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Back in the middle of July news broke that ARM Holdings was being acquired by Softbank Group for an eye-opening US$31.6 billion in cash. ARM designs the energy-efficient chips that power the vast majority of the world’s mobile devices but that’s not why Softbank was so keen to reel it in; the deal was motivated by the opportunities presented by Internet of Things (IoT).

It’s no secret that IoT is one of the IT industry’s next big things. In fact it’s pretty big already and the estimates of future growth are huge. Gartner forecasts that 6.4 billion connected things will be in use worldwide by the end of this year – up 30 percent from 2015 with 5.5 million new things getting connected daily – and will reach 20.8 billion by 20201. Others predict up to 50 billion devices in use by then.

These variances hardly matter as the key point is that the IoT-related market is rapidly shaping up to be an opportunity of unprecedented size, coinciding with and supporting China’s transition to a new economic development model. At SAP we think the IoT market will be worth about €250 billion by 2020 and, to put this into context, this will be about the same size as global jewelry industry2 and IoT will obviously become much larger.

Sensors with everything

So where’s all this growth going to come from? One aspect is the rapidly falling cost of building networked intelligence into things, which means that it will be integrated into many everyday objects. To take one example, this year SAP was involved in a project to help prevent bus accidents, involving drivers’ vests from a fabric with embedded with sensors that monitor vital signs and an algorithm that uses this input to estimate fatigue levels. This data gets fed into the SAP HANA Cloud Platform where it’s combined with other data including current traffic and weather conditions, GPS signals and information from on-board devices that estimate the vehicle’s condition. Leveraging the predictive power of SAP HANA, bus companies can identify potential danger before accidents occur.

If we look ahead just a few years it is not hard to see that – as the cost of sensors approaches zero and their size shrinks to almost nothing – smart clothing with more advanced sensing capabilities will become commonplace, making the current generation of wearable health monitors redundant. Smart clothing will work seamlessly not just with smartphones but with the on-board intelligence of smart cars, linked to smart traffic platforms, to establish a holistic system of safety.

At the moment, smart city applications such as traffic management are the most visible manifestation of IoT and SAP is working with Chinese cities such as Nanjing and Guiyang to deploy leading-edge solutions. That, however, is going to change fast as the IoT revolution picks up pace, with big implications for China’s huge manufacturing sector.

The Industrial Internet of Things (IIoT) and Industry 4.0 applications are set to bring sweeping changes to producers’ entire value chain, from design to after-sales services, enabling a faster response to customer needs than is possible today. By improving the flexibility, speed, productivity, and quality of the production process, IIoT/Industry 4.0 enables a new level of mass customization and the adoption of new business models. The smart clothing concept is a great example of how Chinese brands can add greater value and create products and services that are more attractive to international consumers.

Powering digital business

With tens of billions of connected devices we have the potential to reshape society, the economy and the environment, but the application infrastructure these things connect to is going to be key. After all the real value of IoT lies in what we can do with that data; in the outcomes it enables rather than its collection, transmission or storage. The issue that businesses and public sector organizations in China and elsewhere face is the sheer proliferation of real-time data streams that will be flowing to them. It is going to be a challenge tying it all together across operating locations, business units and functional teams, delivering insights that will enable us to make immediate decisions rather than relying on guesswork or out-of-date forecasts.

Realizing the full potential of IoT to transform business operations and improve our lives requires a platform capable of real time big data analytics and machine learning. That’s why SAP is investing €2 billion over five years to help customers seize the benefits of live business. We’ve just introduced SAP HANA Cloud Platform for the IoT, which includes a software development kit and comprehensive development environment, to accelerate IoT solution delivery. We’re also rolling out industry-specific IoT solutions that seamlessly integrate with core business applications.

These and other IoT developments in the SAP pipeline will enable Chinese enterprises to extend and enrich business processes with real-time, live intelligence so that they can see where opportunities exist, achieve new operational efficiencies, and reimagine business models, products and services to deliver more immediate customer and stakeholder value.