Internet of Things and Beyond: Cyber-Physical Systems

Kate Carruthers
May 10, 2016


The new industrial revolution is a cyber-physical systems revolution. The Internet of Things (IoT) forms a foundation for this cyber-physical systems revolution. It is driving the biggest shift in business and technology since World War II.

"Cyber-physical systems (CPS) are physical and engineered systems whose operations are monitored, coordinated, controlled and integrated by a computing and communication core. Just as the internet transformed how humans interact with one another, cyber-physical systems will transform how we interact with the physical world around us."1

It has been said that the world is on the brink of a fourth industrial revolution,2 and that this new industrial revolution is a cyber-physical systems (CPS) revolution. IoT will form a key foundation for this cyber-physical systems revolution. The emergence of IoT is the beginning of a revolution that will have as great an impact on society and the way people and business are organized as the computer revolution did in the post-World War II era.

Machines now interact and interface with other machines as well as human beings in new ways. The combination of artificial intelligence (AI), machine learning, the cloud, and IoT means that systems of machines will be able to interact with human beings, learn about them and adapt to their wants and needs.

These systems will also be able to apply the principles of behavioral economics3 and enable human behavior to be 'nudged' in predetermined directions. Governments around the world are already setting up behavioral insight teams – also known as 'nudge units'.4 Further, marketers are already applying the principles of neuromarketing,5 where consumers' sensorimotor, cognitive, and affective response to marketing stimuli are being studied with a view to driving consumer purchasing behavior based upon these studies. It is likely that we will see autonomous machines adopting the use of these kinds of techniques to drive human behavior in predetermined ways. This trend is emergent, with fitness wearable devices, such as Fitbits6, using social sharing and gamification to assist users in achieving fitness goals.

Other technologies supporting the evolution of IoT and the emergence of CPS include software-defined networks7 and software-defined storage.8 This drives automation of repetitive tasks, even for manual labor like bricklaying9 – consumer products as well as industrial output.10 This is reshaping industrialization, and regulatory frameworks for IoT are now beginning to emerge.11 Issues like privacy, data ownership, and security will remain important for CPS.

With the emergence of IoT and CPS, consumers face new challenges with their personal data. The new devices, services, and products collect data in volumes hitherto unimaginable. The volume of data being collected about consumers and their activities is reshaping how business is done. For example, insurance companies can offer insurance premiums based, not upon actuarial assumptions, but upon real-time data provided by consenting human beings as they go about their daily activities.12 This combination of real-time data and analytics enables pricing models and risk profiles to change subject to actual results in real time.

What will change?

The emergence of the industrial internet is tied to the rise of networked industries. This convergence of industrial, digital, analytics, and connectivity is different, it is:

  • Shaped by a design focus;
  • Enabled by ubiquitous networks;
  • Driven by application ecosystems;
  • Enabled by different modalities such as flying drones, wearables and ingestible technologies;
  • Reshaping industries through the adoption of autonomous computer systems, robotics, and 3D printing; and
  • Changing the nature of employment and restructuring the economy.

Advances in IoT and related technologies make it possible to deploy CPS within which information from all related perspectives can be monitored and synchronized between the physical manufacturing locations and computational spaces. With real-time data analytics capabilities together with software-defined infrastructure, networked machines will be able to perform more efficiently, collaboratively and resiliently. Thus, machines will connect autonomously to each other as and when required without human intervention. This trend is transforming manufacturing industries, leading some to call for a clear definition of CPS.13 IoT and CPS build upon well-established protocols14 and use enterprise grade cloud hosting. Tools such as AI, machine learning, and data analytics are also critical,15 as are mesh networks and peer-to-peer connectivity.16

Societal and business impact

Identity, access, privacy and data security remain critical for IoT and CPS. However, as these systems become ubiquitous, understanding what autonomous systems are doing, recording and deciding in relation to human beings will emerge as a problem area, together with the commercial decisions made based upon this information.

There will be a shift from a product delivery model to a delivering products plus services model, and this is driven from a one-off product sales based model to an ongoing service delivery model. We are already seeing this shift from delivering a one-time only product to providing ongoing services to support connected products. This means that companies will to need to change the way their organization is structured to service customers and products on an ongoing basis.

"Business models will have to change. We used to build them [products], ship them and forget about them until we had to service them…"

"We've moved to a new world where we have to ship and remember."17

The sharing economy18 drives different utilization models for capital equipment, and it is already starting to change the way consumers and businesses provide access to capital equipment. Uber and Airbnb have enabled people to obtain greater utilization from their assets – cars and houses – to derive additional revenue from an existing asset. This idea of allowing other users to access existing capital equipment is growing, even in the manufacturing sector.19

Devices will increasingly communicate and operate autonomously and independent of human oversight. There was a recent example of a motor vehicle involved in an alleged hit-and-run accident where the car reported the accident.20 The driver of the vehicle did not intend to report that accident, yet her connected vehicle did so autonomously. Thus in this connected world there are new implications for businesses and consumers. However, the reality of this connected world is only now starting to be perceived by society.

The regulatory landscape for IoT is evolving and regulators struggle to understand and support the rapid emergence of new services, products, and business models.21 The regulatory landscape includes licensing and spectrum management, switching and roaming, addressing and numbering, competition, security and privacy. At present IoT is governed by a plethora of existing regulations, which may or may not be a good fit. A US Senate Committee on Commerce, Science and Transportation hearing noted that IoT is more than merely about consumer protection and privacy. It is also significant in industry and agriculture and that strong security in all devices is critical: "We have to design security in at the beginning and throughout a connected device's lifecycle,” said Intel IoT Group Vice President and General Manager Doug Davis."22


CPS include traditional embedded and control systems, and these will be transformed by new approaches from IoT. However, the challenge for IoT and CPS remains security and risk management. As less rigorously controlled systems are linked then risk becomes distributed and the provenance of software components becomes difficult to trace. This gives rise to questions around risk management and liability for breaches or damages. As demonstrated in the 2014 Target hack,23 via their heating, ventilation and air conditioning provider's system, third party systems are now attack vectors. Further, regulators have not yet addressed this issue of distributed or daisy-chained risk arising from connected systems. Attacks on connected systems from nation-state actors and non-state actors are also an increasing threat: "According to Crowdstrike researchers, targeted intrusions will continue to proliferate and nation-states will use espionage to collect information from any organization with valuable data that will serve the country's national interests."24 The big challenges that are raised by IoT and CPS center on risk, security, geopolitics, trust, and privacy.



1. Rajkumar, Ragunathan Raj, Insup Lee, Lui Sha, and John Stankovic. "Cyber-physical systems: the next computing revolution." In Proceedings of the 47th Design Automation Conference, pp. 731-736. ACM, 2010.

2. Schwab, Klaus, "The Fourth Industrial Revolution: what it means and how to respond", World Economic Forum, 15 December 2015, (retrieved 30 December 2015).

3. Thaler, Richard H. and Sunstein, Cass R., Nudge: Improving decisions about health, wealth, and happiness, Yale University Press, New Haven, CT, 2008.

4. Rutter, Tamsin "The rise of nudge – the unit helping politicians to fathom human behavior," The Guardian, 25 July 2015, (retrieved 30 December 2015).

5. Lewis, David & Brigder, Darren (July–August 2005). "Market Researchers make Increasing use of Brain Imaging", Advances in Clinical Neuroscience and Rehabilitation 5 (3): 35+.

6. (retrieved 30 December 2015).

7. Kirkpatrick, Keith. "Software-defined networking." Communications of the ACM 56, no. 9 (2013): 16-19.

8. Ouyang, Jian, Shiding Lin, Song Jiang, Zhenyu Hou, Yong Wang, and Yuanzheng Wang. "SDF: Software-defined flash for web-scale internet storage systems." ACM SIGPLAN Notices 49, no. 4 (2014): 471-484.

9. Redrup, Yolanda, "Robot bricklayer that can build a home in two days impresses on ASX debut", The Australian Financial Review, 18 November 2015, (retrieved 30 December 2015).

10. Regalado, Antonio "GE’s $1 Billion Software Bet: To protect lucrative business servicing machines, GE turns to the industrial Internet", MIT Technology Review, 20 May 2014, (retrieved 30 December 2015).

11. Spencer, Leon "IoT could 'smash' Australia's regulatory framework", ZDNet Australia, 25 March 2015, (retrieved 30 December 2015).

12. Olson, Parmy "Wearable Tech Is Plugging Into Health Insurance", Forbes, 19 June 2014, (retrieved 30 December 2015).

13. Lee, Jay, Behrad Bagheri, and Hung-An Kao. "A cyber-physical systems architecture for industry 4.0-based manufacturing systems." Manufacturing Letters 3 (2015): 18-23.

14. Protocols include Wi-Fi, RFID, Zigbee, Bluetooth, 2G, 3G, 4G

15. Kambatla, Karthik, Giorgos Kollias, Vipin Kumar, and Ananth Grama. "Trends in big data analytics." Journal of Parallel and Distributed Computing 74, no. 7 (2014): 2561-2573.

16. Wark, Tim, Peter Corke, Pavan Sikka, Lasse Klingbeil, Ying Guo, Chris Crossman, Phil Valencia, Dave Swain, and Greg Bishop-Hurley. "Transforming agriculture through pervasive wireless sensor networks." Pervasive Computing, IEEE 6, no. 2 (2007): 50-57.

17. Robinson, Teri, "IoT security forcing business model changes, panel says", SC Magazine, 22 October 2015, (retrieved 30 December 2015).

18. Zervas, Georgios, Davide Proserpio, and John Byers. "The rise of the sharing economy: Estimating the impact of Airbnb on the hotel industry." Boston U. School of Management Research Paper 2013-16 (2015).

19. Anagnost, Andrew "Not Just Airbnb and Uber: Why Manufacturing Is Already a Sharing Economy", Autodesk LINE/SHAPE/SPACE, 8 December 2015, (retrieved 30 December 2015).

20. Osborne, Charlie "Car calls 911 after alleged hit-and-run, driver arrested: A Ford safety feature has also turned out to be a way to track badly-behaved drivers", ZDNet, 7 December 2015, (retrieved 30 December 2015).

21. Soltani, Ashkan "What’s the security shelf-life of IoT?", Federal Trade Commission, 10 February 2015, (retrieved 30 December 2015).

22. Bracy, Jedediah "Senate Committee Explores Internet-of-Things Regulation", The Privacy Advisor, 12 February 2015, (retrieved 30 December 2015).

23. Weiss, N. Eric, and Rena S. Miller. "The Target and Other Financial Data Breaches: Frequently Asked Questions." In Congressional Research Service, Prepared for Members and Committees of Congress February, vol. 4, p. 2015. 2015.

24. Vicinanzo, Amanda "Targeted Intrusions By Nation-State Actors Pose A Major Cyber Threat Going Into 2015", 12 February 2015, Homeland Security Today, (retrieved 30 December 2015).



Kate CarruthersKate Carruthers is a technologist, marketer, entrepreneur, and educator. She has extensive experience in senior executive roles for diverse organisations such as General Electric, AMP, Westfield, and NSW Treasury. Currently, Kate is Chief Data Officer for UNSW Australia, and she is also an Adjunct Senior Lecturer in the School of Computer Science & Engineering at UNSW Australia. Kate is also a member of the Telstra Industry Advisory Board and the New South Wales Government Data Analytics Centre Advisory Board.

Previously Kate lectured in postgraduate business and accounting at Macquarie University and taught diploma level courses in business and management. She is a long-standing member of the Institute of Electrical & Electronics Engineers and was a member of the Advisory Board for the Faculty of Informatics at the University of Wollongong for a number of years before joining UNSW Australia.




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