From an industry perspective, manufacturing, utilities and transportation will be the top three verticals using IoT in 2015 – all together they will have 736 million connected things in use. By 2020, the ranking will change with utilities in the No. 1 spot, manufacturing will be second and government will be third, totaling 1.7 billion IoT units installed. “Government will take the No. 3 spot as it invests in smart street and area lighting for energy saving reasons,” said Mr. Tully. “Utilities will move to the No. 1 position because of investment in smart meters.”

Connected things, such as automated teller machines and airline check-in machines, have previously existed. But, new and novel devices, and many ordinary objects, are also being reinvented with digital sensing, computing and communications capabilities. This functionality provides both new and previously passive objects with a "digital voice", and the ability to create and deliver an information stream reflecting their status and that of their surrounding environment. Such developments radically change the value proposition, creating new services and usage scenarios and driving new business models.

It is likely that within the next few years, some level of built-in intelligence and connectivity will be regarded as standard, and this will rapidly filter down to mainstream products and services. “However, CIOs must understand that the most disruptive impact and competitive threats — and, equally, the greatest competitive opportunities — arise not from simply digitalizing a product or service, but from creating a new business model and value proposition,” said Steve Prentice, vice president and Gartner Fellow.

“Organizations must straddle the tension of all the information available from smart things by balancing their desire to collect and analyze it with the risk of its loss or misuse,” Mr. Prentice said.

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