United States: Risk And Opportunity With The Industrial Internet Of Things

Last Updated: October 24 2018
Article by David T. Doot, Steven A. Cash and James B. Blackburn, IV


The Industrial Internet of Things (IIoT) has increased the connectivity, and correspondingly, the productivity and efficiency of the systems that it brings together. The growth of IIoT has resulted in benefits to the industrial supply chain, such as greatly improved efficiencies in utility systems. However, those benefits have been paired with a commensurate increase in risk, most notably the vulnerabilities presented by systems that have become ever more communicative. Before expanding existing IIoT systems, entities must first be informed and well-equipped to assess the associated benefits and risks presented by new technologies.1

IIoT and IoT Are Different

There are important differences between the Internet of Things (IoT) and the Industrial Internet of Things. The IoT is the network of physical objects, embedded sensors, connections and computers that permeates much of our everyday life. The IoT consists of helpful gadgets and is becoming prevalent in everyday items from fitness trackers, smart thermostats, and vital medical devices to connected water bottles and shopping monitors. The IoT affects consumers directly and continues to evolve within a largely consumer-driven digital ecosystem. The lineage of IoT devices, and their underlying software, can be traced alongside the development of the internet, smartphones and the operating systems with which consumers are already familiar.

The Industrial Internet of Things, like IoT, utilizes a network with sensors and various connections; but it grew not out of the consumer-oriented electronics and operating systems, but alongside large-scale industrial control hardware. Much of the software behind the IIoT was custom-developed (going back decades) as an adjunct to big, expensive pieces of industrial hardware: switches, valves, pumps and other heavy machinery. While the IoT is focused on individual consumers, the IIoT (as its name suggests) serves machines and industrial systems. The IIoT is a fundamental part of the nation's critical infrastructure. It runs our oil fields, our gas pipelines, our water systems, our dams and heavy industry; it underpins the electricity grid, our train systems, our highways and our ports.

Different Networks, Different Risks and Benefits

The IIoT presents both opportunity and risk. Opportunities arising from increased adoption of IIoT technologies can include reducing operational expenses, increasing productivity and efficiency, and improving worker safety.2 Additionally, while the IIoT has been around for some time, new and improved technologies are accelerating opportunities for growth, innovation and value that can be derived with smart IIoT applications. While the introduction of new IIoT technologies can make the entire system smarter, integration of those technologies into IIoT increases risks. This perhaps can be aptly illustrated by a metaphor comparing two very different living organisms: a human and a fungus. The human has a brain and is capable of intelligent thought. The brain actively and passively connects the entire system (the body) and allows those systems to engage in and accomplish highly complex tasks. A fungus, on the other hand, does not contain a connected system capable of intelligent thought and physical dexterity. But with the human's complex system comes increased risk. A kick to the head or a blow to the spine can severely limit or destroy the entire system. In contrast, a fungus does not face the same risks—it's a simple but generally resilient system. In this regard, consider this metaphor in the context of a connected utility network.

By way of a real-world example, consider the power grid. To keep the lights on, generating stations, high-voltage transmission lines, substations and distribution lines must all work in tandem to get power from where it is generated to where it is consumed. Prior to the IIoT, significant human resources and capital needed to be expended to maintain the entire system. When one component failed, operators had to determine its location and assess repair needs; that process took time and money. Now, with the IIoT, sensors connect these assets and give utility operators a real-time view of the entire system. Not only can issues be more quickly detected when they occur, but the system can anticipate failure and proactively deploy resources. This connectivity saves time and money, and contributes to the system's overall resilience.

But the network that connects the entire system creates a new type of risk. Whereas the old, unconnected system was subject to a physical attack, it was unlikely that the failure of any one aspect would result in significant consequence to the entire system. Now, however, if the network fails (or is attacked), the entire system is subject to failure, and that attack may be digital, and thus can be more subtle than a physical attack. Indeed, this was precisely what happened in 2015, when the Ukraine bulk power system was the victim of a cyberattack and shut down for several hours.3

Assessing Risks and Benefits

IIoT systems are continually evolving, driven by new technology and needs. That technology can add to, leverage, or modify the core IIoT technology that currently exists, and can increase the existing benefits inherent with the IIoT and/or diminish the risks that come with a more connected system. Any evaluation of the value of new IIoT technology must include the critical assessment of the impact of that technology on those risks and benefits.

An effective risk analysis framework is key to evaluating where technology investors and purchasers should focus limited resources. The risk assessment approach used by the United States Department of Homeland Security (DHS) provides a useful framework through which to evaluate IIoT and the value of technologies that seek to minimize that risk.4 Risk (R) is a function of Threats (T) x Vulnerabilities (V) x Consequences (C); R=TVC.

Threats: Threats, at least those which flow from the nefarious activities of human beings, are a combination of intent and capability led by sophisticated state and criminal actors that seek, in the example of utilities, to infiltrate the United States electric grid. These types of threats are best dealt with at the national and international levels through the coordination of the public and private sectors. Threats can also derive from natural sources (hurricanes and earthquakes), or from human operator failure. The analytic framework remains helpful, replacing "intent" with "probability" as a guide.

Vulnerabilities: These represent avenues for attack or system failure, and include the attack surface (access points that an unauthorized user can exploit to enter or extract data). While a number of access points on the IIoT systems may provide more avenues for attack, the vulnerability can depend more critically on the protections from attack embedded in each access point and how those access points integrate with the broader system.

Consequences: This represents the severity of a given issue if it were to occur. For example, if one power plant goes down, does the entire system shut down or are there redundancies that minimize the effects of that loss? What would be the loss, in terms of dollars, or lives, or both?

To complete the cost-benefit analysis, we submit that a similar assessment can be made for the benefits of IIoT technologies, such that Benefit (B) is a function of Opportunity and Value. For example, transmission utilities recognized the opportunity and value of applying IIoT technology to substations and switching stations, thereby allowing the utilities to maximize the use of those assets while monitoring their operational efficiency in real time. Conversely, a given IIoT technology may be able to allow for more information to flow, but that information may not provide any value. For example, attaching a sensor to a transmission line that provides information about the ambient air quality may be an opportunity, but it provides little value to the system and therefore little overall benefit.

Evaluating New Technologies

In evaluating new technologies, investors and policymakers should focus on the effects on the variables set forth above. Keeping the focus on the R = T x V x C formula as a framework, risk reduction can be achieved by reducing any of those three variables (conversely, Benefits can be achieved by increasing Opportunity or Value. A technology may be focused on reducing consequence, such as an approach to an integrated network that can quickly isolate and bypass a system failure before it spreads to the rest of the system (for example, new grid technology that can contain and bypass a transmission failure before that failure trips the rest of the system). In contrast, a technology could have the effect of reducing vulnerability. And of course, some technologies could do both.5

The IIoT Players

All stakeholders investing in the IIoT should understand how to assess these new technologies. Technologists should assess their own processes and understand where to invest further resources to improve their product. Investors and owners of IIoT-connected critical infrastructure are best to focus their limited resources on those technologies that provide the greatest benefits and most effectively reduce risks. Policy makers and lawyers must be able not only to assess these technologies, but also to understand how they work together to reduce the risks to—and increase the opportunities of—the integrated IIoT system.


1 For more background on the Industrial Internet of Things, see "The Industrial Internet of Things and the Law," Day Pitney Whitepaper, Sept. 28, 2017, available here. See also "The Industrial Internet of Things: The Railway Law Revolution of Our Time," Bloomberg BNA Privacy and Security Law Report, Nov. 20, 2017.

2 For example, IIoT systems now allow utilities to continuously understand how demand is changing in real time and can assist utilities in managing maintenance costs associated with managing their power generating, transmission and distributing resources. Crews can be deployed in real time or at convenient times prior to predicted failures, efficiently using human and capital resources and reducing the overall costs.

3 In December 2015, Russian hackers were able to use phishing emails to gain control of Ukraine's electric grid and cause blackouts across the country. See "Critical Infrastructure and the Internet of Things," Tobby Simon (Jan. 2017).

5 Although possible, it is unlikely that technologies would reduce threat, either human or natural, with one significant exception: it is possible that intent could be affected if nefarious human actors are aware of decreased vulnerability or consequence—bank robbers are less likely to want to rob a bank if they know it has high-quality locks or little money in the safe.

Click here to read further Insights from Day Pitney

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions