Exclusive: IBM Management On How The Internet of Things Is a Transformational Opportunity

Source: IBM.

IBM has recently announced a $3 billion investment over the next four years to establish a new Internet of Things -- IoT -- unit. In addition, the company is building a cloud-based open platform designed to help clients and ecosystem partners build new IoT solutions.

We reached out to IBM for some additional information regarding what IoT means from a practical point of view and how IBM is planning to capitalize on its opportunities in this area. Chris O'Connor, General Manager, Offerings, IBM Internet of Things was kind enough to provide some answers and insights on this much exciting topic.

Understanding the Internet of ThingsIoT could sound like a complex and sophisticated technology. However, the concept is actually quite simple. Devices around the world, whether it's a smartphone, a home appliance, a car, or an airplane, include a varying amount of sensors inside them. Those sensors are increasingly interconnecting via Wi-Fi and different protocols. Internet of things is about instrumenting, interconnecting, and creating intelligence from all those devices around us.

O'Connor believes that IBM is facing a truly transformational opportunity, the size and magnitude of which could be as big as the cloud.

Putting IoT to profitable use IBM is working with different partners to implement IoT solutions in several industries. In 2014, IBM and AT&T formed an alliance to combine their analytic platforms, cloud, and security technologies in order to gain more insights on data collected from machines in a variety of industries. The partnership is initially focused on creating new solutions targeted for city governments and midsize utilities.

These organizations are getting access to integrating and analyzing data from mass transit vehicles, utility meters, and video cameras, among others. As a result, cities are able to better evaluate patterns and trends to improve urban planning, and utilities can better manage their equipment to reduce costs.

IBM seems particularly focused on the transportation industry, where the company has alliances with players such as Airbus and Cummins .

O'Connor explained:

Cummins manufactures engines for a wide variety of industries, including cars and small trucks, and also big farming or mining equipment. In these businesses, breakdowns can be particularly expensive and disruptive, as a broken piece of equipment can be a major drag on the whole operation. O'Connor provided some insights regarding how IBM is helping Cummings to create value via IoT technologies.

About IBM's competitive strengths in IoTInternet of Things looks like a massive opportunity over the years ahead, there are already many practical and valuable applications, and everything seems to be indicating that we are just in the first stages of what could be a game-changing series of innovations.

However, opportunity attracts competition, and IBM will need to compete against several big players trying to get a piece of the pie. In January 2014 Google invested $3.2 billion in the acquisition of Nest Labs, a leading player in smart thermostats and smoke alarms. This means Google invested more in a single purchase than IBM over the coming four years in its whole Internet of Things initiative.

General Electric is a particularly strong competitor on the industrial side. Via its Predix technology, the company is collecting 50 million data points from 10 million sensors installed on $1 trillion worth of equipment in different industries. General Electric has already produced over $1 billion in incremental revenue from this business in 2014.

While IBM is certainly not alone in trying to profit from IoT, O'Connor believes the company is strongly positioned to compete on the basis of the massive amounts of data in can collect, its superior cloud capabilities, and unique engagement strengths.

Considering the size of the opportunity, IoT should provide enough room for multiple players to profit from it over the long term. IBM seems to have the technological strength, brand recognition, and established relationships with clients in different industries and geographies to be one of the main beneficiaries from the IoT revolution.

The article Exclusive: IBM Management On How The Internet of Things Is a Transformational Opportunity originally appeared on Fool.com.

Andrs Cardenal owns shares of Google (A shares), Google (C shares), and International Business Machines. The Motley Fool recommends Cummins, Google (A shares), and Google (C shares). The Motley Fool owns shares of Cummins, General Electric Company, Google (A shares), Google (C shares), and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.