how will internet of things, mobile internet, data
TRANSCRIPT
How will Internet of Things, mobile internet, data analytics and cloud transform public services by 2030?
techUK Public Services 2030 Conference
4 March 2015
CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited
Andrew Goodman, McKinsey & Company
McKinsey & Company | 1SOURCE: McKinsey Center for Government
Governments must do more… … with less
Demographic changesmean public services are evolving as populations age
Emerging global interconnectivity requires increased coordination
Increasing public sector complexity from cross-cutting issues
Rapid technological innovation raises citizens’ expectations
Macroeconomic vulnerability and uncertainty
Unsustainable debt burdens driven by healthcare, pension, and economic stimulus
Pressure for public sector productivity improvement
Winning the war for top talent as the workforce ages and the skilled labor market tightens
Increasing natural resource constraints
Need for transformative innovation in government
Governments will need to do more with less over the next decade
McKinsey & Company |
Twelve potentially economically disruptive technologies
SOURCE: McKinsey Global Institute analysis
Autonomous and near-autonomous vehicles
Renewable energy
Advanced oil and gas exploration and recovery
Advanced robotics
Cloud technology Advanced materials
3D printingThe Internet of Things
Energy storageAutomation of knowledge work1
Next-generation genomics
Mobile Internet
2
1 Includes Data Analytics
McKinsey & Company |
By 2025, these technologies could have economic impact in the trillions$ trillion, annual by 2025
Impact from other potential applications Low High
Range of sized potential economic impacts in each category
IT and how we use it
Changing the building blocks of everything
Rethinking energy comes of age
Machines working for us
0.2–0.6
Automation ofknowledge work1
Energy storage
Autonomous and near-autonomous vehicles
0.2–0.5
5.2–6.7
0.2–1.9
Advanced robotics
0.1–0.6
1.7–4.5
3D printing
0.7–1.6
Renewable energy
Next-generationgenomics
0.1–0.5Advanced oil and gasexploration and recovery
Advanced materials
0.2–0.3
Internet of Things 2.7–6.2
Cloud technology 1.7–6.2
Mobile Internet 3.7–10.8
SOURCE: McKinsey Global Institute analysis
What does this mean for the public sector?
3
1 Includes Data Analytics
McKinsey & Company |
Big data has already helped transform several industries in the private sector
Food / agriculture
Financial Services
Granular POS data drives changes to merchandising, marketing
Sophisticated machine-learning algorithms predict future purchases
Regulators make data public at scale
Transaction data enables segmentation, evolution of highly targeted products
Government and other players provide reporting and prediction data and services
Innovation (e.g., genetically modified seeds) bends cost curve and changes playing field
Retail / grocery
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�4SOURCE: McKinsey analysis
AUTOMATION OF KNOWLEDGE WORK - DATA ANALYTICS
McKinsey & Company | 5
The relevance of big data in the public sector will hinge on gaining access to larger datasets in the private sector
AUTOMATION OF KNOWLEDGE WORK - DATA ANALYTICS
adds ~12 terabytes daily
transfers ~19 petabytes over its networks daily
processes ~24 petabytes daily
Relative size of data processed or stored by organizations
SOURCE: OECD; Twitter; AT&T; Google
< 1 terabyte of data stored, total
McKinsey & Company | 6
Application of data analytics in the public sector could help to significantly reduce rates of fraud and error
AUTOMATION OF KNOWLEDGE WORK - DATA ANALYTICS
Selected analytical techniques Relevance in the public sector
Text mining
Machine Learning
Network analysis
Geospatial analysis
▪ In 2013 the National Fraud Authority estimated that the UK government loses in excess of £15 billion a year through tax fraud, and more than £7 billion in expenditure fraud and error through improper payments
▪ The US Government has identified 13 ‘high-error’ programs with annual improper payments in excess of $750m – some have improper payments rates in excess of 20%
▪ Several advanced analytics techniques have been used to improve compliance and recovery by insurers, payors and tax authorities
SOURCE: National Fraud Authority; PaymentAccuracy.gov
ExamplePublic SectorApplication
McKinsey & Company |
Projected growth in the Internet of Things Key concepts
7
More objects are becoming embedded with sensors and gaining the ability to communicate – the physical world is becoming an information system
INTERNET OF THINGS
SOURCE: MGI, Company Annual Reports, Capital IQ, Machina, Expert Interviews, Global Insight, Census
1 Personal computers, tablets, and smartphones excluded
Billions of connected end-points
3.6
201817
2.9
16
2.3
15
1.8
14
1.3
2013
1.0
▪ The Internet of Things is an ecosystem includes data sources (sensors) and other devices embedded in the physical world connected by networks to data visualization and analytic computing resources
▪ Connected end-points in the IoT can provide information on identity, location, status, and instructions
▪ In many industries (e.g. GE aircraft engines), IoT concepts and devices have been used for 20 years
▪ While consumer products (e.g., wearables) are a focus of media attention, 70-80% of total value of the IoT lies in enterprise applications
McKinsey & Company |
RFID tags Relevance to the public sector
RFID tagging has been widely used in the private sector, but its use in public sector procurement remains limited
SOURCE: McKinsey analysis 8
INTERNET OF THINGS
▪ RFID tags can be reused as new information can be over-written
▪ Readiness exceeds sight range (can be read through walls, ceilings, etc.)
▪ Multiple items read at a time (hundreds in seconds)
▪ Identifies one specific unit of product. Like a Passport or Driver License, it is unique
▪ RFID tagging has helped private sector firms to increase the accuracy of inventory tracking by 25%+
▪ Use of passive and active RFID tags can help to reduce inventory loss and enable data-driven supply chain optimisation
▪ The US Department of Defense has used RFID tags in its supply chain since 2005 and now tags more than 15,000 cargo loads a week
▪ Despite pilots dating to the 1990s, use of RFID in the government supply chain is still limited compared to the private sector
ExamplePublic SectorApplication
McKinsey & Company |
San Francisco’s SFpark initiative optimizes parking spot utilization and reduces congestion through GIS sensors
SOURCE: San Francisco Municipal Transport Agency
SFPark is a parking system that:
▪ Collects real-time information about where parking is available
▪ Adjust prices of parking at different locations dynamically, according to demand
▪ Reduces traffic congestion by decreasing the number of drivers circling and double-parking and ensures drivers willing to pay a premium are more likely to find a convenient spot
▪ Central database monitors parking occupancy, transport officals analyses historical parking occupancy and usage patterns by location to make data-driven pricing decisions
▪ Price revisions are readily communicated to the public
▪ Rates are adjusted no more than 50 cents per hour down or 25 cents per hour up, and no more often than once per month
▪ Embedded real-time sensorsidentifies parking lots that are available
▪ Drivers can easily visualize parking availability and pricesonline and via smartphones to plan their journeys
9
INTERNET OF THINGS
ExamplePublic SectorApplication
McKinsey & Company |
Consumers are increasingly demanding mobile devices…
… and will have multiple connected device in the near future
SOURCE: Cisco Traffic forecast; SA; Interviews; Strategy analytics, WSJ press article, Team analysis
Asia-Pacific
Western Europe
0.9Middle East/Africa
1.5
Latin America 2.1
Eastern Europe 2.2
4.4
North America 5.8
Japan 5.4
Global mobile device salesmillion units
54
0
66
20
230
130
510
190
+35%
+25%
1,460
+25%
+20%
+15%
2020
2010
2005
Laptops
Smartphones
Tablets
Internet devices per person 2015E; units
Adoption of mobile devices is growing at double-digit rates – mobile devices have become more ubiquitous than land lines
MOBILE INTERNET
10
McKinsey & Company |
Estonia’s Mobiil-ID System Selected uses
11
Mobile devices could help to provide an integrated solution to citizen identification, authentication and verification
MOBILE INTERNET
▪ Estonia has one of the most advanced and widely used e-government systems in the world – almost 100% of the population have an electronic ID
▪ Mobiil-ID can be used on any smartphone or tablet and replaces a traditional electronic ID card
▪ With Mobiil-ID, citizens can access public e-services, authenticate their identity, and provide digital signatures for transactions, public service registration and contracts
▪ The government has made Mobiil-ID’s digidoc libraries available to developers to catalyse private sector uptake
SOURCE: Public sources; McKinsey analysis
ExamplePublic SectorApplication
McKinsey & Company |
There has been a fundamental shift from a “build model” to a “consume model” in Enterprise IT, giving rise to Cloud Service Providers
Legacy Archi-tecture
Cloud
PrivateCommunityHybridPublic
SaaSIaaS PaaS BPaaS
Cloud services are fundamentally changing IT consumption model …
…giving rise to the Cloud Service Provider segment …
… and creating risks & oppor-tunities for traditional players
SOURCE: McKinsey Cloud Service Provider Initiative
Business processes
Software applications
Development platform
IT infra
CLOUD
12
McKinsey & Company | 13
Moving to a modern cloud-based environment could help government departments realise IT savings of up to 40%
CLOUD
Comparison of monthly per-desktop TCO for desktop environment(% cost, normalized to benchmark of 100%)
88
32
15
2014
66
4244
111419Other
-42%
User support(L1 – L3
helpdesk)
Hardware 109
188
Software / services
Gartner 2013 TCO benchmark
100
27
Government - cloud based environment
Government - prior to cloud transformation
Savings primarily driven through significantly reduced software/services and user support costs, reflecting the centralised support and deployment of updates and apps in a cloud environment
SOURCE: Gartner; Mckinsey analysis
ExamplePublic SectorApplication