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What is the Internet of Things (IoT) and how does it work?

The Internet of Things (IoT) is not something new. But while accounts may differ on the introduction of IoT, most seem to agree that there are many instances of the ‘concept’ of the Internet of Things; The idea that objects can communicate and together perform more than just their basic function.

An early example of the potential power of connected ‘objects’ was in the early 1980s when members of the Carnegie-Mellon Computer Science department installed micro-switches in the Coke vending machine and connected them to the PDP-10 departmental computer so that they could see how many bottles were present in the machine and whether they were cold or not.

It wasn’t until 1999 however, that the concept of the Internet of Things was realised. Kevin Ashton, a Product Manager at Proctor and Gamble, was trying to understand why a particularly popular colour of Oil of Olay lipstick was always out of stock. This led to the early deployment of RFID chips on inventory and from there, Ashton coined the term ‘Internet of Things’ as a way of talking about RFID to less-than-computer-savvy crowds.

So, after a brief history of the ‘creation’ of the Internet of Things, let’s take a deeper dive and find out more about its practical uses in today’s society.

What is the Internet of Things?

In the broadest sense, the term IoT encompasses everything connected to the internet, but it is increasingly being used to define objects that ‘talk’ to each other.

“Simply, the Internet of Things is made up of devices – from simple sensors to smartphones and wearables – connected together,” – Matthew Evans, the IoT programme head at TechUK.

By combining these connected devices with automated systems, it is possible to “gather information, analyse it and create an action” to help someone with a particular task, or learn from a process.

“The IoT integrates the interconnectedness of human culture — our ‘things’ — with the interconnectedness of our digital information system — ‘the internet.’ That’s the IoT,” summed up Ashton on ZDNet.

Most of us will be familiar with everyday items that are internet connected such as home assistants, lightbulbs, smart plugs, phones, internet routers, washing machines, and fridges. The application of IoT technology in commercial and industrial devices is leading to a sharp increase in the number of IoT connected devices around the world.

Back in 2014, analyst firm Gartner predicted that there would be over 26 billion connected devices by 2020. More recent research from IHS has that number closer to 30 billion with a huge growth expected over the next five years when we can expect the number of connected devices to top 75 billion. Which leads to the question: What does this all mean for businesses and consumers?

How does the Internet of Things work?

At the most basic level, an IoT system consists of sensors/devices which ‘talk’ to the cloud through some kind of connectivity. Once the data finds its way into the cloud, software processes it and may decide to perform an action, such as sending an alert or automatically adjusting the sensors/devices without the need for the user to intervene.

However, if user input is needed or if the user simply wants to check in on the system, a user interface allows them to do so. Any adjustments or actions that the user makes are then sent in the opposite direction through the system: from the user interface, to the cloud, and back to the sensors/devices to facilitate the change.

IoT is basically a huge network of connected ‘things’, including people and their devices. Relationships that underpin that network which include:

  • People-People
  • People-Things
  • Things-Things

Devices of the IoT

The devices that contribute to the Internet of Things span personal, household, public, business and industrial spaces, and any area currently not affected by them likely will be in the future.


Most of us interact with IoT connected device daily: our smartphones. These devices have a wide range of sensors including GPS, accelerometers, gyroscopes, pedometers and even heart rate monitors. But our smartphones are just the tip of the iceberg. A lot of us are now wearing smart connected devices like fitness trackers which often connect to our phones to send and receive data. It won’t be too long before we see these same sensors built into clothing.


Around the home, IoT connected devices are also becoming more commonplace. From home assistants such as Google Home or Alexa to other appliances such as water heaters, security cameras, doorbells, motion sensors, pet trackers, smart plugs and lights. All of which gather data and can be accessed remotely via the internet.


Our cars are also becoming smarter thanks to the introduction of IoT connected sensors and computing functions. Navigation GPS in cars has been a available for years and in more recent times, we have been able to add a toll tag which automatically pays as we pass through toll booths. Today, sensors can monitor the way we drive (or the way other people drive our vehicles), checking for braking, speeding and fuel efficiency. We also have more connectivity options when it comes to in-car entertainment and while self-driving cars are not yet permitted on New Zealand roads, the technology is there to allow people to drive hands and eyes-free, with sensors monitoring traffic all around for accident prevention.

Of course those same technologies we use in our personal vehicles will also be used in the ‘smart’ transportation sector where it’s possible for transport agencies and authorities to monitor their vehicles, allowing for real-time passenger information updates, traffic monitoring as well as fleet and vehicle planning. Read more about the uses of IoT in transportation in a recent Market Leadership piece.


Many sectors have embraced the power of IoT devices to improve the services they deliver. Doctors and caregivers can monitor patients’ vital signs and other important metrics remotely, saving lives and allowing elderly people to live independently for longer.

In manufacturing there are many examples of companies using IoT technology to improve the efficiency of their processes as well as the quality of the output. Quality control can be carried out using sensors all along the production line, reducing wastage and improving efficiency.

In retail, inventory can be tracked and alerts put in place when stock levels are low (taken early inspiration from Kevin Ashton). In farming, soil and crops can be monitored for moisture levels and irrigation systems automated to keep the soil at an optimum condition for growth.

In office space, environmental controls can be automated to reduce energy waste and cut costs, as well as improving the working environment of employees.

Smart Cities

Taking all this further, smart cities are being developed where entire metro areas use sensors and other IoT-connected technology to help manage and maintain those cities.

NEC is a leading provider of safe-yet-smart city initiatives, offering a wide portfolio of solutions which use new technologies to create ‘Safer Cities’. These solutions include:

  • Public Safety – solutions include automated detection of security incidents which enables governments and enterprises operating large venues to quickly respond to potential threats.
  • Smart Transportation – solutions enable local governments and operators to run efficient transport systems that optimise and automate numerous tasks required in running a complex transport network.
  • Digital Government – solutions enable public authorities to leverage the benefit of digital transformation for government and public services to enable efficient and fair services to its citizens.
  • City Management – solutions provide integrated and secure platforms which local governments can use to integrate, share, and analyse any specific or the entire operations of a city from one portal, enabling efficient operations and better citizen services.

Security concerns

With over 30 billion IoT connected devices already being used across the globe and that number expected to double over the next five years, the one area that generates the most concern is security. While IoT devices allow us to do so much, care must be taken to ensure that the security matches the functionality that these devices provide.

The issue for businesses is that as soon as these IoT devices connect to the network security flaws in those devices open up potential security issues for the network as a whole and cyber-criminals have been quick to exploit these ‘gateways’ to business networks. Such security flaws have been found in a wide range of smart devices including lightbulbs, personal speakers and health monitors.

We have written extensively about the potential issues around the security of IoT devices in our Market Leadership section and you can find more in the following articles:


As we head towards the end of 2020, we can expect the number of IoT connected devices to increase exponentially over the coming years and the functionality of those devices opens a world of possibilities.

The amount of data we can collect, analyse and use to inform day to day decision making is helping make businesses more efficient, cities safer, and our personal lives ‘easier’. There is no doubt that the Internet of Things is changing the way we all operate, whether we know it or not and already, many of the things we take for granted are powered by IoT (e.g. Phones, cars) connected devices.

Security is one area that needs to be paramount and should be addressed via the strong testing of devices’ security, frequently updating of firmware and software and by using data encryption. The adoption of industry standards by manufacturers could also help reduce security issues. Industry businesses can also bolster their own internal IT security by placing restrictions on who has access to collected data.

With the right governance and controls, the Internet of Things is something we can all be excited about, both on a personal and business level.

Watch this space.


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