There’s a new buzz phrase being widely used in the business world, and its ambiguity is leaving many business professionals confused as to what it means, and what it is being used for. It’s the Internet of Things (IoT), and it has the potential to impact businesses in just about every industry. Depending on what you read or hear, the Internet of Things might seem too complex to understand. So, we came up with an easy-to-understand overview of this “next big thing.” This Balboa Capital blog article explains what the Internet of Things is, how it began, and how it can help businesses streamline their internal processes and become more efficient.

A simple explanation of the IoT.

The Internet of Things is the idea of connecting any device or machine, such as a smartphone, smart device, alarm system, smart car, or airplane engine, to the Internet over a closed network. With the IoT, devices that are equipped with special applications and data-collecting technologies are able to communicate with one another. For example, your company’s information technology (IT) department can use the IoT to gather information about hardware, cloud software, and security systems. Or, your office manager could use it to find out when office supplies are running low, and order more automatically.

The business of the IoT.

The IoT is used in a number of different industrial and government applications, including infrastructure monitoring (smart cities), transportation monitoring, smart grid monitoring, and energy monitoring. Although corporations and middle-market companies make up the biggest pieces of the “IoT” pie, the small-to-medium-sized (SMB) market is making inroads. Industry-specific packages, lower price points, and easier implementation processes are making IoT more accessible to SMBs. Mom-and-pop shops nationwide are deploying tools such as smart locks, smart thermostats, smart light bulbs, voice assistants, chat box technology, RFID tags for inventory, and shipping trackers. These advances can help increase efficiency and cut costs. For B2B vendors, retailers, shipping companies, and other customer-oriented businesses, the IoT can also help fulfill orders in a timely manner.

Where to begin.

The IoT is poised to make a big impact in the near future. By 2020, there will be close to 27 billion connected devices, and annual IoT spending is expected to reach $1.3 trillion. Before investing in the IoT, you should determine how it might benefit your small business from an operational and financial perspective. How will it be implemented, and at what cost? Will processes be improved? Will it improve employee productivity? Will it save money? Will it be embraced by your management team, and will they use the data it provides? No two small businesses use this technology in the same way, so don’t go with a “one-size-fits-all” approach. Consulting with your IT manager, or an IoT solution provider, will help you tackle the challenge of determining where to begin.