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What Is the Internet of Things (IoT)?

The Internet of Things is a network of devices and systems connected to the Internet. Each networked object has a unique identifier and can interact with other objects to perform tasks fully automatically.

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Explanatory graphic IoT


What Is the Internet of Things (IoT)?

The Internet of Things is a network of physical objects that are embedded with sensors, software, and other technologies for the purpose of collecting and exchanging data with other devices and systems over the Internet. The wide range of IoT devices extends from simple household helpers to IP cameras and printer systems to complex industrial plants. More than 30 billion IoT devices are already in use today, and experts expect this figure to grow to as many as 75 billion by 2025. The world’s first IoT device is thought to be a Coca-Cola vending machine at Carnegie Mellon University in Pittsburgh. In the early 1980s, it was connected to the Internet so that it could report its inventory remotely.

Network connections


How Does the IoT Work?

In the Internet of Things, basically any Internet-enabled device can be part of the network and communicate with other devices or systems. To do this, each device has its own IP address, making it uniquely identifiable. IoT devices use embedded systems such as processors, sensors, and other hardware to capture, collect, and, if necessary, share data. Once the devices have connected to an IoT gateway or other edge device, the collected data can be sent to the cloud for analysis or analyzed locally.

By connecting to the Internet, IoT devices can act autonomously, adapt to the situation, and react to certain circumstances. IoT devices perform most tasks without human interaction, even though this is basically possible (e.g., for setup or data retrieval). The connectivity, networking, and communication protocols depend primarily on the IoT applications used.


What Are the Benefits and Drawbacks of the IoT?

The IoT ensures that communication between Internet-enabled devices works. Data is constantly being captured, collected, sent, and analyzed in order to further optimize communication and connectivity. This presents tremendous opportunities in professional and private environments, but also risks.

Benefits of the IoT:

  • Information can be accessed from any location and at any time using any (Internet-enabled) device.

  • IoT technologies are continuously improving communication between connected electronic devices.

  • Transferring data packets over a connected network saves time and money.

  • Tasks can be automated, helping to improve the quality of services and reduce the need for human intervention.

Drawbacks of the IoT:

  • Since the number of networked devices is constantly increasing and they are exchanging more and more information with each other, the risk of an attacker stealing confidential data is also increasing. In general, cyber threats are the biggest risk associated with the Internet of Things.

  • The sheer mass of IoT devices presents companies with major challenges in collecting and managing the data they transmit.

  • Many IoT devices are not properly provided with security updates and can therefore become vulnerable to security breaches. In many cases, authentication is also inadequately secured.

  • Due to a lack of international interoperability standards for the Internet of Things, devices from different manufacturers are frequently unable to communicate with each other. To address this problem, several well-known providers have joined forces to form the “Open Connectivity Foundation,” which is working on common IoT standards.

Person works on a laptop


What Is the Technical Basis for the IoT?

The Internet of Things is based on the Internet and microprocessor technology. Ever cheaper, smaller, and more powerful microprocessors make it possible to turn objects into IoT devices that can independently collect data and perform actions with a reasonable amount of effort. Connectivity to the Internet is provided by wired or wireless interfaces and a unique IP address to send or receive data and commands. Communication technologies include wireless standards such as Wi-Fi and Bluetooth as well as cellular standards such as UMTS, LTE, and 5G.

One important (sensor) technology in the industrial sector is RFID (radio-frequency identification) technology. It enables the identification and tracking of goods and products in the logistics chain by means of small transponders (usually in the form of adhesive labels) that transmit data to networked reader devices. In addition, artificial intelligence (AI) and machine learning technologies are increasingly being used to make data acquisition and analysis processes both simpler and more dynamic.

Apps and news alerts on one phone


In Which Areas Is the IoT Being Used?

The IoT offers a wide range of applications. In the private environment, it plays an important role above all in building automation and smart home solutions. Typical areas of application are lighting and heating control, alarm systems, and monitoring systems or smart electricity meters. But everyday objects such as wristwatches, televisions, refrigerators, or electric toothbrushes are also increasingly being connected to the Internet in order to make people’s lives easier and more convenient by collecting and analyzing data.

In the professional sphere, networked systems can, for example, track transport routes, manage inventories, ensure just-in-time delivery, allow vehicles to communicate directly with workshops, or monitor medical procedures. In some cases, private and professional applications are mixed. For example, some insurance companies are already using data from privately used devices such as wearables and vehicle sensors to determine personal risks and calculate individual premiums.


What Security Aspects Must Be Taken into Account for IoT Solutions?

Billions of devices exchange immense amounts of data via the Internet of Things. This information, the respective applications and processes, and the IoT systems themselves must be protected against unauthorized access and manipulation. This requires, for example, effective identity and access management. In addition, all data transmitted over the public Internet should be encrypted, and all relevant systems should be effectively hardened and secured by protective measures such as firewalls. Also important is continuous software and patch management throughout the entire system operating period to close potential security gaps.


What Dangers Does the IoT Pose?

Since IoT devices are networked via the public Internet, there is a fundamental risk that cyberattackers will gain access to transmitted data or the systems themselves. Possible risks range from the unauthorized reading or manipulation of information and the introduction of malware to the sabotage and destruction of entire systems. Insecure configurations with standard passwords and missing or insufficient protective measures often make it easy for attackers to take over IoT devices and integrate them into botnets, for example. They then misuse these botnets for illegal activities such as DDoS attacks, spam campaigns, and credential stuffing or brute force attacks.



What Is the Industrial Internet of Things (IIoT)?

IoT applications in industry are also referred to as the Industrial Internet of Things (IIoT) or Industry 4.0. This primarily involves digitally networked machines or systems. A key area of application is intelligent manufacturing: Individual stations in a production line communicate with each other without human intervention. Machines independently retrieve the information they need to work efficiently and continuously regulate or optimize themselves, including predictive maintenance. This allows production processes to be accelerated, saving costs and time. Thanks to order-based just-in-time production, less storage space is required. The entire supply chain management, including supplier selection, can also be fully automated. Other IIoT application areas include intelligent power grids, smart cities, and networked and intelligent logistics.


How Can Companies Benefit from the IoT?

Increased productivity and efficiency in day-to-day manufacturing and administration, the creation of new business models and revenue streams, and improved customer experience are just some of the benefits that the Internet of Things offers companies. The ease and seamlessness of connecting the physical business world with the digital world contributes to faster value creation. Thanks to the IoT, companies have the opportunity to monitor their entire business processes and make better business decisions based on the data collected—to reduce costs, for example.

Global network


What You Need to Know about the Internet of Things (IoT)

The Internet of Things has revolutionized global communication between machines (and people) and will continue to change it over the long haul. Based on the increasing networking of intelligent devices and systems, companies can develop new business models and continue to drive the optimization of business processes. In the private realm, the Internet of Things also has far-reaching effects: Smart watches, networked cars, and intelligent refrigerators are just the beginning. The fact that convenience and economic growth will go hand in hand with the implementation and further development of the IoT is already noticeable today. However, the risks and necessary security concepts must not be disregarded.