Report: Economic Research and Analysis of the National Need for Technology Infrastructure to Support the Internet of Things
The Internet of Things (IoT) promises to disrupt and transform every aspect of our lives, whether at home, at work, at school and at play. Its impact will be felt across industry, academia, and government, while creating profound economic, societal, and national security implications.
In response, IoT has been identified as an area of focus for the federal “Lab to Market” process, from research and development investments to technology transfer. In September 2019, the United States National Institute of Standards and Technology (NIST) awarded Strategy of Things a cooperative agreement grant to assess the potential economic impacts, resulting from federal research investments, of meeting the Nation’s need for technology infrastructure to support IoT.
Report Description
Economic Research and Analysis of the National Need for Technology Infrastructure to Support the Internet of Things (January 2025)
The study examines the current state of IoT technology infrastructure across nine industries and identifies key cross industry technology gaps. The study includes an economic analysis of the impact of addressing these gaps where appropriate with a combination of federal policies, initiatives and investments. It recommends areas for federal research investments to strengthen U.S. competitiveness and national security.
The industries studied include agriculture, manufacturing, construction, insurance, retail, healthcare, transportation and logistics, smart cities and renewable energy.
The report is organized into three parts: Executive Summary (22 pages), Main Report (154 pages), and Appendices (557 pages).
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Study Objectives and Approach
The objectives of this study are:
- Assess the current state of the IoT technology infrastructure covering research, development and adoption across industries
- Analyze these findings and identify technology gaps
- Perform an economic analysis to understand the industry impact of addressing those gaps
- Recommend potential areas for federal IoT-related research investments that will enhance U.S. competitiveness and national and economic security
- Communicate these findings across the federal government, academia and industry through a variety of channels, including publications, speaking engagements, journals, online and digital means
Nine industries were studied as part of this research. These industries include agriculture, manufacturing, construction, insurance, cities, transportation and logistics, retail, healthcare and renewable energy.
The overall industry and technology research was conducted through secondary research, interviews and a survey. Secondary research consisted of literature reviews of government, scientific and industry publications, reports and online blogs. Interviews added context to some of the information collected from secondary research and the survey Interviews were selective and targeted a small number of people. The survey reached around 450 people and focused on a small set of specific questions. Secondary research consisted of examining a variety of government, industry and academic sources, including blogs, white papers and published research papers.
IoT is not one but rather a diverse set of technologies. To facilitate information collection for the underlying technologies that support and enable the operation of IoT, a six category framework of Hardware, Software, Applications, Networking, Systems and Standards was used for data collection and the gap analysis. Each of the six technological components was further assessed for comprehensiveness. Subcategories were introduced for each of the six technology areas to better capture the complexity and granularity of that area. This provided 25 single technology components.
The study’s analysis provides a technological ranking of the 25 single technology components based on their economic impact adjusted by the role of the public sector. These rankings are then used to inform the decision on the most important IoT infrastructure gaps that have the potential to be remedied by public investment in the United States.
Key Findings
The research suggests ten key findings. These highlight both technological and non-technological challenges in IoT development as well as opportunities for public sector investment to enhance U.S. competitiveness and drive economic growth.
Objective | # | Finding |
Objective 1. Assess the current state of IoT technology across industries | 1 | IoT is envisioned to evolve in four distinct stages, with each new stage delivering increased capability and benefits. The four stages are: Stage 1: Things become “smart”, Stage 2: AI algorithms take action, Stage 3: Outcomes and Utilities, and Stage 4: Hyperconnected autonomy. |
2 | AI offers the potential to deliver transformational value to IoT in several different ways, including the efficient analysis of large volumes of data, autonomous operations, and facilitates interoperability, cybersecurity and network operations. | |
3 | Non-technological challenges are slowing the adoption, operation and realization of the value IoT brings to the economy. These include change or adoption resistance/slow adoption, the digital skills gap, legacy infrastructure, data ownership, industry structure, regulatory and financial factors. | |
Objective 2. Identify technology infrastructure gaps | 4 | IoT is hindered by eight common technology challenges that vary by industry. These are interoperability, cybersecurity, AI, data management, privacy, edge computing, devices/hardware and connectivity. |
5 |
There are three types of IoT technology infrastructure gaps. Core gaps are foundational technological gaps that hinder the operation and scaling of the Internet of Things across all stages of the IoT evolution. Intelligence gaps hinder data processing and analytical capabilities to create an autonomous and intelligent IoT. Hyper-Deployed gaps hinder the development of a future infrastructure to support a massively connected (hyperconnected) and autonomous IoT ecosystem across the economy. |
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6 |
Our research identified the following technology infrastructure gaps:
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7 | IoT is made of a diverse set of underlying technologies. Our research identified four technologies that industry felt were the most important areas appropriate for public sector investment. The four public sector investment areas are: (1) Hardware: IoT Sensors, (2) Standards: Interoperability, (3) Systems: Security and (4) Software: Data Collection. | |
Objective 3. Perform an economic analysis to understand the potential impact on the national economy of the government appropriately addressing those gaps | 8 |
The economic model allocated a nominal public sector investment of $10 million distributed across the nine industries for each single technology component. The allocations were made to provide the maximum benefit to the economy based on the role of the public sector, the importance of the single technology component and the likely future value of IoT in that industry. The analysis considered a $10 million investment in each of the four single technology components specified in the 25 level IoT single technology taxonomy. The investments over the nine industries generated a long term cumulative revenue that ranges from $269 million for an investment in Software: Data Collection to $578 million for an investment in Systems: Security. These investments created a corresponding economic surplus, ranging from $72 million (Software: Data Collection) to $150 million (Systems: Security). A nominal public sector investment of $10 million in each one of the core and intelligence gaps is associated with a long-term cumulative revenue for each gap addressed. The long-term cumulative revenue generated varies by gap, from $548 million for Privacy to $889 million for Data Management. Similarly, these investments create a corresponding economic surplus for each gap, ranging from $149 million (Privacy) to $239 million (Data Management). |
9 |
The allocations based on the role of the public sector, the importance of the single technology component and the likely future value of IoT led to different allocations of the $10 million investment in each industry for each technology infrastructure gap. For example, the analysis estimated that 36.8% of the $10 million nominal research investment in interoperability be allocated to the healthcare industry while only 1.1% be allocated to the renewable energy industry. This is largely driven by the substantially higher economic value of IoT to the larger healthcare industry compared to the renewable energy industry. |
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Objective 4. Recommend potential areas for federal investments | 10 | Five broad areas were identified that provide opportunities for the federal government to consider addressing the Core, Intelligence and Hyper-Deployed gaps identified in Finding 6. These areas are technology development, commercial enablement, market adoption, lead-by-example and economy wide benefits. Each gap has a different combination of possible opportunities specific to the nature of the gap, its technological maturity and other factors. |
Top Cross Industry IoT Technology Infrastructure Gaps
Our research study identified eleven technology infrastructure gaps that hinder the development, adoption and operation of IoT in the U.S. economy and society. These gaps were identified using a framework developed to analyze and map to one of three gap categories (Core, Intelligence and Hyper-Deployed) which are aligned with the stages of IoT evolution to guide prioritization. Core gaps are foundational technological gaps that hinder the operation and scaling of the Internet of Things across all stages of the IoT evolution. Intelligence gaps hinder data processing and analytical capabilities to create an autonomous and intelligent IoT. Hyper-deployed gaps hinder the development and operation of a future economy with billions of interconnected devices and systems communicating and collaboration with each other.
Economic impact of addressing the IoT technology infrastructure gaps
In quantifying the economic impact of addressing the IoT gaps, our study employed the perspective of federal government executives planning research investment decisions. These executives face several questions, including:
- “If I had to invest a limited amount of money for research, what gaps do I spend it on?”
- “How and where should I allocate that investment to maximize its impact?”
- “How can I minimize the overall risks to my investments?”
Our study employed a portfolio investment approach to address these questions. Our economic analysis provided a directional estimate of how public sector investments could be allocated to produce revenues and profits (economic surplus) from a nominal $10 million public sector investment.
The table below shows the indicative revenues and surpluses of a nominal $10 million investment in each of the IoT technology infrastructure gaps corresponding to the Core and Intelligence gap categories. Our economic analysis shows that a nominal $10 million investment to address interoperability will yield a long-term cumulative return of $650 million and an economic surplus (profit) of $162 million.
Gap | Investment ($m) | R&D to Revenue | Revenue from investment ($m) |
Gross Margin |
Surplus from Revenue ($m) |
Core: Interoperability | $10.0 | 1.5% | $650 | 25% | $162 |
Core: Privacy | $10.0 | 1.8% | $548 | 27% | $149 |
Core: Security | $10.0 | 1.8% | $566 | 27% | $150 |
Core: Connectivity | $10.0 | 1.2% | $822 | 23% | $189 |
Intelligence: Data Management | $10.0 | 1.1% | $889 | 27% | $239 |
Intelligence: Artificial Intelligence (Trust) | $10.0 | 25% | $670 | 25% | $167 |
Intelligence: Intelligent Devices | $10.0 | 1.6% | $626 | 25% | $158 |
The table below shows the indicative results for the $10 million public sector investment to address the core gap of interoperability, with the investment allocated across the nine industries based on percentages determined from our economic model. This investment allocation provides the maximum economic benefits to the national economy. Similar results for the other core and intelligence gaps are included in the body of the report.
Industry | Investment ($m) | R&D to Revenue | Revenue ($m) | Gross Margin |
Surplus from Revenue ($m) |
Agriculture | $1.38 | 0.8% | $177 | 14% | $24 |
Construction | $0.85 | 0.8% | $109 | 23% | $25 |
Renewable Energy | $0.11 | 0.8% | $15 | 40% | $6 |
Insurance | $0.40 | 0.8% | $51 | 31% | $16 |
Healthcare | $3.68 | 8.3% | $44 | 52% | $23 |
Manufacturing | $1.30 | 2.3% | $56 | 35% | $20 |
Retail | $1.16 | 0.8% | $149 | 24% | $36 |
Smart Cities | $0.59 | 2.3% | $26 | 29% | $7 |
Transportation/Logistics | $0.53 | 2.3% | $23 | 21% | $5 |
Total | $10.0 | $650 | $162 |
The table below shows the indicative allocations of a $10 million nominal investment to address each of the seven gaps. Our economic model predicts this allocation will result in optimal outcomes for the national economy.
Industry | Core: Interop. | Core: Privacy | Core: Security | Core: Connectivity | Intelligence: Data Management | Intelligence: AI | Intelligence: Devices |
Agriculture | $1.38 | $0.93 | $1.06 | $3.40 | $0.00 | $1.44 | $1.34 |
Construction | $0.85 | $0.31 | $0.27 | $0.00 | $0.00 | $1.08 | $1.03 |
Renewable Energy | $0.11 | $0.11 | $0.13 | $0.00 | $0.00 | $0.15 | $0.15 |
Insurance | $0.40 | $0.65 | $0.55 | $1.17 | $0.00 | $0.43 | $0.29 |
Healthcare | $3.68 | $4.27 | $4.06 | $0.00 | $0.00 | $3.29 | $4.37 |
Manufacturing | $1.30 | $1.26 | $1.24 | $5.43 | $4.64 | $1.54 | $1.07 |
Retail | $1.16 | $0.92 | $1.05 | $0.00 | $5.36 | $0.89 | $1.06 |
Smart Cities | $0.59 | $0.77 | $0.80 | $0.00 | $0.00 | $0.84 | $0.41 |
Transportation/Logistics | $0.53 | $0.80 | $0.84 | $0.00 | $0.00 | $0.34 | $0.28 |
Total | $10.00 | $10.00 | $10.00 | $10.00 | $10.00 | $10.00 | $10.00 |
Areas of Opportunity for the Federal Government
In many cases, such as with core and intelligence gaps, there are significant existing industry efforts to address the gaps identified in each of the three categories. For example, there are numerous industry efforts supporting Standards Development Organizations to develop a variety of standards across many market sectors. In addition, industry participants are developing commercial solutions to address a variety of gaps. However, many of these gaps are too broad, complex and challenging for industry, academia or government to address on their own. Each stakeholder plays a vital and complementary role.
Our research proposes a framework to examine government opportunities to address IoT technology infrastructure gaps identified in this research. The framework focuses on five areas that the U.S. federal government may consider to facilitate the resolution of the IoT technology infrastructure gaps.
Each of the five areas contains specific tools, capabilities and means that the federal government can employ to address these gaps. The list is representative rather than comprehensive. The specific gap, the industries it affects and the state of maturity of the technologies will determine the specific combination of these areas that are deployed to address the gap.
While these areas and capabilities are not new, government leaders and policy makers would do well to consider these capabilities as part of a broader portfolio of capabilities to provide a whole-of-government approach to more effectively address IoT technology infrastructure gaps. Key reasons to support this approach include:
- IoT faces a variety of technological and non-technological challenges. Both must be addressed to facilitate its continued development, adoption, operation and value realization.
- IoT technology infrastructure gaps fall into three categories. Different strategies and approaches are needed to address each category.
- The federal government has a comprehensive set of capabilities that is well suited to support a whole-of-government portfolio approach to addressing the technological gaps and non-technological challenges hindering IoT.
- An investment portfolio approach informs IoT research funding priorities and offers the potential to maximize economic outcomes on an economy wide basis.
Key Recommendations
Based on a review of the gaps, the economic analysis and the portfolio of possible opportunities for the federal government to address these gaps, we make the following six recommendations to address the high level findings and infrastructure gaps identified in the research.
Recommendation |
Description |
Areas of research investments
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Consider research investments for the IoT technology infrastructure gaps informed by this study. These are:
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Whole-of-government portfolio approach |
Consider the findings and results in this report to inform federal IoT related research and development, investment, planning and policy considerations from a “whole-of-federal government” perspective. Furthermore, consider using a portfolio management approach to plan, guide and track the direction and implementation of investments and initiatives to address the gaps. |
Extend future studies to other strategically important industries |
Consider building on this research by extending the study to additional industries, including those that are strategically important or emerging in importance. These may include mining and mineral processing, aerospace and defense and consumer packaged goods. This enables the portfolio approach to be broadened to additional economic sectors. |
Periodic refresh of economic analysis |
Refresh the economic analysis on a periodic basis to inform future federal research investments and initiatives as IoT evolves. Future refreshes of the research should consider technological advancements due to current federal investments, new emerging technologies and updated economic models based on the evolution of IoT. This provides the necessary information to assess the performance of the research portfolio. |
Study convergence of AI with IoT |
Consider a future study to understand and quantify the economic and societal impact of the convergence of AI with IoT (AIoT), to create the AIoT-enabled economy. |
Disseminate findings to industry and academia |
Disseminate the findings of this report to industry and academia. Industry and academia should consider the findings, find opportunities and form strategic partnerships to collaborate with the federal government and agencies to address the gaps identified in this report. |
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Additional Information
- Industry Week magazine article: "Where is IoT headed? NIST looks at gaps in infrastructure, research".
- Video Interview of Research Findings Interview at CES 2025
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