IoT, How Does it Work?

IoT, how does it work?

We have established in a prior post that Internet of Things (IoT) is data pulled securely in real time from devices or machines (“things”) and then transmitted over the Internet, transformed into valuable information, and applied to business decisions. This valuable information can then be used to drive win-win outcomes for vendor and customer alike.

Let’s look at how IoT works from a 50,000 feet view.

Think about that definition above…None of the technology is new or revolutionary. Sensors have been around for a long time, though they are ever improving. The Internet and the cloud have been available for some time now. Data analysis is nothing new, though machine learning is undergoing huge advances these days. Therefore, IoT is simply a progression of the Internet, where the Internet is no longer only accessible via computers but now also extends out to devices. The technology to do that has been around for years; understanding that technology will help us see where the value of IoT comes from.

The technologies involved are:

  • Sensors and embedded systems on the things you measure in your company or on the things you measure in your customer’s environment
  • Data that comes from those sensors and embedded systems
  • Networks over which that data is transmitted
  • Software used to collect, coordinate, process, store, and present the data
  • External systems from which other data is collected which will add value to the sensors sourced data
  • Analytics for transforming all of the data into valuable information
  • Security to protect the data and all related systems

All these technologies come together to create an IoT solution (i.e., a collection of devices, sensors, embedded software, networking and communications protocols, security protocols, cloud hosting and storage, software applications, analysis tools, and presentation of information to users in mobile or web applications).


Let’s take backup power generators as a very basic example. If you were the service manager of a company that manufactures backup power generators you would want to see data about all the generators you service, and see alerts where there may be an issue in the next 2 months.

In this example, the sensors might provide data about the running temperature, power draw of the starter, time to start the engine, fuel tank level, and a few other critical factors. The generator might be set to automatically startup every week or month to perform some automated tests ensuring it is in good working condition. Those sensors would be connected to a central local gateway which caches the data. That gateway might make a cell connected call to get a secure connection to the Internet. The gateway then sends data over the Internet to the IoT software for collecting, storing, and processing the data. Then when you, as the service manager, open a web browser to your IoT software you will see information which provides a prediction that a certain part, maybe the starter, is exhibiting issues which are a leading indicator of failure in 2 months. You know then that it’s time to roll a truck or call a local service repair technician.


There is a wide variety of technologies that must be combined to make an IoT solution which delivers valuable data to the end user. The funny thing is that most if not all these technologies have been around for a while. It seems that these technologies have become inexpensive enough and easy enough to work with to allow companies to combine them in a cost-effective manner to drive valuable results.

An interesting thought is that IoT is merely a tool. It is not the end game. The end game is the valuable information the IoT solution provides, not the technology that delivers it. Therefore, be mindful of not focusing on the technology too much and losing site of what’s more important, the valuable information. That valuable information is what then benefits customers and vendors in a business relationship.