The Internet of Things PDF

Deutsche Bank
Markets Research
Industry Date
6 May 2014
The Internet of
Things North America
United States
TMT
Brian Modoff
Research Analyst
(+1) 415 617-4237
brian.modoff@db.com
Vijay Bhagavath, Ph.D

Research Analyst
(+1) 415 617-3324
vijay.bhagavath@db.com
Kip Clifton, CFA

Research Associate
(+1) 415 617-4247
kip.clifton@db.com
F.I.T.T. for investors

Not quite the Jetsons yet, but places
to look
Internet of Things (IOT) is a big idea but promise and reality are a distance apart
IOT is a set of multi-year secular growth themes in our view impacting every player in our
universe. IOT has the potential for unlocking Trillions of dollars of value – through structural
improvements in operational efficiencies in every industry sector. Early stage IOT initiatives in
Smart Energy, Smart Retail, Cyber Security are the basis for our conviction on a long-tail positive
impact to select players in our universe. But significant work lies ahead to make the promise a
reality. It is our view that the ultimate goal of IOT is a ways off and may not have a significant
impact on unit volumes of connected things until 2016. Still, we believe IOT is the biggest shift
to hit our industry since the internet itself.
________________________________________________________________________________________________________________
Deutsche Bank Securities Inc.
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should
be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST
CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014.
Deutsche Bank
Markets Research
North America Industry Date

United States 6 May 2014
TMT
The Internet of
Things FITT Research
Brian Modoff
Not quite the Jetsons yet, but places Research Analyst

(+1) 415 617-4237
to look brian.modoff@db.com
Internet of Things (IOT) is a big idea but promise and reality are a distance apart Vijay Bhagavath, Ph.D
IOT is a set of multi-year secular growth themes in our view impacting every Research Analyst
player in our universe. IOT has the potential for unlocking Trillions of dollars of (+1) 415 617-3324
value – through structural improvements in operational efficiencies in every vijay.bhagavath@db.com
industry sector. Early stage IOT initiatives in Smart Energy, Smart Retail, Cyber
Security are the basis for our conviction on a long-tail positive impact to select Kip Clifton, CFA
players in our universe. But significant work lies ahead to make the promise a
Research Associate
reality. It is our view that the ultimate goal of IOT is a ways off and may not
(+1) 415 617-4247
have a significant impact on unit volumes of connected things until 2016. Still,
kip.clifton@db.com
we believe IOT is the biggest shift to hit our industry since the internet itself.
Near-term opportunities include Top picks
We highlight three themes – Network Intelligence and Security, Edge Clouds
Qualcomm (QCOM.OQ),USD78.99 Buy
and Datacenter Clouds, which form the basis for building a new generation of
Commscope (COMM.OQ),USD27.84 Buy
infrastructure for implementing “Internet of Things” use cases. IOT
infrastructure rollouts are an incremental +$2B a year capex opportunity in our Cisco Systems (CSCO.OQ),USD22.94 Hold
view (above and beyond the +$47B a year networking IT spend) and could be F5 Networks (FFIV.OQ),USD103.72 Buy
basis for upside to the CY16+ consensus view for select IT vendors. Source: Deutsche Bank
Primer and roadmap for investment Companies Featured

This research note doubles as a primer on IOT. We walk through all elements
Qualcomm (QCOM.OQ),USD78.99 Buy
of IOT from the architectures and protocols being considered to security and
2013A 2014E 2015E
Big Data challenges. All of this is discussed with the beginner in mind, so that
EPS (USD) 3.91 4.56 5.26
investors come away with a holistic view of the challenges that remain but
P/E (x) 16.4 17.3 15.0
also a sense of the possibilities both in the near term and in the long term.
EV/EBITDA (x) 3.3 3.9 2.9
Key names
Commscope (COMM.OQ),USD27.84 Buy
Qualcomm: Qualcomm is likely one of the best positioned companies in the
2013A 2014E 2015E
space, as it will have generated significant “lock-in” given it developed much
EPS (USD) 0.12 1.43 1.51
of the foundational elements that drive even the most peripheral areas of IOT.
P/E (x) 138.9 19.5 18.4
Cisco: We have near-term caution on the company’s core business, while
EV/EBITDA (x) 8.2 8.5 7.9
remaining constructive on CY16+ opportunities in IOT and product refresh
cycles in datacenter switching, security and carrier routing. Cisco Systems (CSCO.OQ),USD22.94 Hold
CommScope: The Wireless segment has the general trend of densification in 2013A 2014E 2015E
its favor, but Enterprise segment could be impacted relatively more by IOT. EPS (USD) 1.86 1.42 1.65
F5 Networks: The market leader in Layer 4/7 is well-positioned to capture a P/E (x) 11.0 16.2 13.9
meaningful percentage of new IT dollars that are being allocated for EV/EBITDA (x) 5.5 7.4 6.2
implementing the Network Intelligence and Security Iayers for IOT.
F5 Networks (FFIV.OQ),USD103.72 Buy
Ciena: could benefit from new use cases around rollouts of optical Ethernet
2013A 2014E 2015E
switches in IOT use cases; also optical network automation tools.
EPS (USD) 3.50 3.90 4.87
Infoblox: It is likely to benefit from IT spending on IP Address Automation and
P/E (x) 25.1 26.6 21.3
DNS Security needed for implementing “Cloud-scale” Internet architectures. EV/EBITDA (x) 12.0 12.6 9.4
Other companies that could benefit from these trends include CAVM, JNPR, Source: Deutsche Bank
UBNT, ARUN, RKUS, ADNC and XXIA.
We also include descriptions and exposure to over 50 other companies.
Valuation and risks
The stocks in our wireless and data networking peer group trade at 17-18x
forward P/E, a premium to the market, given the above-market growth prospects
of the networking universe. Key risks (downside and upside) are from
unanticipated shifts in IT spending, share shifts and technology disruptions.
________________________________________________________________________________________________________________
Deutsche Bank Securities Inc.
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should
be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST
CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014.
6 May 2014
TMT
The Internet of Things
Table Of Contents
Executive Summary............................................................. 4
Companies: ........................................................................................................... 7
IOT Vision .......................................................................... 11

Key Building Blocks of an Internet of Things Infrastructure
........................................................................................... 15
Architecture ....................................................................... 22
IOT Protocols ..................................................................... 28
No clear protocol in place .................................................................................. 29
Security ............................................................................. 37
APIs ................................................................................... 40
Middleware ......................................................................................................... 45
IOT as a Platform ............................................................... 47

IOT platform for devices ..................................................................................... 50
Are Networks Ready? ........................................................ 54

The rising Intelligence in Sensor Nodes ............................ 58
Frequency challenges ........................................................ 61
Big Data and Analytics ...................................................... 64
IOT Use Cases ................................................................... 69
Companies......................................................................... 81
Qualcomm .......................................................................................................... 81
Cisco ................................................................................................................... 83
CommScope ....................................................................................................... 84
F5 ........................................................................................................................ 84
Ciena ................................................................................................................... 86
Infoblox ............................................................................................................... 86
Juniper ................................................................................................................ 87
Riverbed .............................................................................................................. 87
Cavium ................................................................................................................ 87
Ubiquiti ............................................................................................................... 88
Aruba and Ruckus .............................................................................................. 88
Audience ............................................................................................................. 89
Ixia ...................................................................................................................... 89
Companies outside of our coverage area .......................................................... 89
Page 2 Deutsche Bank Securities Inc.

6 May 2014
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Table of Exhibits
Figure 1: Hype versus Reality ............................................................................................. 5
Figure 2: IOT unit forecasts ................................................................................................ 5
Figure 3: Current IOT use cases ......................................................................................... 5
Figure 4: Places to invest ................................................................................................... 5
Figure 5: Internet of Things – A Big Picture View ............................................................. 12
Figure 6: Potential operational efficiency savings from representative Internet of Things
industrial use cases (based on GE IOT Study Data) .......................................................... 13
Figure 7: Contrasting Legacy Datacenter and IOT Edge Cloud / Datacenter Cloud
architectural approaches .................................................................................................. 15
Figure 8: Key Edge Cloud feature-functions (e.g. Cisco ISR 819 series, OEM enterprise
edge routers, etc.) ............................................................................................................ 16
Figure 9: Key Datacenter Cloud infrastructure layers ....................................................... 19
Figure 10: Conceptual view of an IOT Datacenter Cloud – illustrating the Information
Technology (IT) and Operational Technology (OT) infrastructure elements...................... 21
Figure 11: Layers of a generic oneM2M architecture....................................................... 23
Figure 12: Architecture proposed by IOT-A ...................................................................... 24
Figure 13: WSNs market traction as sensor costs decrease ............................................ 25
Figure 14: Tracy and Sreenan architecture....................................................................... 27
Figure 15: Managing disparate devices/services and transport layers ............................. 28
Figure 16: Members of AllSeen Alliance .......................................................................... 30
Figure 17: MQTT machine-to-machine communication ................................................... 32
Figure 18: Abstract layering of CoAP ............................................................................... 33
Figure 19: Architecture of a CoAP-based wireless sensor network.................................. 33
Figure 20: 6LowPAN enables IPv6 over low power WSNs .............................................. 35
Figure 21: Google maps via Verizon’s website ................................................................. 41
Figure 22: Directions to store via Google maps ............................................................... 41
Figure 23: Mashups make it relatively easy to combine applications .............................. 42
Figure 24: Sensor middleware, gateway and API management....................................... 44
Figure 25: Enabling interoperability via APIs .................................................................... 44
Figure 26: Gartner Magic Quadrant .................................................................................. 45
Figure 27: ThingWorx Application development platform................................................ 49
Figure 28: Qualcomm’s IOT development platform ......................................................... 51
Figure 29: Broadcom WICED module .............................................................................. 52
Figure 30: Arduino microcontroller board ........................................................................ 53
Figure 31: Galileo board ................................................................................................... 53
Figure 32: IOT brings value to businesses, consumers and assets .................................. 54
Figure 33: Ericsson Device Connection Platform – general deployment .......................... 55
Figure 34: Gateways in the context of IOT ....................................................................... 56
Figure 35: DRX cycle effect on battery life ....................................................................... 57
Figure 36: A partial list of sensor use cases ..................................................................... 59
Figure 37: Radio technology range and bit-rate ............................................................... 62
Figure 38: 2013 Worldwide Big Data Revenue by Vendor ($ mlns).................................. 64
Figure 39: How IOT will effect the Big Data landscape .................................................... 65
Figure 40: Stream processing enables real-time response ............................................... 66
Figure 41: iTRACS DCIM to optimize data center for stream processing ......................... 67
Figure 42: The path to increased investment in DCIM ..................................................... 68
Figure 43: Industry data summary on CY15 network equipment capex spending
[Infonetics] and DB view of incremental network infrastructure spending on IOT use
cases ................................................................................................................................ 69
Figure 44: Illustration of IOT Cyber Security network architecture .................................. 71
Figure 45: Illustration of key IT stacks involved in implementing an IOT Cyber Security
architecture ...................................................................................................................... 74
Figure 46: Conceptual view of an IOT architecture to support a Smart Energy use case. 75
Figure 47: Conceptual view of relevant IT stacks involved in the Smart Energy use case 76
Figure 48: Conceptual view of an IOT architecture to support a Smart Retail use case ... 79
Figure 49: Conceptual view of relevant IT stacks involved in Smart Retail use case ....... 80
Figure 50: Qualcomm’s IOT initiatives.............................................................................. 81
Figure 51: GSMA unit estimates for the connected car ................................................... 81
Figure 52: Unit cellular estimates for the connected home .............................................. 82
We wish to thank Vinod Khurana and Mohd-Tabish Shams of Evalueserve for

their contributions to this work
Deutsche Bank Securities Inc. Page 3

6 May 2014
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Executive Summary
"A global network infrastructure, linking physical and virtual objects through the
exploitation of data capture and communication capabilities. This infrastructure
includes existing and involving Internet and network developments. It will offer
specific object-identification, sensor and connection capability as the basis for
the development of independent cooperative services and applications. These
will be characterized by a high degree of autonomous data capture, event
transfer, network connectivity and interoperability." – The CASAGRAS report
2011
The above quotation is one for the more succinct descriptions of what the
Internet of Things (IOT) is proposed to be. As to how this translates into units Our thesis differs from most:
and dollars, ideas begin to differ among third-party data providers, industry We believe the IOT, as it is
bodies, companies and people. While almost everyone agrees that the benefits described in the ideal sense
will be significant, the target beneficiaries and when they are affected is a above, is a ways off, likely not
constant debate among pundits. The most noise is made by companies having a significant impact on
themselves, proclaiming that IOT will have a huge impact to their bottom lines unit volumes until 2016 at the
and that this impact is right around the corner. Our thesis differs from most. earliest
We believe that IOT, as it is described in the ideal sense above, is a ways off,
and may not have a significant impact on unit volumes until 2016 at the
earliest. There are a number of challenges around architecture, protocols and
security, all of which need to be addressed before IOT reaches the tipping
point of critical mass adoption. However, despite this time lag, we believe
there are areas of incremental growth which can be exploited now as
companies are winning in these “smart silos,” places like the connected car,
smart home and the smart grid. We walk through the impact of these There are a number of
investments, but only as it relates to the companies in wireless and data challenges around
networking universe. architecture, protocols and
security, all of which need to
This research note doubles as a primer on IOT. We walk through all elements
be addressed before IOT
of IOT from the architectures and protocols being considered to security and
reaches the tipping point of
big data challenges. All of this is discussed with the beginner in mind, so that
critical mass adoption
investors come away with a holistic view of the challenges that remain but
also a sense of the possibilities both in the near term and in the future. It is
within this framework that we conclude the note with a company exposure list
and highlight those names which we believe have the best exposure, and
those with a foothold into the likely winning platforms of the future.
Where we stand today

We are in the midst of a decently sized hype cycle. In many ways this is
positive, as it attracts developers and stimulates idea generation. In other
ways, it can lead people to get ahead of themselves in terms of unit volumes in
the near term. A quick glance at some of the unit forecasts gives a decent
sense of how quickly some project the unit volume to grow. There are caveats
around every estimate, some around the definition of units (e.g. is a jet engine
one IOT unit or hundreds?) and others around a decision tree of actions (e.g.
one protocol used) working in just the right way to achieve targets. In spite of
these caveats, our research on the unit estimates suggests that we are likely
further out than most project given the challenges.

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Figure 1: Hype versus Reality

Present
Figure 2: IOT unit forecasts
Hype cycle 26 billion by 2020 Gartner
50 billion by 2020 Cisco
Hype/Revenue 15 billion by 2015 Intel
50 billion by 2020 Ericsson
IOT Unit
Sales 18 billion M2M devices by 2022 Machina
Research
Source: Various sources – see above
Time 2017 – 2020

timeframe
Source: Deutsche Bank
If we place ourselves at the dotted line, unit volumes are still a ways off and
we are in the midst of a considerable hype cycle. Still, we believe there are Still, we believe there are
places to invest, as there are companies seeing meaningful sales within the places to invest…
realm of IOT. These are often areas where the environment is contained,
disparate protocols need not be leveraged, the overall architecture has been …these are often areas where
decided upon and security is less of an issue; targeted industries like the ones the environment is contained,
mentioned to the right, with some having a greater traction than others (e.g. disparate protocols need not
fitness having greater traction than medical given privacy issues), are the value
be leveraged, the overall
creators within the current IOT. Eventually every industry will leverage IOT to
architecture has been decided
realize efficiencies, and this will have a profound effect not just on unit sales,
upon and security is less of an
but services as well. Our goal with this paper is not to focus on the dreams of
issue
what could be but rather on what can be done with the current tool sets and
provide a framework to help investors find companies within the circle below.
Figure 4: Places to invest

Present
Hype cycle Figure 3: Current IOT use cases

Shipping and location
Hype/Revenue
Home automation
IOT unit The smart grid
Sales Farming/agriculture
Medical
Fitness
Companies are Retail inventory management

winning here, in Environment monitoring
various “smart Industrial automation
silos”
Security (building and infrastructure)
2017 – 2020 Vehicle/smart car

Time
timeframe Lighting
Source: Deutsche Bank Asset tracking
Source: Deutsche Bank;

6 May 2014
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Areas such as asset tracking, shipping, home automation and smart cars
leverage the current wireless infrastructure and will increase their reliance on
such connections in the future. Even though most of the “things” we think
about are connecting to the IOT using close connections over unlicensed –
such as Bluetooth, WLAN, NFC – the data from these “things” will eventually
flow back to the network, where they will be analyzed and managed. This
means that the connections themselves, whether wireless or wired, need to be
ready for this data deluge and we believe that most networks around the world
are not to ready to support this sort of traffic in a reliable fashion.
Potentially trillions at stake, but over the long term

IOT is a multi-year IT spending and infrastructure buildout initiative involving
the private sector and governments and is best viewed as a trillions of dollars
opportunity in the long term created from rich interconnections among people,
processes, data and things.
While IOT is an evolving opportunity, our IT conversations suggest a potential

for $2B in incremental annual capex spending over the next several years on
Layer 0/7 network and wireless equipment (e.g. switches, routers, optical
transport, security, Layer 4/7 appliances) that would be required to implement We note potential for $2B in
IOT use cases in these smart silos. incremental annual capex
spending over the next few
We view the +$2B in incremental capex spending on IOT use cases – above years on Layer 0/7 network
and beyond the current +$47B a year in IT spending on Layer 0/7 wireless and equipment. The +$2B in
network equipment – as a fundamental basis for potential upside to the CY16+ incremental capex spending
consensus view for select IOT-exposed stocks in our networking universe. would be above and beyond
the current +$47B a year in IT
We believe the basis for a conservative $2B a year in incremental IT spending spending on Layer 0/7
on IOT use cases is that CxOs would likely allocate around 10% of the $18B a
network and wireless
year in opex savings from implementing IOT. (A recent GE IOT study notes a
equipment.
potential for +$276B in opex savings over the next 15 years from a modest 1%
improvement in key operational efficiency metrics from leveraging IOT.)
However, challenges still remain. We walk through the challenges associated In a sense, IOT is different
with every element of IOT from the architecture down to Big Data and from every other, emerging
analytics. In a sense, IOT is different from every other emerging technology. technology. With the Internet,
With the Internet, there was one protocol and developers were able to build to
there was one protocol and
that. With cellular technology, a standard body now helps to oversee where
many were able to build to
the standard goes and everyone builds to that. IOT does not yet have such a
that.
body and every smart silo is building in a different direction, often with little
thought to how integration efforts might go. Given this difference, we discuss
where the standards might go, which platforms have the early foothold and
what architecture seems most appealing.
Our investment thesis centers on names that are being impacted now and will Our investment thesis centers
see this impact accelerate along with the adoption of IOT. On the Wireless on names that are being
side: Qualcomm, CommScope, Audience, Aruba, Ruckus and Ubiquiti. On the impacted now and will see
Data Networking side: Cisco, F5 Networks, Ciena, Cavium, Juniper, Infoblox,
this impact accelerate with
Ixia and Riverbed.
the adoption of IOT.

6 May 2014
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Companies:
Qualcomm
Qualcomm has been positioning IOT as the growth driver for the company
since cellular wireless technology first gained traction. The company started
with Omnitracs, a platform for truck fleet management, and then branched out
into a number of IOT initiatives. It developed the AllJoyn protocol, which is
now overseen by the Linux foundation and has more partners and contributors
than any other protocol platform being considered.
Qualcomm will be a key beneficiary of IOT, which is not an extraordinary

statement. But given our view that it will take time for the market to develop,
and with a company that is on the cusp of shipping 1 billion ASICs per year, it
will be some time before it is significant for the company. Having said that,
when IOT unit volumes begin to ramp up in earnest, Qualcomm will likely be
one of the best positioned companies in the space, as it will have generated
significant “lock-in” given it has developed much of the foundational elements
which drive even the most peripheral areas of IOT.
Cisco
The basis for our constructive view on Cisco in the IOT infrastructure
opportunity in the out quarters (2H15+) is: 1. Cisco is viewed as a thought
leader in IOT (we note CEO keynotes on IOT at major trade shows) in IT circles
and has an IOT focused cross business unit product team. 2. Cisco has the
broadest set of touch points in enterprise and service provider infrastructure
and a broad portfolio of IT services from campus to the core. 3. Cisco’s IOT
opportunity in 2H15+, given our view that the company has the set up, from a
product portfolio, customer base, market share and sales execution POV, for
offering a packaged bundle of IOT solutions involving millions of smart objects
(i.e. Internet connected wireless sensors) connecting to an Edge Cloud. 4. The
stock could be a potential margin improvement and earnings growth story in
CY15+, if the company gradually exits from several slower growth and focuses
on higher margin “software” and “advanced services” opportunities in Private
Clouds, Telco Clouds and Internet of Things (refer to our recent CSCO Growth
Strategy note.
Our Hold rating on Cisco reflects our near-term caution on the company’s core
business (switching and routing in product transition mode), while remaining
constructive on CY16+ opportunities in IOT and product refresh cycles in
datacenter switching, security, carrier routing, among others.
CommScope
The Wireless business segment has been a key driver for CommScope’s
overall top-line. While there is nothing specific in Wireless that falls within IOT
per se, its DAS solution will be a key enabler of IOT, as it puts the cellular
network closer to the user. The company has made some interesting
acquisitions in the Enterprise segment, mainly within the vein of IOT –
Redwood Systems, an intelligent lighting company and iTRACs, a data center
infrastructure management platform. The two companies were acquired when
CommScope was held privately. We discuss both of these, as well as other
segments in our report. In short, the trends in IOT will impact Wireless and
Enterprise segments. While Wireless has the general trend of densification
working in its favor, it is likely the Enterprise segment will be impacted
relatively more by IOT.

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F5 Networks
Buy-rated F5 is our top midcap idea to play the near-term [CY15/16+] spending
on IOT – given our research noting that Network Intelligence and Security are a
Phase 1 priority in the multi-year rollout of IOT use cases in enterprise and
service provider verticals.
A third of the +$2B in incremental networking capex a year (DB view) on IOT
use cases could be utilized for Network Intelligence and Security solutions (we
note: Layer 4/7 capex is typically a third of datacenter networking capex). This
is basis for our view that the Layer 4/7 category leaders (FFIV; BLOX, etc) could
see modest TAM expansion in the $100s of Millions a year range from
enterprise IOT use cases such as Industrial Cyber Security, Smart Energy,
Smart Retail, etc and also service provider IOT use cases such as e-Healthcare,
home automation, etc in the out quarters.
Ciena
Buy-rated Ciena could benefit from sales of higher margin optical Ethernet
access products and optical network automation software tools to support IOT
Edge Cloud buildouts. We also note opportunities for Ciena’s Carrier Ethernet
solution and optical network management software tools in the Smart Energy
use case. Undersea cable – carrying optical Ethernet data traffic – is a relevant
use case for sales of Ciena’s carrier Ethernet switches at either ends of the
offshore and onshore optical WAN links. Ciena’s optical network management
SW could be used to dynamically provision optical network transport
equipment at either ends of an optical fiber link.
Infoblox
Infoblox – a market leader in DNS and IP Address Management [IPAM]
solutions – could secularly benefit from the IT spending on IP Address
Automation and DNS Security – needed for implementing “Cloud-scale”
Internet architectures in the Edge Cloud and Datacenter Cloud – two key
themes of our FITT. We have a long view on Infoblox – noting that the
company’s IP Address Automation (DNS, DHCP, IP Address Management;
collectively IPAM) opportunity could meaningfully scale from – the current
+25M enterprise application server IPAM opportunity [refer to our BLOX
coverage initiation note for further color] to potentially offering IPAM
capabilities for 100s of Millions of Internet Connected Objects in key enterprise
and service provider IOT use cases.
Juniper
We are cautious on Hold-rated Juniper in IOT networking buildouts. Juniper, in
our view, lacks a competitive best-in-class Enterprise Edge Cloud and
Datacenter Leaf and Spine Cloud switching portfolio.
We see a limited role for Juniper in the access segments of IOT use cases, i.e.
in WiFi, campus switching or in campus and branch security. Our cautious
view is based on Juniper’s low single-digit market share in enterprise
networking and lack of meaningful competitive advantage versus market
leader Cisco across a wide range of IOT enterprise networking segments.
Riverbed
Hold-rated Riverbed could modestly benefit from enterprise IOT use cases in
CY15/16+, primarily in network performance monitoring by leveraging
Riverbed’s Cascade product portfolio. That said, we remain cautious on

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Riverbed, noting +70% of Riverbed’s FY revs are exposed to a declining

growth WAN optimization (Steelhead) portfolio.
Cavium
While current levels suggest a neutral risk/reward equation – basis for our Hold
rating – given, stock trading at ~25x P/E for ~20% consensus CY15 rev growth
expectation, we have a constructive longer-term view on Cavium’s new multi-
core processors: specifically, Octeon3, Liquid IO and Neuron TCAM chips –
which are relevant for IOT enterprise and service provider use cases.
In the Datacenter Cloud, Cavium’s Liquid IO application acceleration

processors could benefit from IOT use cases such as Big Data Analytics,
processing high volumes of aggregated and encrypted IOT sensor data (SSL
Offload, data compression, etc) – as HW acceleration add-ons in datacenter
servers, etc. Similarly, Cavium’s Nitrox processors fit into HW acceleration use
cases in Layer 4/7 ADC and Next-Gen Security appliances.
Ubiquiti
Ubiquiti is able to proliferate a number of markets quickly, given its low-cost While we believe the devices
and global network of distributors. Most investors know the company for its to have meaningful utility,
airMax and Unifi product lines; however, it has three other platforms – their channel and end-
airVision, mFi and EdgeMax. mFi is Ubqiuiti’s foray into machine-to-machine
customer (as it stands today)
communication. The mFi platform includes everything from smart power strips
may not create the necessary
to sensors (motion, light, temperature and doors). While we believe the devices
demand to make this platform
to have meaningful utility, their channel and end-customer (as it stands today)
may not create the necessary demand to make this platform a significant a significant contributor to the
contributor to the top line. However, if consumers could install these devices top line.
easily and that they were available in known retail locations, we believe that
the traction would be much more significant. As it stands, we see it more as a
hobby of a WISP operator or other tech savvy people.
Aruba and Ruckus

We grouped Ruckus and Aruba as there is no product or platform directed at
IOT by either company; however, both companies should see a general uplift
from the broad trend of connectivity and other trends such as 802.11ac
adoption, location analytics, BYOD, Hotspot 2.0 and cloud managed WLAN
services. These trends will play a major role in making a wireless connection
faster. Additionally, some IOT modules will connect via WiFi and require a
dynamic usage of the spectrum – it will be up to the AP to understand this.
This is where Aruba and Ruckus could differentiate their wares as both have
distanced themselves by incrementally adding intelligence into their APs, and
going further to integrate IOT elements would not be a reach for either
company. In short, we believe that Ruckus and Aruba will eventually be
beneficiaries of IOT, but it will likely not happen in the near term.
Audience
Audience is known for its audio and voice processors. But it could make an
inroad into IOT with its Voice Q and Motion Q technologies that are based on
voice and motion recognition, helping devices to wake up and sleep, and
thereby efficiently managing battery life. The company recently released the
demo versions of the processor at the Consumer Electronics Show and the
Mobile World Congress. The processor will be integrated into the company’s
eS700 series, which will be shipped in the second half of this year. While the
processor may gain initial traction in smartphones, it could also be used in
remote controls, wearables, fitness and health devices, mobile computers and

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other battery powered devices. Going back to our original thesis, while we
believe that it will be some time before this type of processing capability sees
significant growth, we believe that it will be eventually included in adjacent
markets and Audience could see meaningful upside.
Ixia
Hold-rated Ixia will modestly benefit in enterprise and carrier IOT use cases in
the out quarters, in the areas of network visibility and Layer 2/7 network
equipment port monitoring, leveraging its Anue acquisition.

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IOT Vision
We view the Internet of Things as much more than a 2.0 remake of the
Internet.
In our view, the accurate definition of Internet of Things is a “networked” Internet of Things is a
interconnection of people, business processes, data and things. In contrast, “networked” interconnection
the Internet is mainly an interconnection of computing devices and of people, business
applications.
processes, data and things
The fundamental difference between an Internet of Things infrastructure and a

conventional IT infrastructure is the need for a new network element which we
term an “Edge Cloud Node”.
An Edge Cloud Node is an important element between the Datacenter Cloud

and the IOT end-points for the following reasons (discussed in detail in the IOT
Building Blocks section):
1. Offering “localized” compute, networking, security, and storage

feature-functions in physical proximity to the Internet-connected
objects – so as to intelligently process raw data output from 1000s of
IOT sensors and provide immediate local control decisions back to the
IOT elements;
2. Aggregate huge volumes of IOT data and send it upwards to
centralized Datacenter Clouds – for Big Data Analytics, building a
global view for centralized planning and decision making, etc.
3. While conventional datacenters operate under the assumption of a low
latency and continuously available network connection between the
datacenter applications and the end-devices, the Edge Cloud, being
application and network aware – is able to intelligently process IOT
data (locally, when necessary) and trickle charge IOT data up to
centralized Clouds – for business planning, generating longer-term
operational efficiencies, etc.
Internet of Things use cases span a broad range of industry sectors from
enterprise opportunities in smart manufacturing, energy, transportation and
retail to public sector programs in smart traffic and city services and mass-
market initiatives in e-health and home automation. We note +$19 Trillion of IOT
economic value creation
In Figure 5, we note +$19 Trillion of economic value creation potential and +25 potential and +25 Billion
Billion Internet connected devices, according to a recent Cisco IOT study. Internet connected devices

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Figure 5: Internet of Things – A Big Picture View
Internet of Things [IOT]
+$19T Economic Value Creation

Potential (CY13-22)
Private Sector
Public Sector
+$14.4T Value at Stake
+$4.6T Value at Stake
Smart Manufacturing (27% of value)
Smart Retail (11%) Smart Connected Cities
Information Services (9%) Opex Efficiencies in Govt Agencies
Financial Services (9%) Connected Defense
Healthcare, Prof. Services, Business Citizen Experiences
Management, Education, Wholesale, etc Employee Productivity Improvement
(~44%)
Source: Deutsche Bank and Cisco IOT Study Data [bottom-up analysis of 21 private sector and 40 public sector use cases; www.cisco.com
Our vision of IOT is not an abstract futuristic vision. Instead, our thematic view Our view of IOT is grounded
of IOT is grounded in the economic value creation potential of Internet of in the economic value
Things which in our view drives the capex and people investment in Fortune creation potential of Internet
500 enterprises for implementing mainstream IOT use cases in healthcare,
of Things – which in our view
connected transportation, oil and gas, smart manufacturing, smart retail, etc.
drives the capex and people
investment for implementing
A case in point is a recent GE IOT research study which notes that a modest
1% improvement in operational efficiency metrics in key industries such as mainstream IOT use cases
aviation, energy, transportation and logistics and healthcare could drive a
potential $276B in opex savings over the next 15 years (see Figure 6).

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Figure 6: Potential operational efficiency savings from representative Internet of Things industrial use cases (based on
GE IOT Study Data)
Industry Vertical Operational Efficiency Potential Opex Savings

(IOT Use Case) Improvement +$276B
(15 yr timeframe)
Smart Energy 1% reduction in capital +$90B

(Oil and Gas) expenditures
1% fuel savings +$66B

Smart Utilities
1% improvement in +$63B
Smart Healthcare operational efficiency
1% fuel savings +$30B

Smart Aviation
Connected Transportation 1% improvement in +$27B

operational efficiency
Source: Deutsche Bank and GE IOT Study Data
At a bigger picture level, a recent Cisco IOT study notes +$19 Trillion in value
at stake that could be created from public and private sector enterprises
leveraging Internet based interconnections among people, processes, data,
and physical objects – i.e. the “Internet of Things” – to generate structural
improvements in productivity, cost savings and user experience.
The $19 Trillion in IOT value creation potential is based on a bottom-up

economic analysis of +60 use cases and represents a 10-year NPV (CY13-22)
of the potential economic benefits that could be generated in the private sector
($14.4T) and the public sector ($4.6T) from IOT solutions, summarized as
follows:

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1. Asset Utilization ($2-3T range) – generated from structurally lower

operational costs through business process and capital utilization
efficiencies;
2. Employee Productivity ($2-3T range) – generated from labor
efficiencies that result from higher productivity person-hours;
3. Supply Chain and Logistics ($2-3T range) – based on improvement in
business process efficiencies across the global supply chain;
4. Customer Experience ($3-4T range) – based on increasing a
customer’s lifetime value and TAM expansion through new customer
additions;
5. Reduced Time to Market ($3T range) – IOT improves the return on
R&D investments and key business performance metrics such as Time
to Market advantage, in addition to creating new revenue streams
from new IOT business models and use cases;
6. Public Sector ($4-6T range) – IOT helps in structurally lowering
operating costs in government agencies and at the local/state/federal
levels, e.g. in initiatives such as smart cities, smart connected
buildings, supply chain and procurement optimization, digital
government initiatives, etc.

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Key Building Blocks of an

Internet of Things
Infrastructure
The foundational basis for Internet of Things is ubiquitous access for Internet-
connected objects to IT capabilities such as computing, security, performance
optimization, storage and wireless sensors via an “Edge Cloud” layer and a IOT use cases need localized
“Datacenter Cloud layer” for implementing the IOT use cases, as we and low latency access to
summarize below: compute, networking,
security and storage
Edge Cloud resources – hence the need
Internet of Things architectures are fundamentally different from current- for an Edge Cloud - at the
generation Internet architectures from the point of view that IOT use cases periphery of the IOT
need localized and low latency access to compute, networking, security and
architecture
storage resources at the periphery of the IOT architecture (see Figure 7).
Figure 7: Contrasting Legacy Datacenter and IOT Edge Cloud / Datacenter Cloud architectural approaches
Legacy Datacenter (Client/Server Applications) Datacenter Cloud (Web 2.0 / SaaS)
Limited Scale App Specific QoS; Big Data Analytics;

IT Datacenter Layer 4/7 Services (WAN Opt; ADC) Datacenter Cloud Traffic & Policy Management
(F5, Cisco ACI, VMware, IBM…)
Layer 3 Leaf / Spine Switching Network
Layer 2/3 Switching Network & Virtual Overlays
(Cisco Nexus 9k, bare-metal switches, etc)
Network Firewalling; DNS Application + Network Security;

DNS (F5, Infoblox, Cisco, etc)
Assumes Variable-Latency;
Variable BW Network Link
Assumes Low-Latency; Edge Cloud

Constant BW Network Link
Enterprise Edge Router w/
Local Compute, Networking, Storage, Security
(e.g. Cisco ISR 819; HP MSR;

OEM Edge Routers)
Client Devices IOT End-Points
Wireline & Mobile Devices Wireline & Mobile IOT End-Points;

PCs, Smartphones, etc IOT Sensors, Actuators, Mobile Devices, etc

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In comparison, most current-generation Internet end-points leverage

application and compute resources from a Datacenter Cloud.
As a side comment, Internet round-trip delays in the 10s of millisecond

timescales are adequate for most Web based and SaaS applications given our
view that Web applications leverage layer 4/7 features such as client-side data
caching and Web acceleration manage around Internet round-trip delays.
Localized real-time access to Cloud computing resources is therefore not a
requirement to run most Web-based and SaaS applications.
We refer to the local compute, networking and storage resources as “Edge

Cloud Nodes”, and to the network of Edge Cloud nodes as an “Edge Cloud
Layer”.
An Edge Cloud Node provides a rich set of localized compute, networking,

security and storage feature-functions for Internet-connected physical objects
– at millisecond-scale processing time – via a combination of wired and
wireless access methods, e.g. 3G, 4G/LTE, WiFi, wireline Ethernet, etc. (see
Figure 8).
The Edge Cloud node also aggregates sensor data from multiple Internet The Edge Cloud node
connected physical objects for post processing in a Datacenter Cloud. aggregates data from multiple
Internet connected physical
Figure 8: Key Edge Cloud feature-functions (e.g. Cisco ISR 819 series, OEM objects for post processing in
enterprise edge routers, etc.) a Datacenter Cloud
• Wireline Ethernet; 3G/4G; WLAN
• Application Specific Network Bandwidth &

Latency Provisioning (e.g. Cisco ACI Enterprise)
• Automated Edge Cloud Platform Provisioning
• Local Compute (e.g. Cisco UCS running

Application VMs)
• Local Flash Storage
• Layer 2/3 Switching and Routing
• IOT Sensor Data – Traffic Aggregation
• Network Intelligence and Security (WAN

Optimization; Application Optimization;
Malware Defense; Access Control, etc)
• Granular Traffic Analytics

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Aggregating IOT sensor data back to a centralized Datacenter Cloud is useful

for correlating IOT data sets across thousands of sensors and updating IOT
objects with network security policies (e.g. access control rights, data
encryption, etc.) and relevant IT and business rules.
Cisco’s 819 Integrated Services Router (ISR) is an example of a commercially

available Edge Cloud Node offered in industrial hardened and standard
platform form-factors and supports 3G, 4G/LTE, Enterprise and Carrier WiFi,
Ethernet LAN access and Layer 2/3 switching and routing capabilities.
While Cisco is the market leader in enterprise routing with +75% market share
Infonetics), our research suggests that the primary competition for Cisco’s ISR
819 router in IOT Edge Cloud deployments is likely to be from HP (MSR series),
especially for the enterprise IOT use cases.
Cisco’s ISR 819 router (and the branded enterprise routers, in general) is also
likely to see growing competition from unbranded ODM enterprise routers
which are customized Edge Cloud Nodes, optimized for a specific IOT use case
and built using merchant silicon to implement lower-end (1G or lower) layer
2/3 switching, routing and network management features, in addition to the
best in class wireline + wireless access.
Note that the Cisco ISR Edge Cloud Node (and other branded vendor products
such as HP’s MSR node) can support IOT objects that are in motion or
nomadic within a local area with telemetry data from the sensors aggregated
and processed via 4G/LTE or WiFi access. Cisco’s ISR node also supports
Mobile IP protocols to dynamically build and manage IP routed networks
among wireless sensor objects.
As we head into CY15+, when the early set of IOT use cases in enterprise and
service provider verticals would start scaling to 1000s of IOT objects, we see
the role for an interconnection of Edge Cloud Nodes which we term as the
Edge Cloud Layer.
The Edge Cloud Layer has a meaningful value proposition in scale-out IOT use
cases involving tens of 1000s of Internet connected objects connected to
1000s of Edge Cloud Nodes.
For example: we see the Edge Cloud Layer ensuring security and IT policy
coordination across multiple Edge Cloud Nodes (i.e. enterprise edge routers).
The Edge Cloud Layer is ideal for ensuring that security patches and IT rules
are applied consistently across Edge Cloud Nodes in order to avoid
configuration mismatches among Edge Cloud Nodes (which are often the root
cause of network outages, security breaches and performance issues).
A related value proposition of the Edge Cloud Layer is to leverage the

interconnectivity among Edge Cloud Nodes for utilizing spare compute and
storage resources across enterprise edge routers (for example) to handle
overload situations at any given edge routing node especially for objects that
output Gigabytes of data such as Oil and Gas IOT sensors.
In the IOT Themes chapter, we discuss a key set of IOT use cases that leverage
the Edge Cloud Node and a networked interconnection of Edge Cloud Nodes
to implement low-latency and localized compute, networking and storage
capabilities.

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Datacenter Cloud; Network Intelligence and Security

While the Edge Cloud Nodes provide localized and real-time access to
compute, networking and storage capabilities for IOT end-points such as
wireless sensors and various other Internet connected objects, a Datacenter
Cloud Layer could be viewed as a centralized Cloud layer that offers key
features such as:
1. Business Intelligence – based on Big Data Analytics of the information

collected and processed across 1000s of IOT end-points;
2. Cloud IT services such as Application and Network Layer Security,
Disaster Recovery and Backup of the aggregated IOT data;
3. Large-Scale IOT enabled services such as Home Automation, e-
HealthCare and Smart Retail which require raw data from IOT end-
points to be aggregated and processed in centralized servers and
control decisions from the central servers; for example: turning home
automation equipment on or off or setting it to a certain operating
metric to be sent back to 1000s (or even millions) of IOT end-points.
A Smart Retail use case would involve inventory levels collected from
1000s of product SKUs from retail point of sale locations being
aggregated and processed in centralized servers and database
engines for subsequent notifications to global supply chain partners,
warehouses, etc.
The IOT Themes section discusses a set of use cases which require a
coordinated combination of Edge Cloud and Datacenter Cloud capabilities to
implement large-scale IOT use cases in enterprise and service provider
environments.
X-raying into a typical IOT Datacenter Cloud infrastructure, we note a key set
of networking layers (see Figure 9):

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Figure 9: Key Datacenter Cloud infrastructure layers
Networking SW Tools
Apps & Network Automation, Big Data Analytics,

Tools Cloud Services Orchestration Tools
Datacenter Cloud Infrastructure

Layer 4/7
Network
Traffic Management, Security, App Acceleration, etc
Intelligence (e.g. F5, Citrix, A10, etc)
Layer 2/3 Virtual Network Overlays

Networking (e.g. VMware, Cisco, Juniper, etc)
Platforms
10/40GE Layer 3 Leaf/Spine Switching

(Cisco, OEM switches w/ Cumulus SW, etc)
Optical Transport (10/40/100G)

Transport
(Ciena, Alactel Lucent, Infinera, etc)
5
1. A 10/40GE Leaf and Spine switching infrastructure designed to be a

“Cloud-Scale” Layer 2/3 physical networking underlay for
implementing a fully meshed interconnection of application servers
running in the datacenter.
A Leaf and Spine based Datacenter Cloud can scale to support 10s of
1000s of application servers which is adequate to support a majority
of IOT use cases in large enterprise and service provider networks.
Cisco’s recently launched 10/40GE Nexus 9k switches and

competitive alternatives from HP, Juniper, Brocade and the white box
switching vendors (running SW stacks from Cumulus, Big Switch,
etc.) are examples of Layer 2/3 network solutions for implementing
Datacenter Clouds.
2. While many IT vendors (Cisco, VMware, HP, Juniper, etc.) support

virtual network overlays for running Cloud applications in logical
networking clusters (for example: interconnecting a database in server
rack A to a Web application in server rack B and to an Analytics
application in server rack C), Cisco’s Nexus 9k switches support a
virtual network fabric – termed Application Centric Infrastructure (ACI)
Fabric – which enables applications running in a Datacenter Cloud to
inform the switching and routing layers (via APIs) about their network
requirements.

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For example: using Cisco’s ACI Fabric, an IOT application running Big
Data Analytics in a Datacenter Cloud – based on raw data generated
from 10s of 1000s of wireless sensor end-points – could leverage the
ACI Fabric to ensure that raw data from the sensor end-points reach
the Analytics application servers in a time-sensitive manner.
Another example is an IOT application in an Oil and Gas company

which could leverage the ACI Fabric to transport Gigabytes of
machine data from offshore oil rigs to centralized databases on a best-
effort bandwidth available basis since the oil rig data is not time-
sensitive but is bandwidth-heavy.
3. Datacenter Clouds are ideal for running Layer 4/7 network intelligence
and security features that can be consumed by IOT end-points as
Cloud services. Examples of Layer 4/7 feature-functions that can be
delivered to IOT end-points as Cloud services are: Application and
Network Firewalling; Web Traffic Steering; Per-Session IT Policy and
Bandwidth Enforcement, Billing Metrics, etc.
Layer 4/7 appliances in a Datacenter Cloud are implemented as either

SW modules on vendor-specific HW platforms (e.g. F5’s BIG IP or
modular Viprion HW running a wide range of SW Layer 4/7 modules)
or as SW modules running on VMs in industry standard x86 servers.
While use cases such as security processing (SSL Offload) are likely to
require HW optimized vendor platforms, an increasing number of
Layer 4/7 feature functions are likely to be implemented as virtualized
SW modules running on industry standard servers in our view.
Our view is based on our IT conversations noting the operational

benefits around automated SW module deployment on x86 servers,
ease of managing 100s of virtual SW instances, creating service
chains based on a lego-block combination of Layer 4/7 features, etc.
We note that Telco Cloud environments – implementing the Network

Functions Virtualization approach (Telco NFV; refer to our recent S2N
notes on NFV) – are more likely to run Layer 4/7 features in virtualized
SW modules for implementing IOT use cases such as e-HealthCare
and Home Automation.
Fortune 500 enterprise IOT use cases are more likely to use
performance-optimized HW platforms for running Layer 4/7 features,
given their ruggedized form-factors (e.g. flame, temperature range and
electrostatic hazards tolerance, etc) and their relevance in industrial IT
environments.
4. Information Technology (IT) and Operational Technology (OT)

Convergence: A centralized Datacenter Cloud in an IOT architecture is
ideal for implementing a converged IT and OT infrastructure (see
Figure 10).
Figure 10 illustrates a typical IOT Datacenter Cloud containing the IT

layers, i.e. the physical Layer 2/3 underlay network, virtual overlay
networks between racks of servers, Layer 4/7 and security appliances,
etc.; and the OT layers, i.e. the industrial control system network and
the supervisory network.

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Figure 10: Conceptual view of an IOT Datacenter Cloud – illustrating the Information Technology (IT) and Operational
Technology (OT) infrastructure elements
Wide Area Networks

Layer 4/7 & Networking SW Features: (Internet, Datacenter Interconnects)
• Application Acceleration
• Policy Enforcement
• App + Network Security
• Automation
• Analytics
Layer 3 40GE
• Visibility Spine Switch
• Orchestration & Service Chaining (e.g. Cisco, Juniper…)
Leaf/Spine
Cloud Scale
Network
Layer 2/3 10GE

Leaf Switch
(e.g. Cisco, Juniper…)
Server Racks
with Virtualized
Workloads
(e.g. Cisco,
HP, Dell…)
Information Technology [IT] Layer
Operational Technology [OT] Layer
IOT Control Systems Network

Programmable Logic
Controllers; Actuators….
IOT Supervisory Network
SCADA, etc
SCADA – an acronym for Supervisory Control and Data Acquisition –

is an industry standard architecture for: 1) acquiring telemetry data
from industrial objects such as sensors, etc; 2) converting the sensor
data to digital form for delivery over IP networks; and 3) processing
sensor data in centralized servers for relaying back control instructions
to the sensors.
SCADA and other systems management protocols are used in IOT

environments for controlling industrial devices such as actuators in
smart manufacturing and retail environments, connected transportation,
oil and gas installations, home automation systems, etc.
Our objective with this simplified overview of Internet of Things

Technologies is to highlight the core value proposition of Internet of
Things use cases to usher a functional convergence of Information
Technologies and Operational Technologies, i.e. IT and OT systems
co-existing and working in concert in a Datacenter Cloud in order to
implement a variety of IOT use cases.

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Architecture
The current IOT landscape is characterized by the presence of purpose-built
applications operating on a network architecture designed (almost exclusively)
for the application. As IOT systems progress, they will need to integrate with
other systems and this is where the key challenges remain. Currently, these
applications operate in silos; they have a distinct architecture that does not
lend itself to inter-system communication and operation.
A major issue is the presence of numerous protocols, developed to run specific A major issue is the presence
applications, which makes application integration and their respective of numerous protocols,
architectures inadequate and complex. developed to run specific
applications, which makes
To achieve the scale and level of integration that IOT requires, it will first need
application integration and
a common foundation from which to build sub-architectures – a common set
their respective architectures
of building blocks for developing system architecture will ensure a high level of
interoperability at various levels. Given what is at stake, and every vendor’s inadequate and complex.
partial view to one platform or another, the acceptance of a common
architecture is crucial and likely only possible if done from an objective, third-
party perspective.
Currently, various Standards Development Organizations (SDO) are involved in

developing reference architecture for IOT. The International
Telecommunication Union (ITU) has proposed the ITU-T model and IOT Global
Standards Initiative (GSI) to drive standards across all domains of the IOT.
oneM2M
Seven global SDOs which publish telecom standards came together to form
oneM2M in July 2012. The participants were: Association of Radio Industries
and Businesses (ARIB); Telecommunication Technology Committee (TTC) of
Japan; Alliance for Telecommunications Industry Solutions (ATIS);
Telecommunications Industry Association (TIA) of the USA; the China
Communications Standards Association (CCSA); the European
Telecommunications Standards Institute (ETSI); and the Telecommunications
Technology Association (TTA) of Korea.
Their overarching objective is to develop specifications to ensure global The specifications developed
functionality of systems and minimize fragmentation of M2M and IOT by oneM2M will serve as a
architectures. Recently, oneM2M announced that it will publish its first release common structural design for
of standards in August. The specifications developed by oneM2M will serve as
networks and systems to run
a common structural design for networks and systems to run a broad set of
a broad set of applications
applications. The oneM2M architecture intends to develop a common service
layer that facilitates interoperability between sensor/device networks and
cloud‐based applications.

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Figure 11: Layers of a generic oneM2M architecture
There will also be a number of

communication channels –
machine-to-machine,
machine-to-human, machine-
to-application-server –
making it almost
impracticable to have one,
Source: oneM2M
universal solution for all
scenarios in which IOT
IOT-A applications are likely to be

Concurrently to oneM2M, the European Commission established IOT-A, which deployed…
created the Architecture Reference Model (ARM) and defined the key building
blocks of (almost all) IOT systems. These building blocks are referred to as
architectural views: Physical view, Context view, Functional view, Information
view and Deployment view.
Unfortunately, a single network system for IOT cannot be established using the
above views, given the wide range of use cases, differences in physical end-
devices and various ways these elements will be connected (Wi-Fi, cellular
radio, Bluetooth). There will also be a number of communication channels –
machine-to-machine, machine-to-human, machine-to-application-server –
making it almost impracticable to have one, universal solution for all scenarios
in which IOT applications are likely to be deployed.
…Therefore, the architecture
Therefore, the architecture reference model proposed by the IOT-A provides a reference model proposed by
set of abstractions to develop concrete architecture for a large variety of IOT the IOT-A provides a set of
use cases. IOT-A has suggested the above mentioned architectural views to be
abstractions to develop
implemented in contextual manner. They will serve as the building blocks
concrete architecture for a
needed to arrange and configure specific applications. All of this to say that
large variety of IOT use cases.
despite the existence of a large number of sub-architectures within the broad
IOT framework there will be a common set of architectural layers (building
blocks) underlying each framework. Thereby, establishing a common
foundation.

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Figure 12: Architecture proposed by IOT-A
Source: IOT-a, European Commission
The physical entity view of this is perhaps the most complex of all the layers of
IOT architecture. It consists of broad range of physical objects from license
plates to orchids, jet engines, thermostats and anything that could be relevant
from user or application perspective. Therefore, different IOT systems will need
to have specific provisions for physical objects they will address.
It is also important to give adequate consideration to physical objects Different physical objects and
connected to IOT when planning system architecture, as different physical the applications designed for
objects and the applications designed for them can greatly influence the them can greatly influence
system architecture. Physical objects differ from each other in terms of their
the system architecture
properties, dimensions, functionality and purpose (see the license plate and
orchid mentioned above). Consequently, different physical objects require
different types of sensors, actuators and other monitoring tools that influence
the system architecture in a different manner.
The way physical objects interact with sensors and actuators and what type of
information is gathered by them is also an important consideration by
standardization bodies. Whether sensors are attached to the physical objects,
remotely monitoring them, in close proximity, or inside the physical entity?
This further influences the approach to system architecture.
Reference architecture for IOT extends to Wireless Sensor Networks (WSNs),

which were originally developed for military and heavy industrial applications
(not necessarily with the intention to bring them to the consumer domain).
Early on, the United States Military developed the Sound Surveillance System
to identify and locate submarines from the Soviet Union using submerged
acoustic sensors. The architecture used for the Sound Surveillance System still

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resembles the ones used in modern WSN deployments to monitor volcanic

activity. Later, the United States Defense Advanced Research Projects
Agency’s (DARPA) investment in Distributed Sensor Network (DSN) program in
1980s, brought academic research to the field of wireless sensor networks via
participation of MIT and Carnegie Mellon University.
Following this research, the government and other institutions started using
WSNs for civilian use. Some of the early civilian applications of WSNs were for
the prevention of natural disasters, air quality monitoring, building structure
monitoring and forest fire detection. Commercial deployments were focused
on industrial uses like factory automation and efficient power distribution.
Despite the successful implementation of wireless sensor networks in

commercial and public places, the use of proprietary standards made it difficult
to extend their reach beyond a narrow scope of applications. As with the early
computing industry, WSNs were focused on performance and functionality
rather than power consumption and scalability. In order to accelerate the pace
of growth there was need to standardize the protocols, as well as reduce the
size and lower the cost of the sensors. As it stood, early WSNs never overcame
these challenges and were limited to mostly government use.
Figure 13: WSNs market traction as sensor costs decrease
Source: Silicon Labs
A vast number IOT applications will rely on wireless sensor networks for their
functionality. Many deployments will likely be in remote areas with no readily
available power source, requiring sensor nodes to go without a charge for
days, weeks or even months. Some deployments will have the added
challenge whereby they are in areas with limited network connectivity. As IOT
pulls WSNs into the consumer domain, cost constraints will be an additional
hurdle, requiring the new generation of sensors to not only be resource
efficient but cost effective.

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Wireless sensor networks will make up a majority of the elements used in IOT, Wireless sensor networks will
enabling physical objects to be connected to applications and cloud services. make up a majority of the
Data gathered through these sensors will be analyzed in various ways using elements used in IOT,
cloud computing and Big Data approaches. Like many other components of
enabling physical objects to
IOT, wireless sensor networks are evolving at a rapid rate. Though
be connected to applications
contemporary WSNs capable of being deployed in a wide range of scenarios,
and cloud services
their present-day implementations are limited and characterized by proprietary
development environments and interfaces.
Much like the standardization of the architectural approach to network

systems for IOT, wireless sensor networks also need a holistic architecture
model, as the heterogeneous nature of present-day deployments can be a
barrier to ubiquitous WSNs. Ideally, this will ensure the seamless transfer of
data from sensor nodes to applications and the ability of WSNs to integrate
with each other and also larger IT systems and the internet.
There are and will continue to be challenges with sensor nodes, especially There are and will continue to
given the number. For one, they are typically resource-constrained in wireless be challenges with sensor
networks. Moreover, they have low processing capabilities, less memory nodes, especially given the
availability and need to operate with a low energy footprint. This makes it
number. For one, they are
difficult to deploy WSNs and integrate them with IP based services.
typically resource-constrained
in wireless networks.
The majority of WSN deployments are currently proprietary. Designed for
specific applications and services, they cannot be replicated when other
applications and services are considered. As a result many wireless sensor
networks are isolated deployments. Eventually though, this will lead to
redundant WSN deployments. For example, if a wireless sensor network was
deployed to measure temperature and water level in a field and is later
required to monitor sunlight and humidity, the existing WSN cannot be
adapted to measure additional information, leading to the development and
deployment of an additional WSN.
Tracy and Sreenan architecture

An additional architecture was proposed at IEEE in 2013 by David Tracey and
Cormac Sreenan of University College Cork, Cork, Ireland.
According to Tracey and Sreenan, the reference architecture of the wireless According to Tracey and
sensor networks is likely to have multiple layers for different nodes that Cormac, reference
perform different functions. For example, a node might be engaged in architecture of wireless
measuring humidity in the environment, while the other one would be engaged
sensor networks is likely to
only in forwarding the date collected by other nodes and not measuring any
have multiple layers for
physical phenomena. In this case, the forwarder will not have a local
different nodes that perform
instrumentation layer.
different functions
The prerequisites of this proposed architecture to develop and deploy highly
integrated WSNs is to have an architecture that is agnostic to sensor node
functionality and does not require high power consumption. The architecture
should also be able to manage small, static networks and allow the system to
adapt as the network grows and changes, while at the same time providing a
reasonably consistent means to retrieve the information given by the
independent and changing sensors. In addition to being agnostic to sensor
node functionality and allowing the consistent exchange of sensor information,
the architecture should to be able to provide support for integration with other
systems for analysis and modeling of sensor data.

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Figure 14 illustrates the layers in the architecture for nodes of different

capability with their different roles. For example, a node that only fulfills the
role of forwarding information would not have an instrumentation layer, but
has an object space to store data from remote peers.
Figure 14: Tracy and Sreenan architecture
Source: Tracey and Cormac, University of College Cork via IEEE
This architecture uses a simple protocol based on Peer to Peer (P2P) concepts It is holistic approach which
able to run on nodes with limited resources. It is a holistic approach which considers the entirety of the
considers the entirety of the data flow between the actual sensor and the data flow between the actual
service(s) it is delivering, supported by lower layers, rather than each layer
sensor and the service(s) it is
specifying its own behavior in isolation. As a result, it is an orchestrated effort
delivering, supported by
rather than a coalition of random elements.
lower layers, rather than each
layer specifying its own
behavior in isolation

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IOT Protocols
Protocols are another place where the shifting tides of OEMs opinions will Historically, the
likely play a key role. Currently, there are a number of protocols developed and standardization process for
in development, with a few getting more traction than others. Historically, the protocols in other industries
standardization process for protocols in other industries has been long and
has been long and riddled
riddled with dead-ends. The closest proxy to the Internet of Things, and likely
with dead-ends.
one that would incorporate many elements, would be the wireless industry
itself. When wireless emerged as something that could fork into separate
technologies, largely one standard body won over another because the
technology simply worked better (WCDMA) or was significantly cheaper
(GSM); in some cases, however, even the best technology may not win out, as
negative marketing campaigns can undermine a good idea. And given there
were a few standards bodies competing for their own protocol standard to win
out, this did happen.
To get a sense of how numerous protocols may affect the implementation of

IOT, imagine a room filled with people, each speaking a different language,
and none understanding anyone else. It would be a room full of noise with little
if any communication. A scenario similar to the one could play out with
connected devices, as most function on proprietary standards, thereby limiting
their interaction with other devices. For example, different applications were
created to allow an Android device to communicate with a Samsung smart TV,
versus having that same TV controlled with a remote control operating on the
Zigbee interface. It is likely that those two devices, the remote and the phone,
have little interaction with each other – not that that would be imperative in
this case; however, it could be with other use cases.
Figure 15: Managing disparate devices/services and transport layers

What They Say What They Hear
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Kurt Dag! Paul
Dag!
HelloGod
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Hyvää päivää! God dag!
Transport layer Hyvää päivää!
Hello Son!
Jorma Sten
Hyvää päivää
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Hello Son! Hyvää päivää!
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Hyvää päivää!
Irwin Pekka
Devices/Services

6 May 2014
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This is where industry standards, protocols and hopefully the resulting

interoperability play a critical role. Typically, in order to find a commonplace A typical communications
among disparate interfaces, protocols are put in place. By definition, protocols network has multiple layers of
are a set of predefined rules used by devices in a network to communicate
protocols. Each required for a
with each other. A typical communications network has multiple layers of
different set of devices and
protocols. Each required for a different set of devices and tasks, and each
tasks, and each becoming an
becoming an essential element of the network, as they govern how data
essential element of the
transmission and communication between devices on a network take place.
network, as they govern how
For the Internet of Everything to move beyond a hype cycle, all of its data transmission and
components have to work in a platform agnostic, OS agnostic and transport communication between
layer agnostic manner. There have to be protocols that devices conform to, no devices on a network take
matter which OS they operate on and which company manufactures them. place.
Just the way knowledge of a common language would make it possible for all
the people to communicate in our previous example, no matter which country
or region they come from.
No clear protocol in place
If a protocol can be defined and generally accepted early in the development of

a platform, then the chances of the platform’s success are significantly
improved. The Internet is one example, as the standardization of Internet
protocols were the main stay of growth in web-based applications. The
Internet of Everything, however, is yet to find a standardized set of protocols.
Various industry groups and associations are engaged in developing protocols
that will serve as framework for transmitting data by devices and sensors in
the Internet of Everything to each other and the network.
Given the magnitude of connections applications emanating from IOT, it is

nearly impossible for one company to develop standards and protocols.
Therefore, various industry alliances have emerged to address this need.
Driven by the industry effort, there are a number of acronyms of protocols We measure the chance of
being touted to become the standard for IOT. We list most of the existing success based on being light
protocols and place what we believe to be their chance of success. We weight (in terms of code
measure this chance of success based on being light weight (in terms of code
footprint), low power
footprint), low power consumption, open and suitable to a multi-platform
consumption, open and
environment.
suitable to a multi-platform
AllJoyn environment.
CoAP
BACnet
802.15.4e
6LoWPAN
AMQP
XMPP
DDS
RPL
RESTful HTTP

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Dash7
DTLS
UDP
ZigBee Pro
RFID
Bluetooth
AllJoyn
Originally developed by Qualcomm, Alljoyn is, as the name suggests, an open
Figure 16: Members of AllSeen
source project intended to provide an eventual universal framework to enable
interoperability among devices and software applications. Qualcomm has Alliance
Haier Gowe
handed the reins to Linux, and the open source project is now overseen by the
LG Harman
AllSeen Alliance, which is a non-profit consortium. The move to a consortium
Panasonic HTC
oversight has encouraged participation by others, and the list of both partners
Qualcomm Control
and developers has increased significantly since it made this move outside of
Networks
Qualcomm’s umbrella. As shown in Figure 16, the list is lengthy but noticeably
Sharp Imagination
does not include prominent semiconductor names like Intel and ARM. Intel is
Silicon Image Kii
currently building a protocol around Quark and their Atom 3800, parallel to the
Technicolor LIFX
way it handled the wireless standards with its promotion of WiMAX. However,
TP-Link Liteon
the AllSeen list includes Cisco, an encouraging addition given Cisco’s own IOT
2lemetry Moxtreme
initiative and backing of MQTT (see below).
Affinegy Musaic
ATT Muzzley
Ultimately, the goal of the Allseen Alliance is to push participants to devote
Cambridge Audie Patavina
engineering resources to develop code for the open source framework and Technologies
eventually enable disparate devices and services to discover, connect and
Beechwoods Sears
interact, regardless of transport layer. A key directive for AllJoyn services and
Winner Micro Sproutling
applications is that they are created with a source code which is transport-
CA Engineering The Sprosty
layer agnostic, be it powerline, wireless or Ethernet, and leverage this in a Network
manner indifferent to manufacturer or internet connection. Canary Tuxera
Cisco Twobulls
AllJoyn was developed as a mesh networking service which offers automatic D-Link Vestel
discovery and communication for a number of different devices, agnostic of Double Twist Weaved
operating system. Even though the Allseen Alliance is part of the Linux Fon Wilocity
Foundation, the goal of AllJoyn is to be cross-platform with support for Source: AllJoyn
Android, OS/X, Windows variants, gaming engines and other thin clients.1
While it does not support Real-time operating systems – those that process
data without buffering delays – some of those operating systems mentioned
above are likely to eventually be more controller-like, with low-end embedded
duty as enhancements are made with Internet connectivity and overall
intelligence. Eventually, the protocol will eliminate the need for a hub, or an
Internet connection.
The reality of an automated home environment driven by AllJoyn devices may

not be too far away. We were able to see what this environment, enabled by
AllJoyn devices, may look like in the near future during Mobile World Congress.
Qualcomm had part of its booth set up demoing the possibilities. Given the
ample YouTube video of the booth tour, we will not recount every detail here.
Suffice to say that AllJoyn enabled everything from door locks to wine
refrigerators and teddy bears to both send and receive event triggers and
1
http://linuxgizmos.com/open-source-iot-inititiative-taps-qualcomm-alljoyn-framework/

6 May 2014
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notifications in a peer-to-peer manner, across a number of transport layers and

across different device manufacturers.
We believe AllJoyn to be the largest, cross-platform protocol effort existing

today, given the number of players involved and their respective clout, as well
as the oversight from the Linux foundation. Soon, we expect a number of
connected, in-home devices designed with AllJoyn, beginning with LG’s new
smart TV announced late last year. However, despite the backing there are still
other protocols, either industry specific, device specific or transport layer
specific and some agnostic to all of these, and while AllJoyn has done a
decent job of generating support for their consumer-oriented devices, there are
still other protocols which have gained support around other use cases, or will
simply work better for specific applications. We walk through a few of the
important ones below, as well as provide a general description of some of the
others.
MQTT – Message Queuing Telemetry Transport

Originally developed by IBM and Arcom (now Eurotech) in 1999, MQTT is a
lightweight network connectivity protocol used to publish/subscribe
messaging between devices. The term ‘Telemetry’ in the definition refers to
automatic measurement and collection of data, often from inaccessible or
remote locations. Data collected is transmitted to the receiving equipment for
monitoring and further processing.
MQTT has a small code footprint, thus making it appropriate for use in remote MQTT has a small code
sensors with limited processing capability and memory availability. Being footprint, thus making it
lightweight also helps in situations where bandwidth is scarce and latency is appropriate for use in remote
not imperative. Put together, these factors make it possible for a large number sensors with limited
of clients (or things in Internet of Things) to be connected to a single server. processing capability and
memory availability
MQTT also has something called the Extended Reach component, which
facilitates connections between the messaging backbone and devices at the
edge of the network. It allows a wide variety of devices from mobile handsets
to trains, refrigerators, health care devices, smart meters, door locks and cars
to transmit data using sensors for processing and analysis. Embedded sensor
instrumentation facilitates real-time analysis of data generated by remote
sensors.
Having processed data, the central processing unit then communicates back
by sending instructions to devices to act in the optimal manner based on
certain situations.

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Figure 17: MQTT machine-to-machine communication
Source: IBM
MQTT protocol was presented to OASIS for standardization in February 2013,

and based on initial working specifications of the protocol it is likely to be
completed by March 2014. OASIS is a non-profit consortium that develops
open standards for communication technology. Members of the Technical
Committee at OASIS for standardization of MQTT include Cisco, Eclipse
Foundation, Eurotech, IBM, Machine-To-Machine Intelligence (M2Mi), Red Hat
and others.
CoAP – Constrained Application Protocol

CoAP is an application layer software protocol for device-to-device CoAP is meant to be used by
communication. It is meant to be used by small devices like switches and small devices like switches
sensors. These devices are generally constrained by resources, typically using and sensors.
only 10 Kb of RAM and 100 Kb of ROM, 8-bits of microcontrollers and low
quality networks with high error rate. Since small devices are constrained by
resources like processing power, storage space, power and generally a poor
network connection, CoAP is designed to be simple and light weight.
CoAP enables integration of devices/sensors with the web by providing easy

interface with HTTP and allows devices to have request/response interaction.
CoAP works with devices that support either UDP or UDP analogue (UDP –
User Datagram Protocol is used to transport compact messages).
CoAP has two sub-layers: i) a message layer that works with UDP to ensure
duplication detection and reliable delivery of messages; and ii) a
request/response layer which enables interaction through GET, PUT, POST and
DELETE functions.

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Figure 18: Abstract layering of CoAP
Application
Sub-Layer
Requests/Responses
CoAP
Messages
Sub-Layer
UDP
Source: IETF
Figure 19: Architecture of a CoAP-based wireless sensor network
Source: mdpi.com
CoAP is currently being used as the enabling technology for electric utility AMI
(Advanced Metering Infrastructure) and DI (Distributed Intelligence)
applications within Cisco’s Field Area Network.
Features of CoAP:
auto discovery of resources

enables native push notifications and simple subscription for a
resource
minimizes the complexity of mapping with HTTP
lowers the header overhead and parsing complexity
enables content-type support and URI (uniform resource identifier is a
string of characters used to identify a name of a web resource)
enables the device to act as both client and server.

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6LowPAN
Low power network and low power devices – 6LowPAN addresses the need of 6LoWPAN optimizes
low power devices in low power network to enable IPv6 communication over communication by
short range wireless personal area network. 6LowPAN is an acronym for IPV6 compressing message size
over Low Power Personal Area Networks. It enables sensors that have
over low-power radio
constrained processing capability and restricted energy resources to
technologies such as IEEE
communicate over IPv6 networks. Published in 2007 by the IETF, 6LoWPAN
802.15.4.
optimizes communication by compressing message size over low-power radio
technologies such as IEEE 802.15.4. For instance, 6LowPAN compresses 60
bytes of headers to 7 bytes, thereby facilitating sensor and device
communication over highly constrained networks.
Along with MQTT, COAP and Alljoyn, 6LowPAN is also receiving industry
support as a relevant protocol for IOT based communication. In October last
year, IBM and Libelium launched 6LowPAN development platform for Internet
of Things to provide Internet connectivity to sensors and devices via IPv6
protocol. The goal of 6LoWPAN is to include low power devices in Internet of
Things, and the implementation of IPv6 over IEEE 802.15.4 standard helps in
achieve that goal.
IPv6, the latest version of Internet protocol, is a successor to IPv4. In the realm
of IOT, IP addresses have gained importance as they make it easier for these
devices to communicate with the Internet and each other. In early 2011, the
last blocks of IPv4 internet addresses were allocated, marking the shift in the
uptake of IPv6 which not only offers additional addresses but also brings more
comprehensive security features.
6LowPAN allows sensors to be easily established by plugging into standard IP 6LowPAN networks are
sockets. Furthermore, 6LowPAN networks are suitable for mesh networking, suitable for mesh networking,
facilitating the deployment of a large number of sensors with relatively fewer facilitating the deployment of
gateways, thereby simplifying the architecture and reducing capital
a large number of sensors
expenditures.
with relatively fewer
gateways, thereby simplifying
Devices built on IEEE 802.15.4 are designed to have small form factor, low
energy footprint, low cost and flexible installation (think wearable devices). the architecture and reducing
While IEEE 802.15.4 standards focus on code-size optimization, IPv6 aims at capital expenditures.
achieving high transmission speeds; 6LowPAN helps bridge the difference in
focus of two important standards.

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Figure 20: 6LowPAN enables IPv6 over low power WSNs
Source: www.eis.ernet.in
Outside of the protocols mentioned above, there are a number of other

protocols. Most are application specific, and many could be eventually
integrated into the larger, holistic protocols listed above. As such, we provide a
short description of each below:
BACnet: BACnet is a protocol developed by the American Society of Heating,

Refrigerating and Air-Conditioning Engineers (ASHRAE). It is used to build
automation and control networks and is an ISO global standard that is used in
more than 30 countries.
IEEE 802.15.4: A standard maintained by the IEEE 802.15 working group for
low-rate wireless personal area networks to specify physical layer and media
access control.
AMQP: An open source protocol used to enable devices for message oriented
communication between them.
Data Distributed Service (DDS): An open source standard for middleware in

real-time and embedded systems. It facilitates exchange of data in a scalable,
dependable and interoperable manner between publisher and subscriber.
RPL: It is a routing protocol specially developed for low power devices and
helps in best-path communication, with an idea towards resource constrained
devices.
RESTful HTTP: Representational state transfer (REST), which runs over HTTP, is
a simple architecture which is used to read XML file of a web page. A XML file
of a particular page includes the desired content and describes it.
DASH7: Developed by DASH7 Alliance, DASH7 is a long range and low power
open source standard for wireless sensor networking.
Datagram Transport Layer Security (DTLS): DTLS is a protocol which provides

security and privacy to datagram protocol. As basic datagram protocol delivery

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of data packets is not guaranteed, DTLS is commonly used in delay sensitive

and security concerned applications.
User Datagram Protocol (UDP): Developed by David P. Reed, UDP is a

transport layer protocol. It is used to transport datagrams over Internet
protocol.
ZigBee Pro: ZigBee is a specialized protocol for low power devices. It enables
low power devices to achieve high level of communication to form personal
area networks and local area networks, typically with low-cost devices like
remote controls, for applications such as home automation. Silicon Labs has
an extensive history of creating low-power processors for IOT elements, many
of which use the Zigbee Pro protocol. The Zigbee Pro protocol is a feature set
which offers connectivity to Zigbee enabled devices but is also easier to use
and able to support a larger number of devices in one area, than its
predecessor, Zigbee.
Radio Frequency identification (RFiD): RFiD is way of transferring data through

radio frequency electromagnetic fields emitted by small devices with an
antenna and a small chip. Currently, it is used to automatically track and
identify tags containing information about physical goods needing to be
tracked. Impinj, a private company with over $100 million in funding, has
focused on a technology called ultra high frequency (UHF) RFiD, which has
longer range, higher speed and lower cost than traditional RFiD.
Bluetooth: Developed by Ericsson, Bluetooth is a personal area network

protocol used to exchange data wirelessly over short distance between
devices. It has gained wide adoption given its minimal energy requirements
and high fidelity over short ranges.

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Security
Security is a key hurdle for IOT to gain widespread adoption. Without a Without a coherent, holistic
coherent, holistic and integrated security mechanism in place, the risks of and integrated security
deploying IOT, given the potential for malicious attacks, could easily outweigh mechanism in place, the risks
the benefits. Given the lack of a common protocol, the task to secure disparate
of deploying IOT, given the
entities remains daunting. To understand, think about the number of times the
potential for malicious
press discusses some weakness or a large attack on Internet security –
attacks, could easily outweigh
Heartbleed, Target credit card breech, daily DDOS attacks – and this is limited
to a framework which has a common protocol. Now, imagine dealing with a the benefits.
network of resource-constrained devices, all of which will always remain on,
connected, distant and likely autonomous. Given the business models
concocted just to undermine the Internet, it is not difficult to extrapolate the
risks inherent to IOT and the undertaking to secure such a platform. Given the
risks, security must be implemented into the foundation with a holistic view for
all elements and process.
Network security
Given the variety of protocols in play and the resulting heterogeneity of the
overall network, the resulting diversity will severely affect any security
mechanism’s ability to protect the overall platform. Securing any
communication channel, from remote devices to controlling devices for
example, is difficult considering how resource constrained these remote
devices will be. For example, the addition of a simple key management
systems may bog down the system, a system which needs to be light and
flexible.
Nevertheless, some still argue that cryptography, if built into the network
infrastructure at the foundation level, could be a resolution2. Cryptography is
the transformation of data into an indeterminable format and requires a key to
unlock the message. The argument is that cryptography is like mortar,
associating unrelated items in a resource-constrained and dynamic
environment, and therefore the keys need to be changed in order to protect the
network over the long term. It is likely that regular Internet security protocols
can be used further up the communication stack, the risk being that the
differences between Internet protocols and IOT protocols could lead to
vulnerabilities in a system meant to be comprehensive.
Data protection
It is a challenge to conceptualize the amount of data generated by one person We believe that even the
in an idealized IOT world, from payments and in-store beacons to home most trusted sources for
automation and personal health monitoring, but taking into account the security will not likely be fully
current use cases it is easy to see how a Big Brother-type environment can be
trusted by the majority of
developed, as it already has in some geographies. We will leave the
users and will likely depend
philosophical discussion on what should and should not be accessed by the
on the respective
government for others to address. However, the overriding concern relating to
the Internet of Things and security is that given the knowledge that someone application’s personal reach
can and likely will access this data, to what degree are consumers willing to as to what degree it has the
leverage the conveniences of IOT? We believe that even the most trusted potential to become
sources for security will not likely be fully trusted by the majority of users and ubiquitous.
2
IEEE Computer, vol.44, no.9, pp. 51-58, September of 2011

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will likely depend on the respective application’s personal reach as to what

degree it has the potential to become ubiquitous. Yet, IOT will place an
incredible amount of personalized data in the general environment.
There are some possible solutions that could assuage fears: First, the amount
of data accessed, or exactly which data is accessed, could be curtailed or
refined by the user (think of it as an extension of the alerts one already receives
when specific applications want location-based information). Second, the
information could be stored by trusted sources. Admittedly, this would be
challenging, but could be helped if the process is transparent.
In short, data protection is the key to user adoption and could be helped by the The adoption rate of IOT will
steps mentioned above. However, the adoption rate of IOT will be a series of be a series of fits and starts,
fits and starts, bound by the number and degree of data breaches, which will bound by the number and
happen.
degree of data breaches,
which will happen.
Managing identification
Devices will continue to grow and each of them needs to have the ability to be
identified. Inanimate objects such as cars or warehouses have the same issue;
there are a number of sensors associated with each object – static or dynamic
(e.g. a sports arena which changes into a rescue shelter during a catastrophic
event, and hence the identification of this space needs to change dynamically).
In short, a number of IDs would be associated with each device or a group of
devices, and proving these IDs through authentication and authorization, and
within an architecture, which will in many cases be a distributed architecture,
would be a challenge. Hence, for any embedded security element, the number
of elements, their relationship and the potential to have them changed will
need to be considered.
Mechanisms in development
There are a number of standards being developed by industry bodies,
researchers and governments, and these are listed below. All are decent first
steps but without a true ramp up in devices and sensors it will be a process of
incremental change to address aspects which are currently unknown.
Ucode: identification number system which identifies objects and places

uniquely (www.uidcenter.org)
GS1 keys: ID system used for items, services locations, containers
(www.gs1.org)
IEC 62591: protocol for wireless sensors with encryption, authentication
management and key management
ISO/IEC 14443: overall architecture for contactless proximity cards which
provide information flow protection3
As we discussed earlier, cryptography is an important element of security, but
an element which will be embedded inside the protocols on which the devices
run. These are being developed from the ground up, as it is a challenge to
implement Internet protocols like IPsec to provide a holistic, transport layer
security blanket. This is where the aforementioned list of security mechanisms
will target.
3
IEEE Computer, vol. 44, no. 9, pp 51- 58, September 2011

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In total, security will need to combine the challenges associated with resource- In total, security will need to
constrained devices, varying transport layers and likely different protocols. combine the challenges
Cryptography mechanisms will help, but challenges around ID management, associated with resource-
user privacy, and the lack of a single, trusted architecture are formidable
constrained devices, varying
hurdles that would have to be cleared for IOT to work in a seamless manner.
transport layers and likely
Additionally, governments will need to provide a balance of oversight and
different protocols.
protection of its citizens in the most transparent manner before IOT is likely to
reach its potential.

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APIs
Without Application Programming Interface (API), the development of APIs specify how software
applications may not reach a critical mass. API is a communication interface, and other components should
which specifies how software and other components should interact with each interact with each other using
other using a set of instructions and standards for a given platform. Almost
a set of instructions and
every software and web-based company releases a set of APIs to developers.
standards for a given
These APIs enable developers to create applications relatively easily,
platform.
benefitting the companies and developers. APIs are also helpful when
developers are programming the user interface component of applications.
APIs have become a critical element of web, enterprise, mobile, Big Data and
IOT ecosystems. The use of APIs extends to multiple environments and
enables a broad spectrum of functionality, from basic functions such as copy
and paste of text to more complex tasks such as online transfer of funds from
a bank account.
An example that illustrates the role of APIs is Google and its use of maps and
videos. Google provides APIs to developers in order to incorporate its web-
based services such as maps on a developer’s website. Using an API for
Google maps, developers can embed map functionality to their website and
seamlessly provide some of the mapping solutions without having to redirect
users to Google’s website. Likewise APIs for YouTube allow developers to
embed YouTube videos to their respective websites or applications.
In a simple use case scenario we demonstrate the use of Google’s maps

application by Verizon. For users looking for directions to Verizon’s stores, the
company website leverages Google’s map data to provide instructions. In the
store locator section of Verizon’s website, users can click on ‘Get Directions’
link and be directed to another Verizon webpage with embedded Google map
and directions to the store.

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Figure 21: Google maps via Verizon’s website
Source: Verizon, Google
Figure 22: Directions to store via Google maps
Source: Verizon, Google
Another example is Amazon that provides APIs to web developers, allowing

them to access product inventory and updated pricing details. A developer can
use Amazon's Product Advertising API to list Amazon products with updated
prices on his website and possibly monetize the sales opportunity.

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APIs run in the background, not necessarily visible to end users. Users interact In addition to governing the
with the application, which in turn interacts with other applications using APIs. way applications interact with
In addition to governing the way applications interact with each other, APIs each other, APIs also govern
also govern the information which applications can exchange with each other.
the information which
A developer can extend the reach of his application and incorporate
applications can exchange
functionalities such as gathering or sharing feeds from social media platforms,
with each other.
carrying out analytics, building widgets such as Yahoo weather or including
messaging capability to their app. In doing so, APIs make it possible to create
application mashups which are simply analogous to musical mashups where
two or more unrelated songs are blended together in a creative mix. Likewise,
in a mashup of web-based applications, functionality of two or more
applications are brought together using APIs to create a new application. In
this fashion, APIs can be used to extend functionality of IOT applications (see
Figure 23).
Trendsmap.com combines Twitter and Google maps to inform users about

popular topics in the locale they are located. When we looked up New York on
Trendsmap.com, it was easy to see ‘tgif’ and @ladygaga among the most
popular topics on twitter. This is a basic example of a mashup, but it shows
that creative and useful applications can be developed without requiring
developers to write lengthy codes. When Google created Google maps it might
not have imagined that it would be used to lookup popular tweets or
multiplayer games. We believe that mashups for Internet of Things will open
the door for creating new and useful services without the need for them to be
thought up at the outset.
Figure 23: Mashups make it relatively easy to combine applications
Source: Trendsmap

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In a nutshell, APIs have become a lynchpin of sorts in the process of

application development in the Web 2.0 era. As they have evolved, the use of
APIs extended from web-based applications to IOT applications. Web APIs are
one of the key enabling technologies of IOT, largely given that IOT applications
are eventually connected to the web in some way.
In addition to incorporating new features, APIs can enable sensor nodes to

perform various functions such as data collection, storage, transmission and
data processing. They also help configure sensor nodes to log data on various
parameters such as temperature, location, pressure, humidity and other
measured elements, and then transmit that data to web services.
However, simply gathering data and transmitting it to the backend is not Data needs to be contextually
necessarily the end goal. Data needs to be contextually filtered. Sensors should filtered
not simply be a data dump as it will only overwhelm the network, like
processing redundant data from billions of sensors, thousands of times per
day. To put this amount of data into perspective, it is estimated that sensors in
a jet engine can generate up to twenty terabytes of data in an hour. Multiply
this amount of data for a sixteen-hour transatlantic flight from Dubai to San it is estimated that sensors in
Francisco and we get a sea of data sent to applications and analysts for just a jet engine can generate up
one flight. Most of this data is redundant and can be filtered without
to twenty terabytes of data in
hampering the quality of analytics. Sensors, therefore, are expected to have
an hour
the intelligence to filter data in contextual manner and transmit only the
relevant instances of information.
In certain cases sensors may be required to process the gathered data locally,
while also sending it across in various formats for servers and other web
services to process. Additionally, there could be issues related to security and
resilience of wireless sensor networks (WSN).
Frequently, a solution to these issues will likely rest in API management. In a

broader sense, APIs bring secure connectivity and intelligence to otherwise
isolated and stranded sensors by facilitating secure data connections between
applications and sensor nodes. Using Representational State Transfer (REST)
architecture that works through authentication and policy compliant
authorization, APIs facilitate large scale integration of resources and simplify
application programming. With this, applications connected to sensors could
be hosted in cloud, data centers or in any other hosted environment accessible
via API.
REST is a simple, stateless architecture which draws from HTTP instead of REST is a simple, stateless
competing with the protocol. In present-day scenario, REST is being architecture which draws
extensively used by social networking websites, automated business from HTTP instead of
processes, mobile applications and mashup tools. REST APIs facilitate
competing with the protocol.
interoperability among disparate systems (a useful feature as IOT is
characterized with presence of disparate systems) and reuse a number of
software components. REST also makes it possible for a large number of IOT
components to interact with each other, as in the case of its application over
the internet.
In the context of IOT, APIs function as a thread that stitches various protocols
together to allow applications to connect to devices using different protocols.
In current deployment scenarios, a vast majority of applications are able to
connect to only those devices that are protocol compliant. APIs such as Smart

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Object API make it possible to connect different devices running on different

protocols to an application.
Figure 25: Enabling interoperability via APIs
Figure 24: Sensor middleware,

gateway and API management
Source: Michael Koster via datamodels/blogspot
This requires APIs to become an integral part of wireless sensor networks

(WSNs). While most of the new deployments of WSNs have a built-in layer for
API management and sensor middleware, legacy WSNs were not designed for
this. To bridge the gap between standalone WSNs and the network of sensors
with IOT capability, designers need API management tools, gateways and
sensor middleware. They help identify contextual information, facilitate
interoperability, ensure security and overcoming network disruptions.
The API layer is essential to facilitate interaction of sensors with applications,

cloud and data centers. In the case where sensor networks consist of nodes
with different hardware capabilities and functionalities, middleware can help
provide a holistic view of the network. It also provides a greater level of
security and encryption in situations where sensors are deployed to collect
sensitive information.
IOT gateways operate at a level above sensor middleware and provide an

interface for applications to interact with data from other applications, devices
and APIs. The ability to source data from other related applications and devices
allow native applications to have a better contextual view and therefore
respond in more efficient manner. Given the relevance of APIs and their
management in implementation and growth of IOT, the API space is growing
quickly. In terms of how this is playing out monetarily, last year Intel acquired
Mashery for an estimated US$180m, CA Tech acquired Layer 7 technologies
for an undisclosed amount, and MuleSoft acquired ProgrammableWeb.
API management is a competitive market with a number of players and there is

still a long runway before a true leader emerges. Figure 26 illustrates the
Gartner quadrant as it relates to APIs. While we do not believe that the Gartner
quadrant is a definitive guide to leaders, it is a decent starting place.
Source: Intel

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Figure 26: Gartner Magic Quadrant
Source: Gartner
Middleware
The current infrastructure environment does not fully support what is required
to leverage the Internet of Things, in an ideal sense. Middleware can play a
role here. It will likely be either specialized devices or software, both of which
can enable the Internet of Things by leveraging infrastructure and devices
following different protocols.
Middleware as both software and devices

Middleware devices are mostly based on the gateway concept, a more Middleware devices are
sophisticated network enabling tool than a switch or router. They are designed designed to address issues
to address issues related to interoperability, discovery, scalability, related to interoperability,
communication and security of the devices and data. Leading middleware
discovery, scalability,
vendors include Oracle, IBM and Software AG. IBM provides complete
communication and security
middleware solutions to enterprises. Oracle has middleware range by the name
of the devices and data
of Oracle Fusion. Software AG provides middleware specific to real-time data
management and analytics solutions as it relates to the Internet of Things
network.
Middleware Software should control and channel the communication in the

network efficiently. Moreover, it should manage tasks like data offload,
maintenance, error check and network security. Ideally, middleware software
should complement middleware devices as well. To date, the software mostly
comes in the form of different APIs, which perform various desired functions,
mostly in a piece-meal manner.
At its core, middleware addresses a number of issues:

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Interoperability: In the current environment, devices use disparate protocols for

communication and middleware can bridge this difference.
Interface: A common interface should be used, or at least a minimal number of

interfaces should be used, so that users do need to educate themselves on
basic functionality when controlling new elements.
Scalability: Given the number of devices attempting to connect to the network,

middleware must efficiently control traffic without compromising scalability.
Data: Data will need to be offloaded to the cloud after validation and
structuring. Given the constraints with sensor nodes, middleware can help
with additional functionality.
Security: A powerful middleware could help provide a security solution, or at

least limit the damage if one sensor is breached.

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IOT as a Platform
The Internet of Things will be a complex structure with various interconnected
parts, put together by a wide array of industry participants including system
integrators, telecommunications operators, gateway manufacturers,
semiconductor manufacturers, software vendors, network equipment
providers and sensor manufacturers. These players develop applications and
software, manufacture equipment and sensors to collect and send data,
analyze it, provide insights and send contextual instructions from remote
locations for efficient functioning of end devices and much more.
Ideally, any IOT device that labels itself as a platform should work as glue to Ideally, the IOT platform
bring together disparate pieces and fit them together in an efficient and should work as glue to bring
context-aware manner. The platform for the Internet of Things will be more together different pieces and
than just a development, management and support environment. In our view,
fit them in efficient and
there will be two primary approaches to IOT platform.
context-aware manner
First is the software level approach, wherein the platform will facilitate
application development, host connected devices, ensure secure connections
and transmission of data, and carry out analytics. The other approach is a
hardware-centric approach. This approach will provide a platform to facilitate
development of hardware for IOT and will quicken the process of bringing
connected devices to market.
The software based approach to IOT could make it easier for developers to
build applications and services for connected devices, monitor and manage
devices, simplify connectivity, collect and analyze data, provide APIs and
integrate IOT applications to business systems. Over the past several years, a
host of platforms have emerged for the development of M2M and Internet of
Things applications. The integrated approach adopted by some of the new
entrants could disrupt the traditional M2M platform types, as integrated
platforms lead to faster development of applications compared to traditional
platforms. In addition, integrated platforms host connected devices, enable
development of scalable and portable applications and manage devices on the
network.
Whether it is a software-centric approach or a hardware-centric approach, we Whether it is a software-

consider several fundamental elements – connectivity, security, centric approach or a
development/deployment and data management and analytics – all of which hardware-centric approach,
must work in concert with each other for the Internet of Things to become a
we consider a several
reality for the end user. We summarize them and later discuss about their
fundamental elements –
advantages and challenges.
connectivity, security,
Connectivity development/deployment and

Connectivity between devices and the IOT platform can be established in data management and
multiple ways depending on the devices to be connected and solutions to be analytics - all of which must
offered. Some devices connect to the IOT platform directly using protocols work in concert with each
designed for IOT, some through existing wireless protocols, and others make other for the Internet of
use of protocol adapters provided by IOT platforms. Several protocols Things to become a reality for
including MQTT, CoAP and AMMP are being developed, and most include the the end user.
prerequisites for protocols in M2M and IOT such as low energy footprint, low
coding footprint and the ability to function on heavily resource constrained
devices.

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Another method of establishing connectivity between devices and IOT platform

is through software modules installed on devices or on gateways connected to
the devices. These modules are developed to be compatible with multiple
operating systems. Overall, connectivity encompasses not just the protocol but
how wireless networks leverage improved intelligence, dynamically leveraging
resources through wireless networks and machine-to-machine
communication, as well as how that technology could change in the future to
adapt to more automated devices.
Security IOT deployments must

Security will be paramount in almost every use case for IOT. If there are incorporate security measures
numerous compromised instances, then IOT may only realize a fraction of its from the data center to the
potential. Securing both user data and the protection of connected devices
end user
against unauthorized access will be key. Ideally, security should be insured at
all levels including the network, user, application, connection, system and
database. This requires IOT deployments to incorporate security measures
from the data center to the end user. Platforms, being central to deployment
and hosting of applications and connections, play a vital role in the security of
IOT.
IOT platforms will also need to minimize or eliminate the need for additional In an ideal scenario, security
expenses to integrate developer’s security infrastructure with that of the IOT features of IOT platform will
platform in order to support IOT applications and devices. In an ideal scenario, work in tandem with existing
security features of IOT platform will work in tandem with existing security
security infrastructure at the
infrastructure at the client’s end to ensure integrity of the security system and
client’s end to ensure integrity
data. This will increase the value proposition of IOT platforms than do-it-
of security system and data
yourself (DIY) approach taken by some developers.
Application development platforms typically consider security from the design

phase and it is a never ending development process, even when end-users
start accessing and interacting with the application. Besides the use of SSL
certificates, various application platforms use Transport Layer Security (TLS) to
encrypt message traffic and enhance security at the communications level.
Security is enhanced by implementing various other procedures such as

requiring multiple layers of authentication, restricted user rights and
meticulous policy management, allowing only authorized users to be given
rights to access the system. Sometimes authorized users are restricted access
to data and actions they can perform, it just depends on how the security
layers are developed.
If this all sounds complex, with a web of overlapping requirements, that is

because it is. Security is a critical element which must be designed-in from the
start and tweaked on an ongoing basis in order to deal with the complex
threats of a different landscape and changes that could be ahead.
Development and deployment:

Market research firms have different estimates of how many connected
devices there will be in the next 10 years. Estimates range from 23 billion to 50
billion. Regardless of the estimate, the end number is a magnitude greater than
where we stand today. The growth in connected devices is likely to be fueled
by an explosion in applications, purpose built for areas ranging from health
care to industrial systems to provisioning of utilities, running on devices that
range from small to large, remote to local.

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Similar to how frameworks like Java, ASP.NET, Ajax and others helped spur
growth in web applications, dedicated application development platforms for
IOT will play a critical role in creation, hosting and management of applications
for Internet of Things. In general, application development platforms reduce
the time and complexity involved in creating new apps. By leveraging these
platforms, developers can not only minimize development efforts but also
avoid incurring high costs.
Figure 27: ThingWorx Application development platform
Source: ThingWorx
Some IOT platforms have become sophisticated enough to allow developers to Some IOT platforms have
create apps without writing a single line of code. Platforms like ThingWorx become sophisticated enough
have even created an app store to aid development of applications on its to allow developers to create
platform. ThingWorx app store categories range from analytics to cloud
apps without writing a single
services to enterprise systems. In the ThingWorx marketplace, vendors such as
line of code
Google, Oracle, SAP, SalesForce and Ericsson offer various tools in the form of
maps, database management, analytics and protocol adapters that a developer
can simply embed in the application and leverage its functionality. To further
accelerate application development, ThingWorx platform offers app templates
for pre-defined use cases. In short, helping developers create applications in a
relatively short period and manage them with minimum effort.
Although most application development platforms primarily rely on the cloud

for deployment, some platforms allow developers greater choice, giving them
a choice to deploy applications on premise, in self hosted environments, on
gateways, or simply on the device itself.
That said, application development platforms are simplifying the process and
making it more flexible at the same time. By doing so, the development time is
shortened and the number of use cases that can be addressed with IOT
technology is expanded.

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Data Management and analytics

IOT will invariably result in large amounts of data, which is one of the intended
outcomes. The next step is to leverage this data in order to assist businesses
with decision making, customer experience, operational efficiency and
potentially much more. This represents an evolution from earlier versions of
M2M communication wherein connected M2M devices were primarily used for
monitoring the status of assets, rather than gaining business insights using
data management and analytics. This intelligence will not only be used for
recording and transmission of data but also to filter noise from data so that
only relevant information is recorded and sent to the datacenter or cloud.
Platforms will likely play an important role in determining how data generated Platforms will play an
by sensors and devices are collected, stored, processed and analyzed. Data important role in determining
received can be in an unstructured form, needing to be organized and loaded how data generated by
onto enterprise data warehouses. Depending on the agility of platform, it could
sensors and devices are
help developers gain real-time visibility into data using various analytics driven
collected, stored, processed
programs. New generation M2M/IOT platforms could also make it possible for
and analyzed. Data received
data to be shared with multiple applications. In short, the ability to analyze
data in a real-time manner in order to leverage it will be just as critical as the can be in unstructured form,
elements listed above. As such, we spend a considerable number of pages in needing to be organized and
this report discussing the possibilities of what can be done with an effective loaded onto enterprise data
data management platform. warehouses.
IOT platform for devices
The Internet of Everything is not just about applications and analytics. IOT is as
much about the hardware and devices connected to the internet as it is about
the applications running on them. Some IOT platforms will embed the software
supporting their platform on the connectivity chips, thereby creating a tighter
integration between the platform and devices. Thingsquare, Electric ImpOne
and Ayla are some such platforms.
Qualcomm has taken a hybrid approach to IOT. It is working with Oracle to

bring Java enabled development platform to connect, locate and control
everyday objects. The platform comes with an onboard sensor for light,
temperature and movement, as well as embedded modules for connectivity via
Wi-Fi, Bluetooth or cellular radio. Alongside this, Qualcomm is working to
develop software standards via the AllSeen alliance, which will allow everyday
devices like refrigerators, washing machines and televisions to communicate
with each other as well as with people. To strengthen its viability as a universal
platform, Qualcomm has brought in AT&T to test the applications and products
on the platform. Developers can now test their products on AT&T’s network
during varying stages of development. We discuss this in more granular detail
in following sections of the report.
In this framework Qualcomm has adopted a hardware plus software approach

to its Internet of Everything development platform. Qualcomm offers a
comprehensive development platform that supports Oracle Java embedded
SDK and offers support for both hardware and application development.
Devices designed on Qualcomm’s platform have in-built cellular connectivity.

In addition, the presence of onboard sensors, indicators and relays help
minimize development time of the product, thereby reducing time to market
for new devices.

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Qualcomm’s lead in SoC technology and its ability to incorporate multiple Qualcomm’s lead in SoC
connectivity modules on single chipset eliminates the need to have a discrete technology and its ability to
microcontroller/processor or memory while allowing for multiple options to incorporate multiple
incorporate connectivity in the device, thereby reducing the size and the total
connectivity modules on a
bill of materials.
single chipset eliminates the
need to have a discrete
To facilitate portability, Qualcomm allows the code to be ported to any
QSC6270T Module with Java for the commercial product. microcontroller/processor or
memory while allowing for
Figure 28: Qualcomm’s IOT development platform multiple options to

incorporate connectivity in
the device
Source: Qualcomm
Broadcom is taking a different tack with a platform called Wireless Internet

Connectivity for Embedded Devices (WICED). It simplifies the process of
incorporating wireless internet connectivity in devices such as refrigerators and
washing machines and provides connectivity using Wi-Fi, Bluetooth and
Bluetooth Low Energy (BLE) modules. Utilizing Broadcom’s WICED platform,
developers can create secure wireless networking applications on existing
microcontrollers in the products and with their new SDK, Broadcom makes it
easier for device makers to design speakers and audio devices to connect with
Apple’s AirPlay. The WICED platform enables development of network
connected applications that run on highly resource constrained
microcontrollers like the ones with 512kB Flash memory and 64-128kB RAM.
So Qualcomm is not alone here – many connectivity vendors are introducing
IOT modules (platforms) into the space, thereby giving OEMs a turn-key
solution to integrate into their products.

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Figure 29: Broadcom WICED module
Source: Broadcom
Of all the building blocks of IOT, a platform approach will likely have the widest
and most extensive use given its ease of device integration and its ability to
offer a turn-key solution that will encompass more functions than any other
element of IOT alone. Currently, no single platform has gained widespread
adoption or reached a tipping point whereby other device makers need to
follow along simply because the consensus is building quickly.
We are still in a place where different applications have different development, We are still in a place where
management and support requirements. Put another way, there is no universal different applications have
solution that will work just as effectively for a home electricity meter as it does different development,
for a home video monitoring system. One of the alternatives to the adoption of
management and support
platforms is the do it yourself (DIY) inclination of certain organizations. Though
requirements. Put another
we have yet to find conclusive evidence on whether outsourcing IOT platform
way, there is no universal
is actually feasible, it could be a cost-effective approach for small and mid size
business, which need a custom solution for cheap. Large organizations will solution that will work just as
likely decide based on the importance of IOT applications to their core effectively for a home
operations. electricity meter as it does for
a home video monitoring
Arduino system
Arduino is a platform intended for products that interact with environment
sensors and respond by controlling lights and other appliances. The company
sells preassembled boards that can either be used as is or be adapted based
on user’s need. Given the flexibility and low cost, the solution has become
relatively popular. Arduino also provides software which is compatible with
Windows, Linux and Mac OS.

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Figure 30: Arduino microcontroller board
Source: Arduino
Intel Galileo
Intel has developed a platform called Galileo. Launched in October 2013; it is a
microcontroller board based on Intel’s 32-bit processor Quark SoC. Galileo
leverages the simplicity of Arduino’s software and hardware environment and
is the first board designed on Intel’s X86 architecture to be compatible with
Arduino. Galileo represents an alternative to more complex Atom and Intel
Core processor-based designs. Through PC based ports and features Galileo
extends beyond the Arduino ecosystem.
Figure 31: Galileo board
Source: Intel

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Are Networks Ready?

Beneath all the connected devices, their respective applications and layers of
analytics, is the network itself. Wireless and wired networks are the backbone
of IOT. These networks will connect billions of devices (all very different from
each other) and establish integration of physical world (end-devices) and digital
world (servers, applications, cloud analytics).
Legacy telecom networks have evolved in the past to support newer

technology, services and applications. The process of network transformation,
however, was slow until smartphones arrived. Since that point, we have seen a
relatively faster transformation of networks from 2G to 3G to 4G and beyond.
The emergence of IOT and resulting surge in data has enormous implications
for telecom networks, enterprise networks and cloud infrastructure.
Billions and Billions of devices

No matter the third-party research firm, every firm agrees that there will be No matter the third-party
multiples of tens of billions of connected devices by 2020. To obtain research firm, every firm
meaningful information from these devices they need to be identified and agrees that there will be
addressed by the network. These devices will either connect directly to the
multiples of tens of billions of
network or via gateways. In doing so, networked devices will establish
connected devices by 2020
connection with other devices, humans and control systems. As connected
devices make consumers more comfortable, businesses more efficient and
governments more responsive, these stake holders will become ever more
reliant on mobile networks for delivery of services. In this process significant
value will be generated.
Figure 32: IOT brings value to businesses, consumers and assets
Source: Cisco
Present-day networks, though capable of delivering different applications and Present-day networks, though
connectivity solutions, were not designed for wide ranging IOT solutions. IOT capable of delivering different
enabled networks ought to have provisions to carry a very large number of applications and connectivity
devices yet have the flexibility to offer customized solutions with respect to
solutions, were not designed
connectivity, cost and quality of service.
for wide ranging IOT solutions

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This flexibility is important due to the fact that different IOT applications will
have significantly different requirements from the network; some applications
require low latency, always-on connectivity and frequent data transmission
while other applications can make do with intermittent connectivity and
infrequent data logging.
Ericsson has proposed a SaaS solution to this problem by introducing Ericsson

Device Connection Platform (EDCP). It helps network operators to bring IOT
devices on the network and support new applications by providing
connectivity between devices and enterprise applications, enabling policy
enforcement, controlling the quality of service for different applications and
making provisions for future deployments. In short, EDCP allows operator’s
mobile network to act as a flexible link between enterprise applications and
remotely located IOT devices.
Figure 33: Ericsson Device Connection Platform – general deployment
Source: Ericsson
Another important aspect of network and device readiness for internet of

things is the ‘gateway’. With our discussion on gateways, we aim to address
the issue of connecting disparate devices and legacy systems to enterprise
data centers and cloud where relevant information can be processed and
analyzed.
Sensors and actuators are nothing new. They have been around for many
decades, are used for specific applications, are installed using proprietary
technology, have customized interface and run on specific protocols. Sensors
are enablers of IOT; however, their fragmented deployment inhibits true IOT.
Efforts to standardize protocols, platforms and device hardware to drive

growth of IOT are underway. Once these standards are ratified, subsequent
IOT deployments will have seamless integration and interoperability. However,
a large number of existing deployments lack standardized components.

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To extract optimal value from IOT, organizations need to overcome the issue of
fragmented deployment. One possible path is to opt for new and standardized
implementation, but that is a costly affair. Imagine if energy distribution
companies were required to replace hundreds of million dollar transformers to
realize the benefits of IOT. The other option is to establish integration using
gateways that facilitate integration of legacy systems with new business
applications and analytics. We believe the latter is the path that most
businesses will take, optimizing the value of their existing business assets. Gateways have traditionally
been used to bridge dissimilar
Gateways have traditionally been used to bridge dissimilar technologies and technologies and integrate
integrate heterogeneous interfaces. They also enable integration of devices heterogeneous interfaces..
running on different protocols. Gateways can be used in a similar fashion with
the internet of things to institute intelligent connectivity to legacy device
networks. Gateways not only act as enablers of integration, but also as a
protective layer between application and sensor. A resource constrained
sensor may run out of battery if it is in direct contact with the application that …Gateways can be used in a
constantly queries the sensor. The presence of a gateway prevents direct similar fashion with IOT to
interaction between sensor and gateway, thereby extending the battery life of institute intelligent
the sensor. Gateways can also cache and aggregate sensor readings so that connectivity to legacy device
the data log can be sent in one packet to the application rather than networks.
establishing frequent contact with the network, thereby bringing down the
load on the network.
Figure 34: Gateways in the context of IOT
Source: Ericsson
With the progression in IOT, networks will adapt to the changing connectivity
needs of devices and applications. Currently, smartphones, tablets and many
other connected devices are always on and always connected. They
communicate continuously with the network, often pinging the network in the
background without us noticing it.

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In contrast, most IOT deployments should not require continuous network In contrast, most IOT
connection for data logging. In such a situation, one of the possible deployments should not
implementations of the network connection is to operate on discontinuous require continuous network
reception (DRX) mode. It not only brings down network load but also helps
connection for data logging.
save power in energy deprived, low cost sensors nodes. Sensors will benefit by
In such a situation, one of the
not having to remain connected at all times, thereby saving on energy
possible implementations of
requirements.
the network connection is to
Based on current LTE specifications, the lengthiest possible DRX cycle is operate on discontinuous
restricted to 2.56 seconds, which is very low compared to what many IOT reception (DRX) mode.
applications can easily accommodate. Think of a temperature sensor in an
orchid sending temperature data once every hour. Having DRX cycle of 2.56
seconds limits the energy saving quotient. Lengthening DRX cycles can help
bring down energy consumption. According to Tuomas Tirronen of Ericsson
Research, “using very long DRX cycles and optimized LTE procedures show
that it could be possible to reach lifetimes of even over 10 years using off-the-
shelf and relatively cheap batteries” (http://labs.ericsson.com/blog/4g-for-iot).
Figure 35: DRX cycle effect on battery life
Source: Ericsson
Increasing DRX cycles is in works in 3GPP Release 12, which is expected to be

frozen in 2H14. If Release 12 specifies lengthening of DRX cycles in response
to the need for lower power consumption it will be a reflection of changes in
network in response to IOT.

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The rising Intelligence in

Sensor Nodes
The idea of IOT draws heavily on extracting data from wireless sensors.
Sensors should be able to filter this data in a contextual manner and forward
relevant instances of information to the gateway. Moving forward, data could
and likely will be analyzed locally. Keep in mind, that some sensor
deployments will be in harsh conditions, needing the ability to adapt, while
others will operate in noisy (think congested) environments, requiring them to
discern signal from noise. Smart algorithms, intelligent software frameworks
and smart networking solutions can all help but these are very much in the
early stages of development, and it will be some time before sensors will be
able to leverage these in a meaningful way. Despite the timeline for
intelligence at the edge, sensors are still proliferating across a number of
verticals.
Use cases
It is easier to broadly categorize sensors into three categories – environmental
monitoring, object monitoring and interaction monitoring. Environmental
monitoring is defined as sensors measuring specific activities of the
environment. Object monitoring measures the activity of both animate
(humans) and inanimate objects (car). Interaction monitoring is the play
between object and environments.
Currently, there are a number of use cases being developed and some are
already in use. The list below is certainly not comprehensive, but is meant to
give readers some sense of the possibilities.

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Figure 36: A partial list of sensor use cases

Cities Parking Convey parking space availability in an efficient manner
Buildings safety Monitoring the condition of buildings by sensing vibrations, material change
Noise monitoring Monitor of sound in noise-restricted areas like hospitals
Traffic solutions Solving traffic congestion issues by monitoring vehicle and pedestrian traffic and suggesting optimum routes
Street Lights Light sensors can adapt to the weather conditions to give best results
Waste management Monitor the garbage level in containers so that garbage collectors can optimize their route
Environment Forest Fire Inform firefighters about fires. Sense drying areas and inform forest departments to take preemptive
measures
Air pollution Monitor emission of CO2 and other harmful gasses in factories and cities to take preventive measures on
time when the time required
Earthquake Develop early earthquake detection model
Landslide Monitor soil vibrations, moisture and earth density, so that high probability of landslide can be detected and
concerned people are informed in time
Water management Water supply Check quality of water which is being supplied in the city
Leakage Alert leakage of chemical waste of factories into natural water bodies like river
Pollution Monitor the pollution level in the sea and other water bodies
Metering Electricity Monitor consumption of energy
Storage Monitor the level of gas, oil and water in containers
Pressure Measure the pressure of water, air, etc
Security Access control Detect unauthorized access in controlled areas
Detection Detect release of dangerous gas or chemical in the environment
Retail and supply Tracking RFID track location of products during transportation
Payments NFC payments enabled by use of smart sensors
Intelligent Shopping Development of intelligent applications to get price, deals and bundling
Applications
Industries Monitoring Monitor the level of airborne chemicals in a plant
Location Asset location in a factory
Agriculture Green house Monitor green house effect; realize optimum green effect of the crops
Irrigation Monitor conditions and alert to exactly where water is needed and how much resulting in water conservation
and better yield
Home Energy and water Effective use of energy, lighting and water by continuous monitoring
Detection Detect opening and closing of windows and doors of a house, enhancing the security of homes
Health Monitoring Monitor vital stats such as blood pressure, heart beat rate, temperature
Measurement Measure UV ray density
Source: Deutsche Bank;Lbeliium
Remaining challenges
Security, Quality of Service and Configuration remain the key challenges. Even
in remote environments, sensors should maintain confidentiality, availability,
integrity and authenticity. In our section on security we address the challenges
and some possible solutions.
In terms of Quality of Service, intelligent sensors are equipped with intelligent

platforms with the goal to quality of service in spite of noise in the
environment. There are a couple initiatives centered on this issue. Middlware
Link Applications and Networks (MiLAN), developed by University of
Rochester, has a goal to enhance QOS in light of noise. MidFusion is another
middleware initiative; the solution allows applications to specify a description
of their sensory requirements, which can be then used to discover and select
the best sensors. We expect that more will follow, as QOS will become more
important as people start to increasingly rely on the sensor feedback.

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Another challenge is the configuration of wireless sensors, especially as

devices could dynamically come in and out of the range of a network. In the
current scenario, the configuration of sensor nodes is taken care of by
middleware/ gateways or by users manually. Sensors are being developed that
will be able to automatically configure and administer responsibility
themselves. We expect that as the development of sensors progresses this
feature will be baked into the development from the foundation level.
Conclusion
Sensors are very much the heart of IOT. Currently there are challenges, but we
believe as the idea of what can be done with them expands and as people
increasingly rely on this data, pushing Metcalf’s law across the critical
threshold, developers will find a way to move that intelligence to the edge. We
believe this point will likely come in the near term, but that the possibilities of
what can be done with such sensors are still in their infancy.

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Frequency challenges
Almost every device in the IOT concept will use some form of wireless The extensive use of wireless
communication. The extensive use of wireless communication by a growing communication by a growing
number of devices within the same area will pose challenges. Specifically, it number of devices within the
will challenge the quality of the network, the scalability of the elements and
same area will pose
the reliability of all included. There are a number of solutions that can address
challenges. Specifically, it will
the issue, including developing new radio and service architectures. Moreover,
challenge the quality of the
frequency spectrum allocation can be adjusted according to new channel
requirements. network, the scalability of the
elements and the reliability of
Radio Technology all included
Given the constraints a number of IOT devices will be placed under, either
because of energy efficiency or cost, a large number of devices will rely on a
single radio. The efficient use of multiple frequencies that many have become
accustomed to using a smartphone simply are not practical in an IOT
environment. Regardless, IOT will increase the demand of Radio-Frequency
spectrum.
Current spectrum allocation, usage modes and radio technologies are not
currently capable of handling the communication and data generated in IOT, or
at least what people think about as a seamless IOT world. In terms of open
frequency, there are not many open frequencies left. One is the vacated digital
television 800MHz frequencies and recently in Europe, these were changed to
mobile broadband. Television spectrum bands below 1GHz (TV white spaces)
have the potential to work efficiently with license-exempt technologies. In past
research we walked through a number of potential usage scenarios (please
refer to From Start to Mobile Clouds and Beyond).
The actual technology being used will vary, depending on how far and how
quickly the information will need to travel. For almost 90% of the IOT
applications that are currently being considered, most will use short range
wireless technology like Bluetooth, Zigbee and WLAN. To get a sense of the
range and throughput of various radio technology, we found the following
chart helpful.

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Figure 37: Radio technology range and bit-rate
Source: Innovate UK
To address spectrum scarcity in IOT, the physical layer should be equipped Sensing techniques such as
with spectrum sensing techniques and advance reconfiguration ability. matched filtering,
Sensing techniques such as matched filtering, cyclostationary feature cyclostationary feature
detection and energy detection have been brought up as possible ways to
detection and energy
improve efficiency.
detection have been brought
up as possible ways to
Matched Filtering is one of the most efficient spectrum sensing techniques. It
leverages identification to demodulate only approved signals and as a result, improve efficiency.
gives out a strong signal to noise ratio. However, it is complex, as there is a
high dependency on prior knowledge of target signals and the cost is also
high.
Cyclostationary Feature Detection uses spectral correlation analysis to enable

signal identification. The interpretation of modulated communication signals
can be done via multiplexed sinusoidal waves (type of waveform) with
periodicity, known as cyclostationary. The advantage of this method is that it
eliminates the need of multiple antennas as various waves can be
distinguished by using spectral correlation function. However, this technique
also has high dependency on prior knowledge of target signals.
In energy detection, a channel that is idle or busy is determined by comparing

the preset threshold with the power level in the frequency. The advantage of
this method is that it does not require prior knowledge of target signals.
Media Access Control

Spectrum related functionality is regulated by the media access network
(MAC) layer, whereas reconfiguration related to spectrum conditions are made
at the physical layer. The regulation can be done locally by individual nodes or
by cooperation between entities. The mode and duration of sensing are two
aspects of spectrum sensing by the physical layer, which needs to be

6 May 2014
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controlled by the MAC layer. There are two modes of sensing, reactive mode
and proactive mode. Reactive mode helps conserve power by sensing the
spectrum only when the data is to be transmitted. Proactive sensing is exactly
what you might think, the sensing of spectrum at regular intervals. There is
also something called cooperative sensing, which is created through the MAC
layer and leverages entities of the physical layer involved in spectrum sensing
activities. As these entities work in relatively different circumstances, by
collecting data from all of them, it improves the quality of decisions.
Network Layer
As it pertains to IOT, the network layer ensures data network connectivity and
efficient data transmission paths. The routing of data is done in a very
opportunistic way in wireless sensor nodes network as the reliability of links is
very low. At each node the forwarding conditions are analyzed and data hops
are done when they can be done, which is different than what we might
envision happens with typical internet traffic.
Techniques like spectrum awareness can increase the parameters on which M87 developed a technique
forwarding conditions are analyzed at each node for optimum hops. that enables a cluster of m2m
Specifically, spectrum aware mesh routing (SAMER) adds error rate and devices to talk to the network
bandwidth to parameters on which data links are analyzed. Network
through just one good radio
integration can help as well, but as we learned earlier with protocols and
amongst the cluster,
others, it poses a number of challenges.
essentially daisy chaining off
An Austin based start-up, M87, has developed a technique that enables a the good radio.
cluster of m2m devices to talk to the network through just one good radio
amongst the cluster, essentially daisy chaining off the good radio. We believe
this can both simplify and lower the cost of deploying wireless, IOT networks
while improving reliability.
Conclusion
The bottom line is that there are a number of constraints on almost every
element of the network currently, from frequency allocation to the MAC layer
management and the wireline network itself. There are techniques which can
help alleviate some of this strain, but it will take some time before these are
optimized.

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Big Data and Analytics

We have all the data from remote and not so remote sensors, actuators,
mobile phones, tablets and other connected devices. Now what? Not being
able to turn the collected data in to actionable insights will create an issue, and
likely not make the investment worthwhile. If done well, the opportunities to
gain meaningful insights are only bounded by one’s creativity.
Big data and analytics are at the heart of IOT. All the efforts around developing Big data and analytics are at
standards, adjusting networks to IOT and deploying applications are ultimately the heart of IOT. All the efforts
directed towards realizing economic and social benefits. These benefits come around developing standards,
in various forms such as efficient use of natural resources, minimal break-
adjusting networks to IOT,
down of machinery, increasing productivity of employees, better customer
deploying applications are
satisfaction, disaster management and on and on.
ultimately directed towards
To achieve these benefits, stakeholders rely on Big Data and analytics tools to realizing economic and social
harness data generated by billions of IOT devices. It is nearly impossible for benefits.
IOT to realize its potential and fulfill its promise if the hardware, software and
services elements of IOT analytics are not in place.
IDC breaks the Big Data industry into three broad segments: infrastructure,
software and services. Infrastructure is the largest segment with a 45% share
of Big Data revenue in 2013, while services and software accounted for 30%
and 25%, respectively.
Growth in Big Data is driven by sustained advancement in cloud-based Big

Data services and the introduction of features, such as YARN, which makes
Hadoop a multi-application framework. The further enhancement of security
and privacy measures plays a critical role in making Big Data solutions
enterprise class and ready for mass adoption. Overall, the Big Data ecosystem
is evolving with industry players forming technical and non-technical
partnerships.
Figure 38: 2013 Worldwide Big Data Revenue by Vendor ($ mlns)

Big Data Total Big Data Revenue as % Big Data % Big Data % Big Data
Vendor
Revenue Revenue % of Total Revenue Hardware Revenue Software Revenue Services Revenue
IBM $1,368 $99,751 1% 31% 27% 42%
HP $869 $114,100 1% 42% 14% 44%
Dell $652 $54,550 1% 85% 0% 15%
SAP $545 $22,900 2% 0% 76% 24%
Teradata $518 $2,665 19% 36% 30% 34%
Cisco
$295 $50,200 1% 72% 12% 16%
Systems
Juniper $28 $4,669 1% 82% 0% 18%
Total $18,607 n/a n/a 38% 22% 40%
Source: IDC
For all its benefits, carrying out analytics on a vast set of data produced by IOT 90% of the global data today
devices is a challenge. The operational costs associated with storage of rapidly was created in past two years
growing, unstructured data is a key hurdle to most organizations. Data has alone (IBM).
been growing at an unprecedented rate, so much so that 90% of the global
data today was created in past two years alone (IBM).

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In addition to storage, organizations need to manage and secure data, along

with creating scalable infrastructure to meet future needs. These are
significant challenges. Our research suggests that some of these challenges
are being addressed by corporations like IBM and Cisco.
Figure 39: How IOT will effect the Big Data landscape
Source: IBM
Along with an increase in the amount of data, IOT will bring about several Most of present day data
changes in the velocity and variety of data gathered. Outside of IOT, there are processing involves batch
not a great number of use cases where we see enormous amounts of processing of structured data.
unstructured data being generated, transmitted and processed in real time to
obtain actionable alerts. Most of present day data processing involves batch
processing of structured data.
However, that may soon change. IOT deployments will lead to large number of Collection and periodic batch
applications in which vast amounts of data would require real-time processing processing of data might lead
to derive timely business insights and obtain actionable information. Collection to a delay in obtaining
and periodic batch processing of data might lead to a delay in obtaining
relevant insights, providing
relevant insights, providing analysis that was good yesterday, but not
analysis that was good
necessarily today.
yesterday, but not necessarily
One solution to this issue is stream processing, which enables real-time today.
collection, visualization and analysis of large scale data arriving in high
velocity. Stream processing works alongside existing enterprise resources
without disrupting the systems and storage infrastructure already deployed. It
allows organizations to analyze structured and unstructured data arriving in
large quantities.
If implemented well, stream processing not only facilitates large volumes of If implemented well, stream
data to be aggregated and analyzed but also helps in maintaining data quality processing not only facilitates
while lending itself to data auditing. large volumes of data to be
aggregated and analyzed but
To give you a perspective on the rate at which certain web/mobile applications
also helps in maintaining data
generate data, Facebook generates more than one Tb of data every hour while
quality while lending itself to
Twitter generates one Tb of data every two hours4. Real-time analysis of this
data help businesses identify which topics are trending in a given geography at data auditing.
4
https://www.ibm.com/developerworks/library/bd-streamsintro/

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a given time among a given age group of people. It offers them monetization
opportunities based on consumer interest and behavior. In the absence of
stream processing, data would be collected, stored and later analyzed. By the
time insights are obtained it might be too late to reach out to users as they
may have moved on to something else.
This is just the beginning; as IOT matures, application developers will come up
with hundreds and thousands of applications that generate vast amounts of
structured and unstructured data, requiring real-time analysis for efficient
functioning. Think of a transit application that provides real-time information
on busses and trains, real-time traffic updates or availability of parking in a
given business district or shopping mall, while connecting it to current and
forecasted weather data to help us decide whether to drive to our destination
or use public transportation systems. Such an application solves a major, real
world problem and requires real-time feeds that need real-time processing –
sort of an extension of HopStop. Multiply this by millions of users and
hundreds of cities for which such information is made available and you have a
massive challenge at hand. Such an application will depend on stream
processing and cannot be subject to batch processing.
Figure 40: Stream processing enables real-time response
Source: EMC
Stream processing does have its challenges though. It requires extensive

computing resources and needs to overcome hurdles related to security,
bandwidth, capacity and data integrity. In addition, a vast amount of data
arriving through IOT applications needs to be continuously filtered. Data will
need to be filtered in the context of the application, as a one size fits all
solution for filtering data does not work. All of this requires very powerful
processors. Moreover, stream processing will significantly increase workloads
in data centers; we estimate that a growing number of use cases of stream
processing coupled with the ensuing complexity of the process will have a
transformative impact on data centers.
Existing data centers need to evolve, while new data centers should be
designed to support the increased expectations for performance. Currently,
building a new data center or upgrading an existing one in order to execute
stream processing is a cost prohibitive and daunting task.

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One of the solutions proposed to make stream processing commercially viable Data center managers need
is to implement distributed data center management. To prevent individual to leverage DCIM (Data
data centers from being bogged down by a flood of IOT data, data center Center Infrastructure
managers can decide to distribute data aggregation, tasking it to multiple data
Management). DCIM is a
centers. These data centers can then perform the initial level of processing and
sophisticated data center
send relevant data to the central data center for further processing and
monitoring solution which
analytics. In addition to distributed data center management, data center
managers need to leverage DCIM (Data Center Infrastructure Management). helps manage and optimize
DCIM is a sophisticated data center monitoring solution which helps manage the performance of data
and optimize the performance of data centers. Today’s data centers are centers
designed to accommodate bandwidth requirements originating from human-
application interaction. A typical data center is not designed to handle massive
sensor data, creating a wide gap in available and required bandwidth. To
address this issue, data center managers will need capacity management
platforms like DCIM.
DCIM gives a holistic view of the functioning of data centers by providing

information about real-time utilization levels, energy efficiency, capacity
planning and asset management. This information results in better control of
data center assets and greater operational efficiency, allowing data centers to
be able to take on larger workloads associated with stream processing and Big
Data.
DCIM brings down operational expenses by reducing data centers downtime.

And based on recent commentary from industry analysts, modern DCIM
solutions are sophisticated enough to drive utilization levels high enough to be
able to defer data center capital expenses.
Figure 41: iTRACS DCIM to optimize data center for stream processing
Source: CommScope
In short, IOT aims to make institutions and society more efficient; since IOT
deployments generate vast amounts of structured and unstructured data that
require efficient collection, aggregation and detailed analysis, Big Data

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solutions will gain traction. Challenges still remain, in the name of velocity,
volume and veracity of IOT data. It is likely that many IOT related Big Data
problems are best addressed using stream processing, which is a daunting
task and places strain on data center resources, requiring data centers to be
managed at high levels of efficiency. DCIM is an effective way to optimize
performance of data centers and to maximize their utilization levels. We would
note that CommScope is one of the leading companies in DCIM space.
Figure 42: The path to increased investment in DCIM

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IOT Use Cases

In this section, we highlight 3 IOT use cases – representative of ongoing IOT We highlight 3 IOT use cases
buildouts in 3 major industry sectors: 1) Industrial Cyber Security, 2) Smart – representative of ongoing
Energy (Oil and Gas sector) and 3) Smart Retail. IOT buildouts in 3 major
industry sectors: 1) Industrial
Our use case discussions, albeit at a high level, are our basis for highlighting
Cyber Security, 2) Smart
the investable plays in the “infrastructure” aspects of IOT buildouts – i.e. in the
Energy (Oil and Gas sector;
Edge Cloud, Datacenter Cloud and Network Intelligence and Security aspects
of an IOT infrastructure. and 3) Smart Retail
We believe key catalysts for capex investments in IOT infrastructures are the
potential for structural multi-year improvements in productivity and opex
metrics. A recent GE IOT study notes potential for appx +$18B in annual opex
savings benefits from a modest 1% improvement in operational efficiency
metrics.
The GE IOT study is basis for our view that capex investments in IOT Figure 43: Industry data summary on
infrastructures is likely to be pegged at around 10% of the $18B in yearly opex CY15 network equipment capex
savings – i.e. we anticipate IOT related capex investments in the $2B range a
spending [Infonetics] and DB view of
year over the next few years on Layer 0/7 networking solutions. We note that
incremental network infrastructure
CxOs typically invest ahead of anticipated recurring opex savings.
spending on IOT use cases
The $2B a year in IOT related networking capex investments would be Appx CY15 IT
incremental to the current +$47B a year of capex spent on networking Capex Spend ($B;
Product Category
equipment – summarized in Figure 43 – and a fundamental basis for potential based on
Infonetics data)
upside to CY15/16+ consensus expectations.
Datacenter Switching $9.0
In the remainder of this chapter, we discuss 3 major IOT use cases and Enterprise Routing $4.0
highlight how each of the Layer 0/7 IT stacks are involved in implementing the
end to end IOT infrastructure. The networking vendor plays are in one or more Carrier Routing & Carrier
of the IT stacks’ – as we summarize in the IOT use cases discussion. Ethernet $15.0
Layer 4/7 (Application

The basis for our IOT use cases discussion is as follows.
Delivery; WAN Opt) $3.0
1. The IOT CyberSecurity use case highlights how IOT enabled Security Equipment $7.0
infrastructure can offer a well-rounded defense against a broad range
of security attacks – from the Operational Technology elements – i.e. DWDM Optical
physical security access, etc – to the Information Technology elements Networking $9.0
– i.e. Layer 0/7 network equipment.
Total Network Eqp Capex
2. The Smart Energy scenario is representative of an IOT use case for View for CY15 $47.0
Remote Monitoring and for Big Data Analytics of Gigabytes of data
output from Internet connected sensors in offshore Oil and Gas rigs. DB view of incremental IOT
related networking capex
From a network impact POV, the Smart Energy use case is
spend $2.0
“bandwidth intensive” and “delay insensitive”.
Source: Deutsche Bank; Infonetics
3. The Smart Retail example is representative of a use case for IOT

enabled supply chain management and Big Data Analytics. From a
network impact POV, the Smart Retail use case is “bandwidth
tolerant” and “delay sensitive”.

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In the discussion below, we discuss how the networking vendors can benefit
from selling their policy-based and dynamically managed Layer 0/7 equipment
in these 3 representative IOT use cases.
IOT Use Case #1: Industrial Cyber Security

Figure 44 illustrates a representative IOT architecture for implementing an
industrial cyber security use case.
The IOT architecture has both IT and OT network elements – required to

implement an end to end cyber security solution.
The OT aspects include industrial security systems and devices at the physical
security layers – i.e. Internet connected objects such as programmable video
cameras, audio recording devices, temperature sensors, fire alarm equipment,
access badges, etc.
The IT aspects are of interest in the context of our FITT – since they correspond
to investable opportunities for the Layer 0/7 networking vendors in our
coverage universe.
Drilling down into the IT layers, we highlight security capabilities required at

every major tier of the IT stack – i.e. at the optical transport and wireless
access layers, at the Layer 2/3 switching and routing layers, and at Layer 4/7.
Referring to the cyber security architecture in Figure 44, we note that vendors
such as Cisco, Aruba, etc currently offer wireless air interface security and
wireless data layer encryption mechanisms in their industrial hardened
802.11ac access points.

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Figure 44: Illustration of IOT Cyber Security network architecture
Big Data Enterprise IOT

Applications c c c
Analytics Apps Control
App Specific QoS; Big Data Analytics;

Datacenter Cloud Traffic & Policy Management
& Virtual Overlays
Datacenter Cloud (Cisco Nexus 9k, bare-metal switches, etc)
Application + Network Security;

Edge Cloud Node

Edge Cloud c
OEM Edge Routers)
IOT End-Points
Wireline & Mobile IOT End-Points;

IOT End-Points IOT Sensors, Actuators, Mobile Devices, etc
Point of Sale Sensors; Digital Signage,

Video Cameras, Sales Metrics Analyzers
Cisco, with its +50% market share in enterprise WiFi equipment and broadest
set of networking solutions in enterprise IOT use cases, is likely to be a mid- to
long-term beneficiary of enterprise WiFi networking rollouts in IOT
architectures. Cisco’s point product competitors, we note, lack the IOT
solutions integration expertise that Cisco and its industrial IT ecosystem
partners (Rockwell, GE, Siemens, etc) would bring to industrial IOT use cases.
Moving up the IT stack, to Layer 2/3 switching and routing, we see Cisco likely
to benefit in the CY15/16+ timeframe from sales of virtualized network firewall
modules at the Edge Cloud Nodes (e.g. virtualized intrusion detection and

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prevention SW modules running in the Cisco’s ISR 819 series enterprise router,
etc) and from sales of campus switches (e.g. Cisco’s 3850 series) running
802.11ac access points integrated into the switch.
Moving further up the IT stack, into the Datacenter Cloud Layer, we note
meaningful opportunities for Layer 4/7 specialists such as F5 and Infoblox to
benefit from the IOT Cyber Security use cases.
F5 – a market leader in Layer 4/7 has multiple security touch points in the IOT
Cyber Security architecture that we illustrate in Figure 44.
At the network access control layer, F5’s Access Policy SW Module – running
as either a virtual instance or in the company’s HW optimized BIG IP or Viprion
platforms – has an important role to play in controlling end-user access to a
wide range of datacenter application servers – at a fine level of granularity – i.e.
access control by user name, workgroup affiliation, geographic coordinates,
user context, etc.
IOT sensors imbedded in various industrial objects can relay security incidence
monitoring events to F5’s Access Policy Module – and F5’s TMOS SW is
designed to cross-correlate across 1000s of individual security incidence
response and access control events – to generate security trend analysis
patterns, feedback to IT security policy design, etc.
We note that F5’s Access Policy Module is currently the best selling SW
module in the company’s SW portfolio – a point of proof of the F5’s best–in-
class competency in network and application access policy management.
At the application and network firewalling layers, F5 has a core set of value
propositions to offer – as part of an overall industrial cyber security framework.
F5’s Application Security and Network Firewalling SW Modules – implemented

as either virtualized SW instances or running in the BIG IP or Viprion HW
platforms – can scale to 100s of Gigabits of packet processing throughput (in
comparison, we note that many of F5’s security peers scale to 10s of Gb/s) for
handling volumetric attacks such as Distributed Denial of Service (DDOS)
attacks – originating from the public Internet – and targeted towards the
perimeter of the extended enterprise (i.e. the enterprise’s HQ network, branch
offices, key supply chain partner networks, etc).
More recently, F5 has been offering a Cloud based subscriptions service

(leveraging the Versafe acquisition) for detecting and IT reporting of advanced
malware threats across IP connected devices – from mobile devices running
industry standard OS to industry vertical devices running Linux or Windows OS.
F5’s Cloud Security IT services – competitive with Cloud services offerings

from Cisco/Sourcefire, FireEye, Akamai, etc – are likely to see directionally
improving enterprise IT customer adoption trends in IOT and other industry
vertical use cases – given our view that IOT, in particular, involves the
provisioning of security capabilities for1000s of Internet connected end-points
(in a wide range of form factors) – especially to defend the enterprise IT
infrastructure against a growing number of advanced malware threats and
sophisticated security attacks targeted at layers 4/7.

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F5’s iRules scripting framework has a core value proposition in IOT use cases –
given the relative ease at which simple English language IT and business
security policies can be defined and implemented in a matter of minutes – to
defend the enterprise architecture against a dynamic set of security threat
vectors, which by definition need a dynamic policy creation and
implementation framework (offered by iRules).
We estimate F5’s application and network security opportunity in the +$2B a

year range (out of a total +$8B security equipment market [Infonetics]) – with
growth rate trends in the low double-digit Y/Y range.
From a security attach rate POV, it is our view that F5’s Layer 4/7 systems (BIG
IP and Viprion) could see the security SW modules attach rate scale from the
current +30% of HW platforms sold to around +50%, over the next few years.
We believe IOT use cases are a key catalyst for scaling the company’s security
solutions sales opportunities given the significantly higher number of security
IT end-points in IOT use cases, which could be the underlying basis for scaling
the quantity and types of security modules required to defend against a broad
set of attack vectors in IOT Cyber Security use cases.

solutions – could secularly benefit from rollouts of DNS Security mechanisms
to safeguard DNS servers situated at the enterprise’s infrastructure borders,
i.e. at the network perimeter that connects the enterprise network to the public
Internet and to the company’s’ supply chain partners.
We note that a vast majority of enterprise DNS servers (which resolve

incoming Web requests such as www.example.com to an set of IP addresses;
corresponding to internal servers) currently lack adequate security
mechanisms to 1) safeguard the DNS servers from security attacks that
originate from the public Internet (e.g. DDOS attacks targeted at corporate
DNS servers) and 2) defend against security attacks that originate from
malware-infected employee PCs, smartphones, tablets, etc, when the
employee computing devices are connected to trusted corporate networks.
Infoblox recently introduced DNS Security appliances that defend against DNS
security attacks that originate from the “outside-in” and the “inside-out” – and
these DNS security appliances leverage live DNS reputation feeds to cross-
check all incoming and outgoing DNS queries against a constantly updated
live IP address and Web URL feed so as to identify malicious URLs and
hacking attempts on a company’s DNS servers.
We estimate Infoblox’s DNS security opportunity for enterprise IT use cases

(including IOT use cases) in the mid $100s of million a year range given our
view that DNS security is a next-gen security use case and the market
opportunity for Next-Gen Security
Figure 45 is an IT stack level diagram summarizing how an IOT enabled Cyber

Security architecture can be implemented by utilizing best-in-class security
mechanisms at every major layer of the IT stack.

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Figure 45: Illustration of key IT stacks involved in implementing an IOT Cyber Security architecture
Application Application Access Control, Web Application Security, DNS

Security
(e.g. F5, Infoblox, etc)
Transport
Layer Transport Layer Security (SSL)
Security (e.g. F5, Citrix, A10, etc)
Virtual Network Layer Security

Network
(e.g. VMware, Cisco, Open Source SW, etc)
Layer
Security
Network Firewalls
(e.g. Cisco, F5, Palo Alto, Juniper, etc)
IOT Endpoint IOT Endpoint Security

Security (Access Badges, Video Cameras, IOT Sensor Metrics, etc)
IOT Use Case #2: Smart Energy (Oil and Gas)

Figure 46 illustrates a representative Edge Cloud and Datacenter Cloud
architecture for implementing an IOT Smart Energy use case – in this case, a
set of Internet connected sensors and actuators in offshore Oil rigs – for
implementing remote IOT enabled systems and devices monitoring.
Remote monitoring is a core value proposition that leverages centralized

onshore facilities for dynamically managing a set of Internet connected end-
points in offshore Oil and Gas installations.
A set of IOT objects (industrial sensors monitoring the entire lifecycle of

offshore oil rig equipment; actuators implementing various control decisions,
etc) continuously transmit sensor data (coded using industrial SCADA
protocols and transported over TCP/IP) to Edge Cloud Nodes (e.g. Cisco’s ISR
819 router, etc) via wired Ethernet or WiFi LAN access.
The Edge Cloud Nodes offer a core set of localized compute, networking,
storage and security functions for the offshore oil rig sensors and actuators.
The Edge Cloud functions include: 1) aggregation of IOT events from 100s or
(1000s) of Internet connected sensors, 2) real-time local SW processing of IOT
event data, 3) implementation of edge security access and intrusion detection
capabilities and 4) batch upload of Gigabytes of IOT offshore rig data, etc.

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Figure 46: Conceptual view of an IOT architecture to support a Smart Energy use case
Big Data ERP IOT

Applications c c c
Analytics Apps Control

& Virtual Overlays

Edge Cloud Node

Edge Cloud c
OEM Edge Routers)
IOT End-Points

Drilling Site IOT Sensors, Actuators, etc
The Edge Cloud nodes perform an important networking function; i.e. they
transmit Gigabytes of IOT event data, aggregated from multiple IOT sensors in
“batch” mode, to centralized databases and application servers.
By batch mode, we refer to data sets being set on a “best-effort” bandwidth-

available basis to centralized datacenter servers versus in a continuous real-
time mode.

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We note that transmission of bulk data along with delay-sensitive IP traffic in a

narrow bandwidth onshore to offshore WAN link often negatively impacts
time-sensitive IP voice and data communications. This is the basis for our view
that bulk data transport in WAN links needs to be dynamically managed to
ensure overall integrity and performance of IP voice and data communications
between onshore and offshore Oil and Gas facilities.
Cisco’s ACI Fabric (anticipated to be generally available mid CY14 timeframe)

could be relevant in Smart Energy networks given our view that network
equipment in the WAN links (e.g. Edge Cloud Nodes running Cisco’s APIC
Enterprise SW module) can dynamically communicate the bandwidth and
latency requirements of application traffic traversing the links between the
edge of the network and the datacenter to a centralized SDN controller (e.g.
Cisco’s APIC SW engine).
The SDN controller, in turn, can provision relevant Quality of Service policies
on a box by box basis – i.e. in every switch or routers across the end to end
network connection – so as to ensure optimum delivery of delay sensitive and
bulk data traffic through the WAN links that interconnect the onshore and
offshore Oil rig facilities.
Figure 47 illustrates the relevant IT stacks involved in the dynamic

management of the onshore to offshore network connections.
Figure 47: Conceptual view of relevant IT stacks involved in the Smart Energy use case
Application Web 2.0 and SaaS Apps

Layer
Datacenter Application Aware Networking, Traffic Management, Security

Cloud Layer (e.g. Cisco ACI Fabric, F5, Infoblox, OEM/Open Source systems)
Virtual Network Overlays

Edge Cloud
Layer
Edge Routers w/ Local Processing & Security

(e.g. Cisco ISR, HP, OEM edge routers, etc)
IOT Endpoints
IOT Endpoints (Drilling Site Sensors, Actuators, Analyzers, etc)

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Referring to the IT stack diagram in Figure 47, we note that Cisco’s ACI
solution would play a meaningful role in Quality of Service management at
Layers 2/3, while F5’s policy management solutions could play a role for
managing Web traffic at Layers 4/7.
Cisco’s ACI Fabric (competitive with VMware’s NSX solution, etc) can also be
used to set up virtual network tunnels between WAN router end points and
datacenter servers – or between various server racks within the Datacenter
Cloud – for managing the data traffic in the Smart Energy infrastructure based
on policy descriptors such as virtual tunnels dedicated for routine backups,
disaster recovery, delay sensitive traffic, best effort bulk data transport, etc.
F5’s Web traffic steering feature – a core traffic management feature in the
BIG IP and Viprion ADCs – has a core value proposition to offer for managing
Web traffic requests originating from offshore oil rig installations.
Different sets of Web URL requests – based on the business sensitivity and
time-sensitivity of the application traffic – can be directed to different sets of
Web application servers by F5’s ADCs running the core traffic management
software (TMOS SW).
F5 also offers iRules scripts to selectively encrypt different sets of Web

application traffic, and also safeguard application traffic from eavesdropping
and hacking attempts at the Web layers.
F5’s Network Access Control solution (based on the Access Policy SW module)
can be used to enforce selective tiers of access to energy management and
data analytics applications in the Datacenter Cloud.
As we noted in the Cyber Security use case discussion, Infoblox’s IP address

management solution and DNS’ security solution have a key role to play in the
Smart Energy use case: for automating IP address assignment across device
types (wired and mobile end-points, servers, etc) and for safeguarding the
corporate DNS infrastructure.
We also note opportunities for Ciena’s Carrier Ethernet solution and optical
network management software tools in the Smart Energy use case. Undersea
cable – carrying optical Ethernet data traffic – is a relevant use case for sales of
Ciena’s carrier Ethernet switches at either ends of the offshore and onshore
optical WAN links. Ciena’s optical network management SW could be used to
dynamically provision optical network transport equipment at either ends of an
optical fiber link.
In summary, we note near-term opportunities for the Layer 4/7 specialists – F5,
Infoblox, etc – to sell into network intelligence and security use cases in the
Smart Energy use case, opportunities for Ciena in optical Ethernet and optical
network management tools and out-quarter opportunities for Cisco’s ACI
Fabric solution.
IOT Use Case #3: Smart Retail

Figure 48 illustrates representative Edge Cloud and Datacenter Cloud
architecture for implementing an IOT Smart Retail use case.
A Smart Retail IOT use case is the converse of the Smart Energy use case
from a networking POV. While the Smart Energy use case involves transport of

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bulk data from the offshore rigs, the Smart Retail use case involves the
dynamic management of mostly time-sensitive transactional data (e.g.
inventory levels, hourly or daily product sales metrics, etc) from retail point of
sale IOT sensors to regional offices and HQ locations of the corporate
enterprise and its global supply chain partners.
Referring to the IT stack level diagram in Figure 49, we note a variety of data
traffic formats that need to be dynamically managed to and from the regional
and HQ offices and the retail point of sale locations.
At Layers 0/1, Operational Technology [OT] data such as parking space sensor
data, motion sensor data, environmental metrics, etc is carried over Internet
protocols (TCP/IP) to the Edge Cloud Node – where location-specific decisions
can be made (often in near real-time) by SW applications that process the OT
data in Enterprise Routers (e.g. Cisco’s ISR 819 series).
At Layers 2/7, Information Technology [IT] data such as product inventory

levels, customer demand trend metrics, product sales metrics by time of day or
day of week, etc need to be delivered, often in near real time, to centralized
Datacenter Cloud servers for business planning and decision making across
the extended retail supply chain.

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Figure 48: Conceptual view of an IOT architecture to support a Smart Retail use case
Big Data Supply Chain IOT

Applications c c c
Analytics Management Control

& Virtual Overlays

Edge Cloud Node

Edge Cloud c
OEM Edge Routers)
IOT End-Points

Point of Sale Sensors; Digital Signage,

Video Cameras, Sales Metrics Analyzers
We see a role for Cisco’s ACI Fabric solution (running on the enterprise routers
and also in datacenter switches, etc) to dynamically manage the end to end
network connections for reliable and express delivery of key performance
metrics such as product inventory levels, product sales metrics, marketing
promotions, etc between the retail locations and the extended supply chain.

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F5’s Layer 4/7 ADC solutions have a key role to play in the Smart Retail use
case. F5’s iRules scripts can be set up to provide differentiated Quality of
Service for in-store customers or in-store staff making secure (e.g.
https://www.retail-store.com) purchases via the company’s e-commerce Web
servers.
F5’s core ADC software and specialized security SW modules can be utilized to
defend the extended retail supply chain against sophisticated Web application
layer attacks (malware in Web links, phishing attacks) and to handle
unexpected surges in retail store Web traffic volumes to Datacenter servers,
etc.
Similar to our discussion in the Smart Energy use case, Infoblox’s IP address
management solution and DNS security solution have a key role to play in
automating IP address assignment across wired and mobile devices and in
safeguarding the corporate DNS infrastructure against DNS layer threats.
Figure 49: Conceptual view of relevant IT stacks involved in Smart Retail use case
Application Web 2.0 and SaaS Apps

Layer
Datacenter Application Aware Networking, Traffic Management, Security

Cloud Layer (e.g. Cisco ACI Fabric, F5, Infoblox, OEM/Open Source systems)
Virtual Network Overlays

Edge Cloud
Layer
Edge Routers w/ Local Processing & Security

(e.g. Cisco ISR, HP, OEM edge routers, etc)
IOT Retail Point of Sale & Supply Chain Endpoints

IOT Endpoints (Point of Sale Sensors, Metrics Analyzers, Digital Signage, etc)

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Companies
Qualcomm
Qualcomm has been positioning itself as a growth driver of IOT since cellular Figure 50: Qualcomm’s IOT
wireless technology first gained traction. The company started with Omnitracs, initiatives
a platform for truck fleet management and from there the company branched AllJoyn Protocol allowing
out into a number of IOT initiatives. It developed the AllJoyn protocol, which is elements to connect,
agnostic of brand or
now overseen by the Linux foundation and has more partners and contributors operating system
than any other protocol platform being considered. We discussed AllJoyn in IOT development Platform for cellular
our note, as well as its IOT platform. These have both been used to develop platform connectivity
revenue generating products in a number of industry verticals. Automation and Solutions that scale for
Enterprise solutions enterprises
Automotive: In terms of an overall platform, the company has only recently AllPlay media platform Plug and play wireless
audio build on AllJoyn
demoed a platform at Consumer Electronics Show and later at Mobile World
Smart Car Telematics and
Congress. The company retrofitted both a Jeep and a Mercedes, which both computing designed
had multimedia streaming, connected device sharing, rear seat entertainment for the car
systems, enhanced navigation, vehicle diagnostics and location services. The Smart home and
security management
platforms leveraged Snapdragon 602A processors, their connectivity solutions
(Vive) and 9x15 modems. Qualcomm took the modems a step further and Wearables Displays, efficient
computing
recently introduced the Gobi 9X30, with Cat 6 capabilities, Wifi hotspot and Source: Deutsche Bank; Qualcomm
telematics services – a 20 nanometer modem specifically designed for the

automotive category. It also includes vehicle to vehicle communication, a
safety measure recommended by the National Highway Traffic Safety
Commission. There are already plans for automakers like Audi and GM to use
these solutions across a broad portion of their fleet and AT&T has partnered
with Qualcomm to offer LTE connectivity services for cars. The GSMA
estimates that there will be over 35 million embedded connectivity solutions by
2018. And while that may not be hugely meaningful to a company that will
very shortly be manufacturing over 1 billion ASICs units per year, it will help
accelerate consumers’ ideas of what having connectivity in other places
outside of the smartphone can mean.
Figure 51: GSMA unit estimates for the connected car

40
35
Annual unit sales (million)
30
25
20
15
10
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Embedded Tethered Smartphone
Source: Deutsche Bank; GSMA

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Smart home: At Mobile World Congress this year, Qualcomm demoed Overall, we believe the home
connected home solutions: everything ranging from a wine refrigerator, the will be one of the earlier silos
door of which would trigger an alarm if left open, to remote locks, appliance to become increasingly
alerts that pop up on the TV and even content monitoring for kids. Some
automated and adopted
believe that this market (connected home cellular devices) will quickly grow to
just shy of 140 million connected units, from 25 million where it stands today.
We are a bit more conservative than this; while many will quickly understand
the benefits of adding connected solutions in their home, unless it is a
seamless installation procedure or it is new home construction, it could take a
bit longer. Many devices in the home will be connected via WiFi or Bluetooth.
This will offer a cheaper way to leverage the internet, and will also offer
quicker adoption given it can easily sync with the home gateway. To be clear,
Qualcomm is a large player here as well, given its Atheros unit, but the ASP on
the chipsets are much lower. Overall, we believe the home will be one of the
earlier silos to become increasingly automated and adopted. It will likely be
done early with unlicensed connected solutions and we have already seen this,
but there are areas that will need to remain connected via cellular (e.g. smart
meters and security systems). All of this will take time, but we believe
Qualcomm is one of the best positioned companies to leverage the growing
smart home trends.
Figure 52: Unit cellular estimates for the connected home
Source: Berg Insight; Beecham Research
Industrial and Enterprise solutions

Qualcomm has developed cellular solutions for ATMs, POS, retails kiosks,
digital signage, asset tracking and handheld terminals. The ease of set up,
coupled with the ability to be always connected and mobile makes these
devices appealing. While we do not think these unit volumes are meaningful to
Qualcomm, we do think tablet attach rates are improving because of their
increasing use as a point of sales mechanism. And while many will be
connected via WiFi to the business’s network, a majority will have cellular
backup given the importance of up-time on this device.
The company also has a number of gateways and router solutions, which can
be embedded into any device, from utility meters to card access solutions. The
cellular element of these solutions negates the need for wire line, the
installation of which can be a challenge. Given the security elements necessary
for the enterprise vertical, we believe propriety platforms will remain for some
time and thus limit overall unit growth here.

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Qualcomm Development Platform

Please see our section on IOT as a platform.
Wearables
Last year Qualcomm introduced the Toq, a smartwatch with its Mirasol display
technology. The move was an attempt to prime the pump for wearable
technology. While OEMs like Samsung and Sony have released their wares,
the unit volume has not been stellar. These are early days for wearable
technology. And the connectivity technology included in these devices likely
will be of the unlicensed kind (WiFi or Bluetooth). There are a number of other
ways Qualcomm can participate here, with the sale of their wireless charging
technology, and to a lesser degree their display technology (though Mirasol
has always struggled) and connectivity solutions. While we think wearables
will eventually be a meaningful market, we think the technology has some way
to go before it becomes a considerable number for component suppliers.
Parting thought
Qualcomm will be a key beneficiary of IOT; that is not an extraordinary
statement. But given our thesis that it will take time for the market to develop,
and with a company that is on the cusp of shipping 1 billion ASICs per year, it
will be some time before it is significant for it . Having said that, when IOT unit
volumes begin to ramp in earnest, Qualcomm will likely be one of the best
positioned companies in the space, as it will have generated significant “lock-
in” given it has developed much of the foundational elements that drive even
the most peripheral of areas of IOT.
Cisco
The basis for our constructive view on Cisco in the IOT infrastructure
opportunity in the out quarters (2H15+) is as follows.
1. Cisco is viewed in IT circles as a thought leader in IOT (we note CEO

keynotes on IOT at major trade shows) and has an IOT focused cross
business unit product team.
Cisco’s IOT interest spans a wide range of use cases – from home
automation and digital healthcare to smart manufacturing, smart cities
and smart retail.
2. Cisco has the broadest set of touch points in enterprise and service
provider infrastructures – from campus switching, wireless access and
security to datacenter servers, switching, core routing and mobile
packet core – and a broad portfolio of IT services from campus to the
core.
3. We are constructive on Cisco’s IOT opportunity in 2H15+, given our
view that the company has the setup, from a product portfolio,
customer base, market share and sales execution POV, to offer a
packaged bundle of IOT solutions involving millions of smart objects
(i.e. Internet connected wireless sensors) connecting to an Edge Cloud
(based on Cisco’s ISR router, etc – for localized switching, routing,
security, voice, video and network optimization) and leverage
Datacenter Cloud Services for centralized computing, analytics and
storage [refer to Figure 1].

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4. The stock could be a potential margin improvement and earnings

growth story in CY15+, if the company were to gradually exit from
several slower growth and declining margin areas such as lower-end
campus switching, parts of SP video and collaboration, optical
transport, etc and razor focus on higher margin “software” and
“advanced services” opportunities in Private Clouds, Telco Clouds and
IOT (refer to our recent CSCO Growth Strategy note.
Our Hold rating on Cisco reflects our near-term caution on the company’s core
business (switching and routing in product transition mode) while remaining
constructive on CY15+ opportunities in IOT and product refresh cycles in
datacenter switching, security, carrier routing, etc.
CommScope
The Wireless business segment has been a key driver of CommScope’s overall
top line. And while there is nothing specific in Wireless that falls within IOT per
se, their DAS solution will be a key enabler of IOT, as it is puts the cellular
network closer to the user. We have discussed the possibilities of its DAS
solution, both its current one and its ION-e solution, in a recent S2N (S2N #497
– What the DAS market means for CommScope).
It is in the Enterprise segment where CommScope has made some interesting

acquisitions, mainly within the vein of IOT. Redwood Systems, an intelligent
lighting company, and iTRACs, a data center infrastructure management
platform, were both acquired when CommScope was held privately. We
discussed the potential for iTRACs in our Big Data section within the note. In
short, iTRACs has been thought of as the “autoplilot feature on a plane” for
data centers and we believe this management tool adds compelling value to
data center investments. With Redwood Systems, companies will be able to
measure temperature, light and occupancy with these low-voltage, connected
LED systems. While the market is likely limited to new construction, we
believe that most companies will understand the capex to opex calculus and
make the investment. However, it is a competitive market – Philips is a large
player in the space – but believe that the market is big enough, and growing
quickly enough, to support multiple players.
In short, the trends in IOT will impact both Wireless and Enterprise. While
Wireless has the general trend of densification working in its favor, it is likely
the Enterprise segment that will be impacted by IOT.
F5
Buy-rated F5 is our top midcap idea to play the near-term [CY15/16+] spending
on IOT – given our research noting that Network Intelligence and Security are a
Phase 1 priority in the multi-year rollout of IOT use cases in enterprise and
service provider verticals.
A third of the +$2B in incremental networking capex a year (DB view) on IOT
use cases could be utilized for Network Intelligence and Security solutions (we
note: Layer 4/7 capex is typically a third of datacenter networking capex). This
is basis for our view that the Layer 4/7 category leaders (FFIV; BLOX, etc) could
see modest TAM expansion in the $100s of Millions a year range from
enterprise IOT use cases such as Industrial Cyber Security, Smart Energy,

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Smart Retail, etc and also service provider IOT use cases such as e-Healthcare,
home automation, etc in the out quarters.
Specific IOT touch points and sales opportunities for F5 could be in the areas
of:
Rollouts of virtual ADCs and HW optimized ADCs in the IOT Datacenter Cloud
– for Network Intelligence and Security functions such as: 1) Application and
Network Firewalling; 2) Web Traffic Steering; 3) Per-Session IT Policy and
Bandwidth Enforcement, 4) Application- and Usage-Specific Billing Metrics,
etc.
F5’s Application Security and Network Firewalling SW Modules can scale to

100s of Gigabits of packet processing throughput (in comparison, we note that
many of F5’s security peers scale to 10s of Gb/s) for mitigating Distributed
Denial of Service [DDOS] attacks and sophisticated Web and application layer
attacks at corporate servers.
More recently, F5 has been offering a Cloud based subscriptions service

(leveraging the Versafe acquisition) for detecting and IT reporting of advanced
malware threats across IP connected devices – from mobile devices running
industry standard OS’ to industry vertical devices running Linux or Windows
OS.
From a security attach rate POV, it is our view that F5’s Layer 4/7 systems (BIG
IP and Viprion) could see the security SW modules attach rate scale from the
current +30% of HW platforms sold to around +50%, over the next few years.
Internet of Things use cases are a key catalyst for scaling the company’s
security solutions sales opportunities, in our view. This is given the
significantly higher number of security IT end-points in IOT use cases – which
could be the underlying basis for scaling the quantity and types of security
modules required to defend against a broad set of attack vectors in IOT Cyber
Security use cases.
F5’s Access Policy SW Module has an important role to play in controlling

end-user access to a wide range of datacenter application servers – at a fine
level of granularity – i.e. access control by user name, workgroup affiliation,
geographic coordinates, user context, etc.
For example: IOT sensors imbedded in various industrial objects can relay
security incidence monitoring events to F5’s Access Policy Module – and F5’s
TMOS SW is designed to cross-correlate across 1000s of individual security
incidence response and access control events – to generate security trend
analysis patterns, feedback to IT security policy design, etc.
F5’s iRules scripting framework has a core value proposition in IOT use cases –
given the relative ease at which simple English language IT and business
security policies can be defined and implemented in a matter of minutes – to
defend the enterprise architecture against a dynamic set of security threat
vectors – which by definition need a dynamic policy creation and
implementation framework (offered by iRules).
In summary, we believe that the low double-digit FY15 consensus product rev
growth expectations factors in mostly high single-digit growth in F5’s core
ADC business and few points of incremental growth from the Security and

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Telco use cases. IOT could be a secular upside driver to consensus product rev
growth expectations for F5 – especially as mainstream IOT use cases in Cyber
Security, Energy, Retail, Transportation, etc start to scale over the next few
years. Network Intelligence and Security are clearly high priority technology
spending areas in Internet of Things use cases, in our view.
Ciena
Buy-rated Ciena could benefit from sales of higher margin optical Ethernet
access products and optical network automation software tools to support IOT
Edge Cloud buildouts. We also note opportunities for Ciena’s Carrier Ethernet
solution and optical network management software tools in the Smart Energy
use case. Undersea cable – carrying optical Ethernet data traffic – is a relevant
use case for sales of Ciena’s carrier Ethernet switches at either ends of the
offshore and onshore optical WAN links. Ciena’s optical network management
SW could be used to dynamically provision optical network transport
equipment at either ends of an optical fiber link.
Infoblox

solutions – could secularly benefit from the IT spending on IP Address
Automation and DNS Security – needed for implementing “Cloud-scale”
Internet architectures in the Edge Cloud and Datacenter Cloud – two key
themes of our FITT.
We have a long view on Infoblox – noting that the company’s IP Address

Automation (DNS, DHCP, IP Address Management; collectively
IPAM) opportunity could meaningfully scale from – the current +25M
enterprise application server IPAM opportunity [refer to our BLOX coverage
initiation note for further color] to potentially offering IPAM capabilities for
100s of Millions of Internet Connected Objects in key enterprise and service
provider IOT use cases.
Infoblox’s GRID architecture – which helps to build a globally correlated view

of IP Address Automation – across the extended enterprise, is a key
competitive differentiator, in our view, for Infoblox’s design wins in key IOT
use cases (versus BLOX’s sub-scale peers).
On the DNS Security side, we believe that DNS Security is a need to have
(versus a nice to have) in IOT use cases, to safeguard DNS servers situated at
the enterprise’s infrastructure borders – i.e. at the network perimeter that
connects the enterprise network to the public Internet and to the company’s’
supply chain partners.
We note that a vast majority of enterprise DNS servers currently lack adequate
security mechanisms to safeguard the DNS servers from security attacks that:
Originate from the public Internet (e.g. DDOS attacks targeted at corporate
DNS servers);
Defend against security attacks that originate from malware-infected employee

PCs, smartphones, Tablets, etc, when the employee computing devices are
connected to trusted corporate networks.

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Infoblox recently introduced DNS Security appliances that defend against DNS
security attacks that originate from the “outside-in” and the “inside-out” – and
these DNS security appliances leverage live DNS reputation feeds to cross-
check all incoming and outgoing DNS queries against a constantly updated
live IP address and Web URL feed – so as to identify malicious URLs and
hacking attempts on a company’s DNS servers.
We estimate Infoblox’s DNS security opportunity for enterprise IT use cases

(including IOT use cases) in the mid $100s of million a year range – given our
view that DNS security is a next-gen security use case – and the market
opportunity for Next-Gen Security solutions in our view is in the +$2B a year
range (out of a +$7B a year spend on network security [Infonetics]).
We maintain our positive longer-term outlook on Infoblox – the stock trades in

the ~2.5-3x EV/Sales range – a discount to its small cap tech peer group [basis:
FY15 consensus view].
Juniper
We are cautious on Hold-rated Juniper in IOT networking buildouts. Juniper, in

our view, lacks a competitive best-in-class Enterprise Edge Cloud and
Datacenter Leaf and Spine Cloud switching portfolio.
Juniper is likely to play into a narrower set of opportunities in IOT, i.e. primarily
in out-year telco IOT use cases that require Juniper’s Contrail SW for service
creation on demand. For example: a telco could use the Contrail SW for
activating a series of Layer 2/7 virtual networking features within its datacenter
for automatically setting up a home automation service for an end-user who
signs up for the service via the carrier’s IOT web portal.
We see a limited role for Juniper in the access segments of IOT use cases, i.e.
in WiFi, campus switching or in campus and branch security. Our cautious
view is based on Juniper’s low single-digit market share in enterprise
networking and lack of meaningful competitive advantage versus market
leader Cisco across a wide range of IOT enterprise networking segments.
Riverbed
Hold-rated Riverbed could modestly benefit from enterprise IOT use cases in
CY15/16+, primarily in network performance monitoring by leveraging
Riverbed’s Cascade product portfolio. That said, we remain cautious on
Riverbed, noting +70% of Riverbed’s FY revs are exposed to a declining
growth WAN optimization (Steelhead) portfolio.
Cavium
While current levels suggest a neutral risk/reward equation – basis for our Hold
rating – given, stock trading at ~25x P/E for ~20% consensus CY15 rev growth
expectation, we have a constructive longer-term view on Cavium’s new multi-
core processors: specifically, Octeon3, Liquid IO and Neuron TCAM chips –
which are relevant for IOT enterprise and service provider use cases.
In the Datacenter Cloud, Cavium’s Liquid IO application acceleration

processors could benefit from IOT use cases such as Big Data Analytics,

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processing high volumes of aggregated and encrypted IOT sensor data (SSL
Offload, data compression, etc) – as HW acceleration add-ons in datacenter
servers, etc. Similarly, Cavium’s Nitrox processors fit into HW acceleration use
cases in Layer 4/7 ADC and Next-Gen Security appliances.
The Neuron TCAM chip could see potential design wins in high-end Terabit-
scale routers such as Cisco’s NCS, etc – which are likely to be used in service
provider IOT use cases such as for handling millions of IOT transactional
events in home automation, e-Healthcare, Smart Vehicles, etc.
For the present, we remain with our Hold rating on the stock – given the rich
trading multiple – and as we gain further field color on Cavium’s market
opportunity in mainstream IOT Datacenter Cloud use cases.
Ubiquiti
Uniquiti is able to proliferate a number of markets quickly, given its low cost
and network of distributors around the world. Most investors know the
company from its airMax and Unifi product lines; however, it has three other
platforms – airVision, mFi and EdgeMax. airVision was released a few years
ago and was riddled with issues that eventually tempered demand for the While we believe the devices
product. EdgeMax is new, but is purpose built for WISP use in its network
have meaningful utility, we
operating centers and access points and is not necessarily an IOT product.
believe their channel, and its
mFi, on the other hand, is Ubqiuiti’s foray into machine to machine
end-customer (as it stands
communication.
today) will likely not create
The mFi platform includes everything from smart power strips to sensors the demand necessary to
(motion, light, temperature and doors). While we believe the devices have make this platform a
meaningful utility, we believe their channel and its end-customer (as it stands meaningful contributor to the
today) will likely not create the demand necessary to make this platform a top line
meaningful contributor to the top line. If instead, these devices were easy
enough for a consumer to install, and available in known retail locations, our
sense is that the traction would be much more significant. As it stands, we see
it as more of a hobby of the WISP operator, or other tech savvy people.
Aruba and Ruckus
We grouped Ruckus and Aruba together here as there is not necessarily any
one product or platform directed at IOT with either company; however, both
should see a general uplift from the broad trend of connectivity, as well as
other trends which go along with this such as: 802.11ac adoption, location
analytics, BYOD, Hotspot 2.0 and cloud managed WLAN services. All of this
will play a role in bringing in faster wireless connectivity closer to the user.
Additionally, some IOT modules will connect via WiFi and will require a sort of
dynamic usage of the spectrum – it will be up to the AP to understand this.
This is where Aruba and Ruckus could differentiate their wares, as both have
distanced themselves so far by incrementally adding intelligence into their
AP’s and going further to integrate IOT elements would not be a reach for
either company. In short, we believe that these two will eventually be
beneficiaries of IOT, but it will likely not happen in the near term.

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Audience
Audience is known for its audio and voice processors. The company has
Samsung as a significant customer, as well as Chinese vendors like Lenovo,
ZTE and Xiaomi. The audio and voice processing unit will likely continue to
move alongside the trajectory of its OEM handset customers. But where
Audience could make an inroad into IOT is with its Voice Q and Motion Q
technologies, which wakes and sleeps a device based on voice and motion
recognition, thereby efficiently managing battery life. The company recently
demoed versions of the processor at the Consumer Electronics Show and at
Mobile World Congress. It will be integrated into some of its eS700 series of
processors, which will ship in the second half of this year. While it will likely
gain initial traction in the smartphone realm, we could see this being used in
remote controls, wearables, fitness and health devices, mobile computers and
other battery powered devices. Going back to our original thesis, while we
believe that it will be some time before this type of processing capability sees
significant growth, we do think that it will be eventually included in adjacent
markets and Audience could see meaningful upside as a result of this – from
our viewpoint, though, this would be a number years away.
Ixia
Ixia could see a modest set of opportunities in network performance visibility

monitoring in IOT use cases given our view that SDN controllers from Cisco,
etc could be cost-competitive alternatives for SW based network visibility
monitoring versus their HW based counterparts over the next few years.
Companies outside of our coverage area
2lemetry: 2lementary provides data management and analytics solutions for

IOT environments. It provides the middleware, development layer and cloud
services so that data generated in IOT can be managed and analyzed.
Affinegy: Affinegy manufactures products that provide network management

solutions for IOT, specifically as it relates to the home environment. Its network
management solutions are focused to support cloud based services in IOT
environments.
AT&T: Most recognize ATT as one of the leading carriers in North America. As
it relates to IOT though, the company provides IP-based communication
services to enterprises, an expanding business line for the company.
Additionally, it owns the largest Wi-Fi network in United States.
Beechwoods Software, Inc: Beechwoods creates solutions for the embedded

software market. As this relates to IOT, it helps companies implement ideas on
specific devices. The company got its start by helping DirectTV develop its set-
top satellite box.
Belkin: Belkin has an entire division called WeMo devoted to IOT, with
connected lighting and switches. While mostly known for its wireless routers
and computing peripherals, Belkin likely sees home automation as a key
growth area.

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CA Engineering: CA Engineering provides solutions related to storm water

management, wastewater design, water supply design and water resources
engineering.
Controlled Network Solutions (CNS): CNS has been providing hosting and IT
support to its customers that are operating in various industries such as
finance, healthcare and manufacturing.
D-Link: Similar to TP-Link, D-Link is a manufacturer of connectivity products

and often is able to design and manufacture them at compelling price points.
DoubleTwist: DoubleTwist developed a platform to deliver music in a device

agnostic manner. The company is writing to the AllJoyn protocol and is likely
going to be one of the earlier beneficiaries of the IOT idea.
Fon: Fon is WiFi product manufacturer and global WiFi network. The company
leverages the extra capacity of subscribers’ home wireless routers in order to
provide service for other Fon members, in the area. To date, Fon has wireless
capacity in 100 countries and over 7 million hotspots.
Haier: Founded in 1984 in China, Haier is one of the largest producers of white
goods in the world. It has 80,000 employees, five R&D centers and operates in
more than 100 countries. The company has a number of efforts to embed its
products with IOT capabilities; it was one of the first to sign up for
Qualcomm’s AllJoyn network.
Harman: Harman International Industries includes brands JBL, Mark Levinson,

Lexicon, Logic 7, Becker and Infinity. The company manufactures electronic
systems and audio products, as well as develops mobile applications. The
company will likely be a player in the early pocket of IOT investment – the
connected car.
HTC: HTC is a handset manufacturer which, given its reliance on Android OS,
has made strides in terms of IOT connectivity. The company has joined and is
an active member of the IOT AllSeen alliance.
iControl Networks: a software based home control platform for managing the
connected home. Applications include music, energy monitoring, lighting
control, traffic, weather and news alerts.
Imagination: The company provides various electronic goods manufacturers

with its System-on-Chip intellectual property (SoC IP). Its SoC IP powers some
of the more advanced electronic goods. For further information on this
company please contact Johannes Schaller.
Impinj: Impinj is a major provider of ultra high frequency RFiD solutions, which
are used to locate, identify and authenticate items for applications such as
retail inventory management, warehousing and logistics. The company was
founded in 2000 and has raised over $110 million in venture funding.
Jawbone: Jawbone has developed wearables and audio devices for over 10
years. The company has done well by designing products that appear sleek but
are also technologically innovative. The company’s products include fitness
wearables, wireless speakers and headsets. Most of its products operate via

6 May 2014
TMT
Bluetooth technology. The company has built a record of being first to market
but with products that are best in class.
Kii Corporation: Kii was formed by the merger of Synclore Corporation and
Servo Software in July 2010. The company created the Kii Platform, which
helps app developers by providing cloud technology solutions and other
development solutions.
LIFX: LIFX was Kickstarter project that raised $1.3 million in three days. It
produced an LED light bulb, equipped with Wi-Fi, which can be controlled by
use of its application.
LG: LG is one of the largest electronic goods producers in the world. Based in
Seoul, South Korea, its main product verticals are home appliances,
entertainment, energy solutions, air conditioning and semiconductors. The
company supported AllJoyn protocols in its most recent iteration of smart TV
releases and released a smart light bulb within the past two weeks.
Liteon: Liteon, a Taiwanese company, is a leading producer of optoelectronic

devices. The company develops products like photo-interrupters and photo-
couplers.
M87: M87 developed Routing at the Edge (RATE), which is a software solution
designed to move the intelligence to the device rather than the network,
thereby allowing the device to leverage the best connection, be it the macro
cell or another handset. The company is located in Austin Texas and has raised
$3 million in funding.
Metaio: Metaio is one of the leaders in augmented reality systems. We first

met the company at Mobile World Congress in Barcelona and were impressed
with their demos. Augmented reality has a growing number of use cases,
currently providing solutions like the placement of virtual Ikea furniture in the
house to understanding the elements of a car during repair. Over time, the
technology will increasingly leverage wearable technology, becoming more
energy efficient through the use of its cloud engine. All of this will help
augmented reality to become a more seamless experience and likely more
ubiquitous with time.
Moxtreme: Moxtreme designs products to help service providers and OEMS

manufacture products with smart connecting ability.
Musaic: Musaic is a London based company that produces wireless HiFi

systems centered on the ability to play music from Android devices, Apple
devices, Macs, PCs and other sources.
Muzzley: Muzzley provides a middleware in the cloud by the help of which

OEM manufacturers and service providers can create their own custom user
interface to control the connected devices in an IOT environment.
Panasonic: Panasonic has over 634 companies under its corporate umbrella,
and with that, designs and manufactures a broad range of electronic goods
under the Panasonic brand. The company has developed M2M and IOT
devices and chipsets, most recently releasing a multi-mode M2M chipset that
would allow devices to communicate autonomously over various wireless
protocols.

6 May 2014
TMT
Patavina Technologies: Founded in 2009, as a result of spin off of University of

Padova, Patavina Technologies provides system and software design services
to its customers. Its main product, ThinkIP, is a device controlling solution for
IOT.
Quirky: A different company, Quirky crowd sources ideas and then designs and
manufactures the best ones. It designs products across a number of verticals
(not necessarily all related to IOT) and has developed sensors and power strips
that have connectivity and leverage the IOT idea.
R/GA: R/GA is an accelerator with a sole focus on developing start-up

companies in the connected device space. The company has a number of large
clients (e.g. Google; Unilever) for which it helps develop connected devices.
Sears: Sears is one of the largest retailers in Canada and United States with
more than 3,900 stores, including specialty and full line retail stores. In some
product areas, the company manufactures its own products and in doing so,
has made inroads into IOT.
Silicon Image: Silicon Image provides connectivity technology and

semiconductor products for HD playback over consumer devices like TV,
tablets and smartphones. The company played a role with the establishment of
DVI and HDMI standards in the digital industry.
Silicon Labs: Silicon Labs is a semiconductor company, which designs

chipsets for sensors, portable devices and gateways. The company has an
extensive history of creating low-power processors for elements, which we
would now place into the IOT realm.
Skyworks: Skyworks is one company that is seeing early exposure to the IOT,
resulting in their Broad Mix business segment (infrastructure; connected home;
m2m; medical; auto) to become a main driver for overall growth despite it only
being 30% of the total business. The company had its solutions incorporated
into a number of products including TV’s, wireless lighting, auto navigation
assistance, intelligent thermostats and wearable medical solutions. The
company has front-end modules for WiFi 802.11ac, switches for remote car
entry, converters, touch screen drivers, amplifiers and other, unlicensed front
end modules (e.g. Zigbee for remotes and 900 Mhz for metering). All told, the
company’s analogue processors are seeing meaningful traction with IOT given
their price relative to performance.
Smartthings: With $15 million in funding, Smartthings designs and

manufactures a number of physical sensors, along with a gateway, for home
automation. The sensors include those for doors, locks, motion, lights,
damages and dangers and the hub controls all elements. Put together, they
allow a person to easily automate a number of home elements and do so in an
easy-to-use manner.
Sproutling: Sproutline is a startup THAT develops wearable monitors for

babies. It monitors a baby’s movement, heart rate, temperature, room’s
humidity level, light level and noise level.
The Sprosty Network: Sprosty provides technological support to firms engaged

in development of wireless solutions, emerging technologies and consumer
technology.

6 May 2014
TMT
Technicolor: Technicolor manufactures DVD and CD and provides content and

media services like visual effects, sound services, game design and animation.
In terms of IOT, the company has developed multi-screen, OTT, smart home
and ultra HD solutions.
TP Link: TP Link is best known for its inexpensive WLAN networking products,
which include switches, routers, ADSL, powerline adapters, networking
adapters and media converters. The company will likely integrate the
consensus protocol within its devices, and given its cost competiveness, will
be one of the main volume producers of IOT connected gateways.
Trimble: Trimble has long created devices that leverage wireless technology,
be it cellular, GPS, or WLAN, which are more effective and easier to use than
their older, analogue counterparts. The company makes connected devices for
industries such as agriculture, construction, transportation and geospatial.
Tuxera: Tuxera’s NTFS and exFAT solutions are designed for the file systems
space. Tuxera provides low power, high performance mobile and embedded
solutions. In 2012, BMW and Audi became the first cars to have Tuxera file
systems installed in them.
Two Bulls: Two Bulls develops mobile & web apps, augmented reality and
enterprise solutions. It is one of the preferred developers of Qualcomm for
augmented reality and is also a member of Apple Consultants Network.
Vestel: Founded in 1984, Vestal is a Turkey based company known for

manufacturing a wide range of consumer electronics. It is also engaged in the
development of software and technology related to consumer electronics and
multimedia communication.
Weaved: Weaved provides cloud services, mobile apps, software and

technology for devices in the IOT environment, essentially making it easier for
a device to become an IOT device. Weaved’s goal is to therefore quicken the
time-to-market for new products.
Wilocity – Founded in 2007, Wilocity is based in Israel. It is famous for its low
power 60 GHZ wireless chipset with data rates up to 7 Gbps. It provides
wireless connectivity and networking solutions with technological partners,
including Marvell Semiconductors and Qualcomm.
Winner Micro: Based in China, Winner Micro develops IOT centric wireless
communication chips and solutions, and does so for a variety of verticals
including home, medical and industrial fields
Withings: The company is focused solely on the medical devices market. To

date, the company has raised $34 million. Products range from a smart baby
monitor to a smart body analyzer. The company uses smartphones and
computers as bridges to the network and to date, have developed a network of
over 100 developer and device partners.

6 May 2014
TMT
Appendix 1
Important Disclosures
Additional information available upon request
Disclosure checklist
Company Ticker Recent price* Disclosure
Commscope COMM.OQ 27.84 (USD) 2 May 14 1,2,6,7,8
Cisco Systems CSCO.OQ 22.94 (USD) 2 May 14 1,2,6,7,8,14,15
F5 Networks FFIV.OQ 103.72 (USD) 2 May 14 2
Qualcomm QCOM.OQ 78.99 (USD) 2 May 14 2,6,7,8,14,15
*Prices are sourced from local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies
Important Disclosures Required by U.S. Regulators

Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States.
See Important Disclosures Required by Non-US Regulators and Explanatory Notes.
1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering
for this company, for which it received fees.
2. Deutsche Bank and/or its affiliate(s) makes a market in securities issued by this company.
6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this
company calculated under computational methods required by US law.
7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment
banking or financial advisory services within the past year.
8. Deutsche Bank and/or its affiliate(s) expects to receive, or intends to seek, compensation for investment banking
services from this company in the next three months.
14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company
within the past year.
15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received
non-investment banking securities-related services.
Important Disclosures Required by Non-U.S. Regulators

Please also refer to disclosures in the Important Disclosures Required by US Regulators and the Explanatory Notes.
1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering
for this company, for which it received fees.
2. Deutsche Bank and/or its affiliate(s) makes a market in securities issued by this company.
6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this
company calculated under computational methods required by US law.
7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment
banking or financial advisory services within the past year.
For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this
research, please see the most recently published company report or visit our global disclosure look-up page on our
website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

6 May 2014
TMT
Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the
subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive
any compensation for providing a specific recommendation or view in this report. Brian Modoff
Historical recommendations and target price: Commscope (COMM.OQ)

(as of 5/2/2014)
30.00 Previous Recommendations

4 Strong Buy
3
25.00 Buy
Market Perform
Underperform
2 Not Rated
20.00
1 Suspended Rating
Security Price
Current Recommendations
15.00
Buy
Hold
10.00 Sell
Not Rated
Suspended Rating
5.00 *New Recommendation Structure
as of September 9,2002
0.00
Oct 13 Jan 14 Apr 14
Date
1. 12/04/2013: Upgrade to Buy, Target Price Change USD22.00 3. 04/17/2014: Buy, Target Price Change USD28.00
2. 02/21/2014: Buy, Target Price Change USD24.00 4. 04/30/2014: Buy, Target Price Change USD30.00

6 May 2014
TMT
Historical recommendations and target price: Cisco Systems (CSCO.OQ)

(as of 5/2/2014)

12
Strong Buy
25.00
10 11 13 Buy
14
Market Perform
9 Underperform
5
4 Not Rated
20.00
1 6 78 Suspended Rating
Security Price
2 3
Current Recommendations
15.00
Buy
Hold
10.00 Sell
Not Rated
Suspended Rating
5.00 *New Recommendation Structure
as of September 9,2002
0.00
May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 May 13 Aug 13 Nov 13 Feb 14
Date
1. 05/12/2011: Hold, Target Price Change USD19.00 8. 11/14/2012: Buy, Target Price Change USD22.00
4. 11/10/2011: Upgrade to Buy, Target Price Change USD22.00 11. 07/01/2013: Buy, Target Price Change USD26.00
6. 05/10/2012: Buy, Target Price Change USD22.00 13. 11/14/2013: Downgrade to Hold, Target Price Change USD25.00
7. 11/04/2012: Buy, Target Price Change USD21.00 14. 02/13/2014: Hold, Target Price Change USD24.00

6 May 2014
TMT
Historical recommendations and target price: F5 Networks (FFIV.OQ)

(as of 5/2/2014)

6 Strong Buy
140.00
7 Buy
8 Market Perform
120.00 16 Underperform
4 5 17
9 Not Rated
15
100.00 10 11 Suspended Rating
Security Price
3 14
13
12 Current Recommendations
80.00 12
Buy
Hold
60.00
Sell
Not Rated
40.00 Suspended Rating
*New Recommendation Structure
20.00 as of September 9,2002
0.00
Date
9. 07/19/2012: Buy, Target Price Change USD136.00

6 May 2014
TMT
Historical recommendations and target price: Qualcomm (QCOM.OQ)

(as of 5/2/2014)

11
80.00 Strong Buy
10 Buy
5 9
70.00 Market Perform
8
4
Underperform
1 7 Not Rated
60.00 6
2 3 Suspended Rating
Security Price
50.00 Current Recommendations
40.00 Buy
Hold
30.00 Sell
Not Rated
Suspended Rating
20.00
*New Recommendation Structure
10.00 as of September 9,2002
0.00
Date
6. 07/19/2012: Buy, Target Price Change USD70.00
Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total 500
share-holder return (TSR = percentage change in 49 % 49 %
450
share price from current price to projected target price 400
350
plus pro-jected dividend yield ) , we recommend that 300 56 %
investors buy the stock. 250 42 %
200
Sell: Based on a current 12-month view of total share- 150
holder return, we recommend that investors sell the 100 2 % 32 %
50
stock 0
Hold: We take a neutral view on the stock 12-months Buy Hold Sell
out and, based on this time horizon, do not
recommend either a Buy or Sell.
Companies Covered Cos. w/ Banking Relationship
Notes:
North American Universe
1. Newly issued research recommendations and
target prices always supersede previously published
research.
2. Ratings definitions prior to 27 January, 2007 were:
Buy: Expected total return (including dividends)
of 10% or more over a 12-month period
Hold: Expected total return (including
dividends) between -10% and 10% over a 12-
month period
Sell: Expected total return (including dividends)
of -10% or worse over a 12-month period

6 May 2014
TMT
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consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the
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EU countries: Disclosures relating to our obligations under MiFiD can be found at
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Registration number - Registered as a financial instruments dealer by the Head of the Kanto Local Finance Bureau
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Group Chief Economist
Member of the Group Executive Committee
Guy Ashton Marcel Cassard Richard Smith and Steve Pollard

Global Chief Operating Officer Global Head Co-Global Heads
Research FICC Research & Global Macro Economics Equity Research
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Deutsche Bank

Vijay Bhagavath, Ph.D

Kip Clifton, CFA

F.I.T.T. for investors

North America Industry Date

Not quite the Jetsons yet, but places Research Analyst

Primer and roadmap for investment Companies Featured

IOT Vision .......................................................................... 11

IOT as a Platform ............................................................... 47

Are Networks Ready? ........................................................ 54

Page 2 Deutsche Bank Securities Inc.

We wish to thank Vinod Khurana and Mohd-Tabish Shams of Evalueserve for

Deutsche Bank Securities Inc. Page 3

Where we stand today

Page 4 Deutsche Bank Securities Inc.

Figure 1: Hype versus Reality

Time 2017 – 2020

Figure 4: Places to invest

Hype cycle Figure 3: Current IOT use cases

Companies are Retail inventory management

2017 – 2020 Vehicle/smart car

Deutsche Bank Securities Inc. Page 5

Potentially trillions at stake, but over the long term

While IOT is an evolving opportunity, our IT conversations suggest a potential

Page 6 Deutsche Bank Securities Inc.

Qualcomm will be a key beneficiary of IOT, which is not an extraordinary

Deutsche Bank Securities Inc. Page 7

Page 8 Deutsche Bank Securities Inc.

Riverbed, noting +70% of Riverbed’s FY revs are exposed to a declining

In the Datacenter Cloud, Cavium’s Liquid IO application acceleration

Aruba and Ruckus

Deutsche Bank Securities Inc. Page 9

Page 10 Deutsche Bank Securities Inc.

The fundamental difference between an Internet of Things infrastructure and a

An Edge Cloud Node is an important element between the Datacenter Cloud

1. Offering “localized” compute, networking, security, and storage

Deutsche Bank Securities Inc. Page 11

Figure 5: Internet of Things – A Big Picture View

Internet of Things [IOT]

+$19T Economic Value Creation

Page 12 Deutsche Bank Securities Inc.

Industry Vertical Operational Efficiency Potential Opex Savings

Smart Energy 1% reduction in capital +$90B

1% fuel savings +$66B

1% fuel savings +$30B

Connected Transportation 1% improvement in +$27B

Source: Deutsche Bank and GE IOT Study Data

The $19 Trillion in IOT value creation potential is based on a bottom-up

Deutsche Bank Securities Inc. Page 13

1. Asset Utilization ($2-3T range) – generated from structurally lower

Page 14 Deutsche Bank Securities Inc.

Key Building Blocks of an

Legacy Datacenter (Client/Server Applications) Datacenter Cloud (Web 2.0 / SaaS)

Limited Scale App Specific QoS; Big Data Analytics;

Network Firewalling; DNS Application + Network Security;

Assumes Low-Latency; Edge Cloud

(e.g. Cisco ISR 819; HP MSR;

Client Devices IOT End-Points

Wireline & Mobile Devices Wireline & Mobile IOT End-Points;

Source: Deutsche Bank

Deutsche Bank Securities Inc. Page 15

In comparison, most current-generation Internet end-points leverage

As a side comment, Internet round-trip delays in the 10s of millisecond