What is an IoT Device?

An Internet of Things (IoT) device is an internet-connected object that collects and exchanges data with other devices and systems. Often, an IoT device uses sensors to gather data on itself or its environment and sends this information to an IoT platform that orchestrates the collection and analysis of data from many devices. Organizations deploying IoT devices use analytics to generate insights that improve decision-making, enable remote control over the device, or trigger an automated response.

What is an example of an IoT device?

The IoT is a network of uniquely identifiable endpoints, or “things”, that communicate without human interaction using IP connectivity.

From a consumer perspective, common IoT devices include items such as smart refrigerators, home security sensors, connected lights, thermostats and doorbells. These devices enable consumers to monitor the status of appliances and locations remotely, and automate decision-making and actions. Consumers are now familiar with connected medical sensors, fitness trackers, real-time inventory tracking and delivery drones.

IoT devices used in a business context share many features, but the applications of these devices are specific to each industry. IoT devices used in industrial operations are categorized as Industrial IoT (IIoT) devices and are used to track both people and machines across processes and operations. Data gathered often includes pressure, vibration, light, heat and moisture measurements, which can serve as indicators of machine performance or to look at operations from a systems perspective. This data can be processed using IoT analytics to generate insights that help improve operations.

The range of applications for IoT devices is as wide as the industries using IoT solutions. In the healthcare industry, providers utilize IoT devices for patient monitoring to help collect patient metrics, keep track of medical equipment, and monitor refrigerated vaccines. Manufacturers, utilities, and energy companies are using IoT devices that make equipment smarter to meet their objectives: reducing unplanned downtime, improving safety, delivering higher-quality products, and providing a foundation for sustainability initiatives.

Increasingly, manufacturing equipment providers are leveraging IoT devices to create smart, connected products. Information and insights feed a range of use cases that improve the customer experience, spanning remote monitoring, smart field services, performance management and even new business models such as Equipment-as-a-Service.

Learn how IoT devices are leveraged in industries such as manufacturing, retail, healthcare and more

How do IoT devices work?

Embedded sensors track the performance of a physical device that is IP-enabled, which can range from a wearable device, to a vehicle, to industrial equipment. The sensors collect real-time data, such as temperature or pressure, as the device executes its function. On-board processors condition the data to be transmitted, or in some cases perform more complex data analysis.

The IoT device’s internet connection allows it to be managed and controlled remotely and enables a consistent exchange of the collected data. The data is then shared to other IoT devices or transmitted through a gateway to be analyzed either locally (i.e. edge computing) or on the cloud.

IoT devices generally feed information into an IoT platform running a rules engine. A rules engine is a system that makes a series of decisions to determine how to react to a certain piece of data, or a certain situation involving information from multiple IoT devices. It is an effective way to model complex logic in a relatively simple way, so business users can set rules and outcomes without relying on programmers.

In an industrial environment, IoT devices may communicate anomalous temperature or vibration in a piece of equipment. This can be used to trigger immediate technician attention, or feed into a maintenance model that helps the equipment operator to identify future maintenance needs, preventing unplanned downtime.

How do IoT devices work with an IoT platform?

An IoT platform is an application that provides tools and capabilities to connect every “thing” in an IoT ecosystem. By providing functions such as device lifecycle management, device communication, data analytics, integration, and application development, an IoT platform harmonizes the many moving parts that contribute to your IoT system.

The IoT platform allows users to configure IoT devices, collect data from connected devices, process and analyze the data, and visualize insights. This information can then be used by a variety of stakeholders in myriad including detecting patterns, identifying problems and spotting inefficiencies. IoT platforms support application building for developing, deploying, operating and extending custom IoT applications. And IoT platforms help organizations capitalize on the value of data pulled from IoT devices by integrating it into other applications, cloud services and systems used across the enterprise for even greater insights and sophisticated automated workflows.

An IoT platform can operate on-premises, on the cloud, or at the edge. IoT edge computing is an increasingly popular approach for IIoT users. By running workloads at the edge—on systems close to the IoT devices, rather than transmitting data to be processed on the cloud or on-premises hardware—organizations can improve reaction time as well as reducing bandwidth and load on back-end servers. This approach providers a greater degree of autonomy to equipment.

IoT devices are integral to the value of an IoT platform. They provide the data foundation on which organizations can generate insights into operations. Without the right IoT devices—for example, if a device is not supported by a particular platform, costs too much to provide an acceptable ROI, consumes too much power, is difficult to connect, or presents other challenges—users will be left unable to realize their planned use case.

How IoT devices connect

From connecting IoT devices for the very first time to retrieving real-time insights into device performance, the method of connectivity acts as the foundation for managing, monitoring, controlling and communicating with your IoT devices.

IoT devices can communicate in dozens of different ways, using hundreds of different protocols. How they communicate depends on what they are, where they are, what other devices and systems they need to talk to, and what they have to say. There’s no single best protocol, which is essentially the common “language” used to route messages from one IoT device to another. The right choice is always dependent on the application’s specific needs, including the coverage, bandwidth and power consumption your IoT project requires.  

There are two main protocol layers that are important for IoT devices. These protocols are the set of rules that govern the communication between devices.

The network layer protocol involves choosing a communication medium. Common network layer protocols include ZigBee, Bluetooth, Ethernet, LoRa/LoraWAN, and WiFi.

The application layer, on the other hand, is the interface between the IoT device and the network with which it must communicate. The application layer structures data formatting and presentation, serving as the bridge between what the IoT device is doing and how it hands off the data it produces to the network. Application layer protocols important to IoT devices include MQTT, HTTP, OPC UA, and LWM2M, among others.

IoT gateways are used to access devices within a local network from the internet and let them speak to the IoT platform. These gateways process the incoming data, translate it into a unified format and route it to the internet server.

The gateway can also translate inputs from an IoT platform and send it to the relevant device, which allows the device to execute the required action.  

What are business use cases for IoT devices?

Bega Cheese, one of the largest dairy producers in Australia, wanted to make the supply chain process—milk’s journey from truck to supermarket—faster, safer, more efficient, more cost effective and less susceptible towaste. To do this, the company utilized IoT devices attached to various machines and components throughout the operation.

By deploying approximately 1,000 sensors and related IoT devices in dairy farms and trucks, Bega could use real-time data to truly analyze the company’s supply chain, both inbound and outbound.

These sensors monitor milk quantity, temperature and quality. Proximity sensors detect tanker truck arrivals and departures for dynamic scheduling. Sound and current transformers and sensors monitor critical events in the milk pick-up process, and environmental sensors check for milk supply forecasting.

Using Software AG’s Cumulocity IoT platform, the sensor data is analyzed to offer Bega useful and accurate information that provides real-time visibility and insight into their operations, further allowing Bega to curate highly accurate milk-production forecasting applications.

This gives Bega the crucial information needed to make the milk’s journey a lot less perilous—ensuring customers get the freshest pint of milk possible.

Customer Stories
See more innovative business use cases for IoT devices

IoT device challenges

While IoT devices are incredibly useful in both personal and business use cases, challenges still remain when it comes to the complexity of IoT device data, management and connectivity.  

1. Data complexity and costs

IoT devices collect and send massive volumes of data to servers. This can make it challenging to transmit data cost-effectively. The variety of data entering an IoT platform can result in complex datasets that must be homogenized before it can be analyzed to derive insights that inform business decisions.

The volume of data, and the complexity of data, can make it difficult for organizations to fully leverage their IoT devices and their capabilities. In addition, there are often high costs associated with deploying, configuring, and maintaining IoT devices on the environments that support them. Many organizations are embracing IoT edge computing to remove the cost barriers associated with large fleets of IoT devices—to say nothing of the low latency required for performance optimization of industrial equipment.

2. Device management inefficiencies

For IoT at scale, you’ll need the ability to manage thousands, hundreds of thousands, even millions of devices. Registering and managing these devices throughout their lifecycle, from monitoring and maintenance through to retirement, is a massive challenge if you don’t have the right IoT platform. If you fall behind, you run the risk of having IoT devices running outdated (and vulnerable) software, lose connectivity, and have maintenance and upkeep distract you from customer-facing innovations.

3. Self-built platforms are inflexible

The costs to build IoT capabilities in-house require substantial investments of both time and resources to stand up and maintain. A homebrew IoT platform might solve one specific challenge well, but likely introduces technical complexity that makes it difficult to launch other initiatives.
Additionally, many IoT platforms aren’t designed to scale with the organization, meaning they reach a limit on the number of devices they can connect or amount of data they can reasonably collect, process and store.

For this reason, many organizations are finding the fastest, more sustainable approach is to “buy and build” their IoT platform—buying a pre-built system that offers a foundation on which to build differentiating capabilities and services.

4. Security

According to Beecham Research, a leading technology research and analysis firm that specializes in IoT, nearly three quarters of IoT projects won't be considered successful. One reason why IoT projects fail: IoT security. Without strong security, an IoT device and its data is vulnerable to hacks and data breaches that make private information public and place business at risk.

Security is another reason organizations should think twice before running on self-built IoT platforms. It’s a challenge to build a new platform securely in the first place, and even harder to ensure it keeps up with evolving technology and security standards.

Why do IoT projects fail—and how can you beat the odds?

How to secure IoT devices

An IoT security solution is essential given the nature of how an IoT device functions and communicates data. A hack or data security breach threatens the welfare and reputation of your company, your customers, and your business partners. Here are some ways you can protect your IoT device and its connections.

  • Secure APIs: Ensure communication with APIs are secure and data cannot be compromised while stored or in-transit between the cloud, devices and the local network.
  • Physical security: Physically secure unauthorized access to IoT devices by monitoring occurrences such as an activation of tamper devices.
  • Network security: Ensure efficient protocol is in place to secure communication and data transfer from devices to applications.
  • Application security: Follow effective practices for application-level hardening.
  • Access control: Establish an authentication and authorization process and create permissions and roles for devices and groups of devices.
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Benefits of a powerful IoT device solution

The right IoT device solution is a force multiplier. With tools for connecting, integrating and monitoring your devices, your ability to build smart equipment using IoT devices grows exponentially. You can turn real-time data into insights, opportunities and innovations that enable you to evolve new business models and deliver new customer-facing services.

Software AG’s Cumulocity IoT platform enables businesses to quickly deploy IoT applications, collect and act on data and integrate IoT with a wide variety of devices and enterprise applications.

The Cumulocity IoT platform allows you to connect and monitor equipment to deliver new services to customers, understand and streamline business operations, or to deliver scalable IoT services to internal and external customers. It is designed to give you complete business visibility and control of all the remote assets in your organization, from the system level down to individual machines and individual sensors. With low-code / no-code tools to build IoT applications and analyze data, it empowers your entire organization to take advantage of IoT insights.

Core capabilities

Access countless opportunities with your IoT devices—with just one click.


To grow your business on the Internet of Things, you need to connect any “thing”—and fast. Quickly connect any asset with our self-service IoT platform.


Manage all your IoT devices from one place, from planning, monitoring and maintenance—through to retirement.


Integrate now and capitalize on all the data you’re pulling in from IoT devices everywhere.


Develop IoT apps faster on our application enablement platform to save developers significant time, and enable non-developers to build solutions with intuitive drag-and-drop tools.


Access key data, discover insights and make decisions in real-time. The more widely accessible your insights, the greater their value across the entire enterprise.


With Cumulocity IoT, you can run IoT anywhere: any cloud, on-premises and at the edge (and in any combination).

We know IoT projects can be complicated. That's why the Cumulocity IoT platform removes technical complexity from IoT projects, enabling business leaders to focus on true business outcomes. As a leading self-service IoT platform, top rated by independent analysts with fast ROI, the Cumulocity IoT platform is a truly rapid self-service approach on a resilient platform you can trust.  

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