The R&D Tax Aspects of Machine-to-Machine (M2M) Innovation
Machine-to-Machine-Innovation
Machine-to-machine, or M2M, is a
broadly-defined term to describe the computer and networking
technologies that are integral to the Internet of Things
(IoT); technologies that allow both wireless and wired systems
to communicate with other devices of the same type. Examples
of M2M systems include utility smart grid systems, logistics
and tracking systems, and other monitoring and control
systems. As computing power, networking, and data analysis
become available to everything and anything around us, so does
the opportunity for innovation in a wireless world.
The Research &
Development Tax Credit
Enacted in 1981, the Federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include employee wages, cost of supplies, cost
of testing, contract research expenses, and costs associated
with developing a patent. On January 2, 2013, President Obama
signed the bill extending the R&D Tax Credit for 2012 and
2013 tax years.
M2M in the Internet of
Things
Machine-to-machine is core to the Internet
of Things - a world where even seemingly mundane products and
objects can communicate to networks through on-board wireless
devices. In the Internet of Things, companies and users can
have total quality monitoring and control over inventories,
equipment, possessions, and household products. An object with
a device would capture an event and relay it through a network
to an application for processing.
Machine-to-Machine
Prospects
The U.S. and China are strong and growing
markets for smart devices, with smart devices and RFID both
being key to the Internet of Things. The following paragraphs
look at some of the prospects for innovation and growth that
currently exist in M2M.
Various Markets See Potential for
Growth
In general, marketing forecasts place the value of the
wireless M2M market at $196 billion in revenue by 2020,
following a CAGR of 21% between 2014 and 2020. With forecasts
predicting about 12.5 billion devices out there by 2020, the
market opportunities and challenges will be huge regardless of
where in that range the truth falls.
A New Level of Total Quality
Management
Commercial M2M is being used for inventory monitoring and
control as well as asset tracking. The logistics industry
makes heavy use of M2M and wireless technologies to track
packages and equipment, and maximize efficiency in the fleet.
As more devices become "smart", one can expect that companies
will want to track and monitor new company assets.
The industrial sector can see vast improvements contributing
to total quality management techniques. Robots and other
automated systems can be tagged to create monitoring and
control systems that actively send and respond to changing
conditions in real time.
One example of this kind of system can be found in high tech
mining operations. Ventilation-On-Demand systems work in
underground meshed networks to report events that go on inside
the mine, increasing safety and optimization. Miners wear an
M2M sensor in their equipment that sends an alert if anything
dangerous happens. In addition, should the worst happen, the
M2M technologies put in place can afford a snapshot.
Conserving Resources
In the agricultural industry, M2M products and services are
used to track livestock and monitor and control the efficiency
of watering, planting, and sunlight on crops. AgSense, LLC is
a company based in Huron, South Dakota that provides remote
monitoring equipment to monitor different conditions in crops
in order to save water, resources, and power using GPS and
sensor data.
In the infrastructure industry, M2M deployment in the form of
energy smart grids could use M2M technologies to reduce carbon
emissions and energy use through efficient monitoring and
control of electrical grids. As the Internet of Things adds
newer tags, devices, objects and equipment, smart grids may be
able to efficiently manage nearly all aspects of power and
utility grids to meet quality and supply demands while
conserving energy, carefully consuming resources, and
controlling pollution and emissions. The Department of Energy
is already offering incentives in various forms to innovate
and implement smart grids through initiatives and task forces.
Some companies already offer a business-level solution to
facility management. Pacific Controls Inc. offers
IntelliCommand software for facility management which can be
used with M2M systems in order to provide around-the-clock
remote facility monitoring and control - these systems work to
maximize building efficiency and reduce waste.
Across all industries, the gains in efficiency for machines,
products, and assets would not only contribute to greater
quality, control, and monitoring, but also contribute to
reduction in greenhouse gases and carbon emissions through
reduction in resource usage. The Carbon War Room has estimated
the abatement of greenhouse gases to be seven times greater
than the carbon footprint of the infrastructure and logistics
to support it - the costs are clearly outweighed by the
benefits.
Looking Good - Working Smart
Wearables are quickly becoming a popular consumer item and are
gathering a lot of attention. Wearables are mobile devices you
can wear. Wearables are an emerging market, but leaders in
consumer electronics have brought products to market that are
developing and growing the market for these new mobile
devices.
Google, Sony, Apple, and Samsung all have big stakes in the
wearable devices market. Google's Google Glass continues to
make waves in building a future of augmented reality and
mobile computing. Sony, Apple, and Samsung are all competing
in the market of smartwatches and accessories. Google is
hoping that its Android Wear platform enables innovation and
new products. These devices rely on second and third party
innovations and products to succeed, so application developers
and product designers are both key participants of these new
products. Currently, these devices work mostly with your own
mobile device, but will probably move towards controlling and
interacting with other devices as product lines expand.
Intel is taking a more abstract approach to wearables by
researching and developing truly wearable technology - clothes
and materials that people can wear that aren't just devices or
toys. Intel is working with its finance and technology
partners to create garments that can gather contextual
information from the area around it. Intel also hopes to
expand wearable technology to allow people to harvest energy
from their environment.
Networking
Infrastructure Opportunities
Considering the large amount of expected
growth in smart devices and objects contributing to IoT, there
are plenty of challenges that exist to be overcome in M2M
network infrastructure, applications and security.
The extraordinary amount of data generated and processed by
the Internet of Things will require innovations and
investments in expanded infrastructure, sensor technologies,
software applications, security and control systems, as well
as handling the up-front costs that currently give pause to
businesses considering if M2M devices and applications would
be helpful to them.
Another of the primary challenges to widespread adoption of
M2M products and services is the lack of common standards and
application frameworks. The Carbon War Room discusses
solutions to this and other M2M challenges in a document they
researched and published in 2013. Through common standards and
protocols, the market of products and services would be easier
to develop for and feature interoperability between systems,
networks, and across other boundaries.
Conclusion
All of the opportunities within the
machine-to-machine and Internet of Things developments
described above may offer opportunities for R&D.
There may be related expenses that qualify for the Research
and Development Tax Credit. As technology progresses to
shrink computing and networking devices, the opportunity for
new products and services opens to anyone with the drive and
vision to create them.
