manufacturing, transport and logistics, retail, agriculture, and finance have all boosted efficiency thanks to IoT adoption.

  • What does the future of IoT look like with new technologies (edge computing, AI, 5G)? The IoT will only continue to grow with the help of innovations. It will become smarter, faster, and more reliable.

  • How will the IoT affect customer relationships and CRM? The IoT will improve customer relationships by automatically providing personalised responses and instantly sending customer information to CRM platforms.


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Internet of things (IoT) FAQs


What is the Internet of Things with examples?

In simple terms, the Internet of Things (IoT) is a series of physical objects connected to the internet in order to transmit data online. Personal use examples include fitness trackers, smart home appliances, and connected cars. Businesses use IoT technology to monitor retail stock levels, create personalised marketing campaigns, and automate machinery. 

What is the main aim of the Internet of Things?

The purpose of the IoT is to collect data-driven inputs from various physical devices to analyse and consolidate their functions. Benefits to businesses include improved productivity, waste reduction, cost savings, instant diagnostics, enhanced levels of customer experience, and more informed decision-making. 

Is the Internet of Things the same as AI?

IoT and artificial intelligence are not the same, but they can work together. AI is a simulation of human intelligence typically achieved through natural language processing, speech recognition, and machine vision. AI’s machine learning capabilities can help IoT devices learn from the data they analyse. Ultimately, this means that the data from IoT devices is more valuable and useful for businesses.

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