Boston’s City Hall, with its jarring architecture glowering over the graceful red brick of Faneuil Hall, is a favorite target of many of this city’s notoriously cranky residents.
But a department called the Mayor’s Office of New Urban Mechanics brightened it up over the holidays with the “wicked-good tree,” whose 720 LED lights changed color when people tweeted it.
It was a simple example of the kind of technology embodied by the Internet of Things, the potentially multitrillion-dollar industry that could ultimately connect billions of devices over wireless or wired networks, allowing them to be controlled and monitored remotely, and which Goldman Sachs has called the next mega-trend.
The Internet of Things, or IoT, “is at the intersection of a lot of the strengths of this city,” says Chris Osgood, who co-chairs the office. “You have people who are experts in hardware and experts in software and experts in how to solve problems.”
Which raises the question: In an age when competing regions offer tax breaks and other incentives to lure high-technology and biotechnology companies—and areas like Silicon Valley become synonymous with them—what terrestrial city, state, or country is poised to become the center of the IoT?
No one place has yet captured the lead, says Steve Halliday, president of a Pittsburgh technology consulting company called High Tech Aid.
“If you look at it in the framework of, is a city engaged in the concept of the Internet of Things, there’s probably a handful of cities worldwide that are,” Halliday says. “Boston, Silicon Valley, Seattle, even Pittsburgh—but I don’t think any of them are particular hubs.”
History suggests that competition could be fierce among cities that want to become one, and that covet technology companies and the highly educated, well-paid people they employ. That’s what’s helped make Silicon Valley home to the most billionaires per capita in the United States. The IoT is projected to have as much as a $2.3 trillion global economic impact by 2025, according to the McKinsey Global Institute.
Measured by venture capital investments, the San Francisco/San Jose area is the leader in technology startups, according to the National Venture Capital Association, followed by New York, then Boston, then Los Angeles.
In biotechnology, the venture capital association reports, Boston/Cambridge and San Francisco Bay split half of investors’ dollars, federal government grant money, lab space, and employment, and seesaw in first and second place.
For a city to win that level of dominance in the nascent IoT sector “is quite an attractive proposition,” says Marlin Mickle, professor emeritus at the University of Pittsburgh’s Swanson School of Engineering.
But the IoT is much more diffuse by nature than, say, biotech, says Jim Tully, lead analyst on the IoT for the technology research firm Gartner.
It includes the vast array of products in which sensors are embedded, the sensors themselves, the software that controls and analyzes them, and the networks across which they connect.
So far, Tully says, “All the vendors tends to be in totally different spaces, and all over the place. I don’t see a lot of geographical concentration.”
Most of the added value of the IoT is at the top, in the companies that furnish services and software. And they cover the map.
Of the top IoT players based on market capitalization, as calculated by the IoT consulting firm Postscapes, five are headquartered in Silicon Valley, one, PTC, is just outside Boston in the Route 128 belt, and still others are scattered around San Diego, Texas, New York, Seattle, Germany, and the United Kingdom.
“I still don’t see, at least as yet, any pattern of geographical concentrations there,” Tully says. That may happen. It did happen with other industries. It might just be that we’re too early in the Internet of Things to speak about it yet.”
What could accelerate that process is the work of smaller startups, and their acquisition by these major actors, according to people who follow the tech industry. PTC, for instance, absorbed Axeda last year and ThingWorx the year before, and Boston is also home to IoT rising stars such as LogMeIn.
“We’re already seeing this consolidation happening,” Tully says. “And acquisitions will make the big players bigger.”
Nor can American cities be smug in the belief that the competition will be confined to the usual suspects. The country with the most things already connected? China, according to the telecom industry association Groupe Speciale Mobile.
The northern Spanish port of Santander in Spain has been chosen as a European test facility for IoT applications called SmartSantander. China has created an IoT innovation zone in Wuxi, near of Shanghai, where there are already 300 IoT companies with $6.6 billion in annual revenue collectively.
As IoT innovators look for places to do business, they’ll likely be drawn to cities like these that have the infrastructure they need, Mickle says.
But they’re also likely to congregate in places where IoT technology is in increasingly widespread use, he says, “Because those people feel at home there.”
That gives cities such as Boston an advantage, says Jascha Franklin-Hodge, who heads Boston’s Department of Innovation and Technology.
“So much of our technology industry in general is fueled by partnerships between entrepreneurs, more established businesses, and academic institutions, which makes us fertile ground for the Internet of Things and many other trends in the technology world,” Franklin-Hodge says.
The city itself already uses IoT technology to monitor when municipal trash cans need to be emptied and parking spaces aren’t in use, and is even installing Soofas—smart solar-powered park benches where people can recharge their mobile devices.
“To me the Internet of Things isn’t an industry and it isn’t a place,” Franklin-Hodge says. “It’s a rethink of the way that technology is used in the physical world and the way people interact with it. Our goal is to make this a city where people can try new things—where companies can put their smart park bench—and use this to find ways to grow.”
Photo courtesy of Changing Environments