I have been writing a lot about the Internet of Things (IoT), and mostly I have been writing cautionary things. While I believe there is great potential in IoT, and eventually we will wire up everything, I also think it is important to be realistic about how long it will take for this to become a sizable business. I also think that there is not going to be a single, unitary “IoT” with a common operating system. Instead, I think there will be many different, vertical applications with each industry taking a different approach. IoT systems in factories are going to be very different than IoT systems in ‘smart cities’ or vast oil fields.

So if you are want to invest in IoT today, where do you look? I noted a few weeks ago that private equity investors are extremely hungry for IoT investments, but public market investors are a bit more cautious because there are very few IoT investment options available. For companies who want to participate in this market, there is an even bigger challenge. They have to make real-world product bets that may or may not be desirable. The level of customer demand for full-scale IoT systems is very small, and most deployments are still very custom in nature. To make matters worse, there are a half dozen (at least) competing software layers that seek to unify this IoT.

I have recently begun to work on a project to square this circle. I think it is important to identify all the industries that are working on some version of IoT and then try to calculate the value of each opportunity. For companies looking to participate in this, the next step would then be to find the sales partners and systems integrators most likely to influence IoT purchase decisions in each field. This is not a small project, but I think it is something that companies need to do in order to avoid chasing after too many dead-ends. There will be a lot of those, so it makes sense to be very careful in allocating investment dollars.

So by my count here are the 24 industry verticals most likely to seek IoT of some sort, sorted alphabetically:

This is a big list. There are a lot of categories on here, and I am probably missing a few. It is also a vague list, many of these could be further subdivided. So I offer it up as a good starting point for further discussion.

And I think there are a few things that really stand out. First, there are only three categories on here in which the consumer is going to be the decision maker in a purchase – the two Consumer segments and Automotive. I will contend that there are probably $1 billion businesses in each of these. (Let’s call that a statistical prediction, some will be smaller, but many will be much, much bigger than that.) The bulk of the opportunity in IoT will be in non-consumer applications.

The second point I want to make is that many of these categories contain very different types of systems. For instance, “Energy” includes oil fields, solar plants, and household-level distribution meters. Each of those will be built by different companies, that today operate in discrete industries. On the other hand, many of these systems will overlap. Retailers will want to connect with their logistics providers.

IoT is going to mean a lot of different things to different people. At some level, many of these problems will be solved by software. For instance, retailers already have complex systems managing their inventory. IoT for them will mean some new plug-in to those systems.

Further down, it is easy to see how components suppliers can get excited by this. Once some of the big industries start to deploy IoT systems there is the potential for massive units. Imagine the day when retailers start to install sensors on every shelf to track inventory on the store floor. This Quora Post says there are 1.1 million retail outlets in the US today, multiplied by 100 sensors in each, or 1,000. But then there is that tricky word – imagine. We could imagine big numbers for all of these verticals. But I used retail as an example for a specific reason – RFID. The dream of connecting every shelf and every product has been around for a long time. Ten years ago there was a big wave of investment in RFID companies, very little of which has yet to pay off. I offer this cautionary reminder not because I am skeptical about IoT, but to remind people to be careful to pick their battles wisely. Many years ago I was offered a job with an RFID company. At the time, it sounded like a great role at a high-growth company. I turned it down for geographic reasons, and I am glad I did, as that company no longer exists. Someday, RFID will arrive, as will IoT. For companies making investment decisions today, someday is not a workable timeline.

IoT will bring a big opportunity someday, but today companies will need to think very carefully about where they invest.