How Does Internet of Things Work?

You’ve probably heard of Internet of Things, or IoT. You probably know that IoT is impacting your daily life in a variety of ways. But do you know what Internet of Things actually is and how it works?

How does Internet of Things work? An IoT sensor/device communicates with the cloud through connectivity, whether it’s physically or wirelessly connected. Once the data reaches the cloud, the software will determine what action needs to take place.

That’s a very brief and basic look at how Internet of Things work and it probably doesn’t answer the question thoroughly enough. I’m going to explain in greater detail how IoT works, as well as explain what IoT is and why businesses are embracing it.

What Is Internet of Things (IoT)?

The Internet of Things (IoT) is a network of physical objects that have connectivity thanks to embedded sensors, software, and technologies. The purpose of these sensors, software, and technologies is connecting these objects so they can exchange data with over devices over the internet.

To give a less technical answer, let’s look at IoT technology in the consumer sector. In the consumer market, there are a great deal of IoT products that enable you to have a ‘Smart Home’. These are devices that can be controlled using a range of devices, such as your smartphone, regardless of physical location (as long as you have an internet connection). For instance, thermostats that enable you to turn on your heating using a smartphone application. ‘Smart’ speakers, home security systems, and lighting fixtures are all examples of devices/appliances that could be considered IoT technology in the consumer market.

Internet of Things (IoT) is a network of physical objects that all have connectivity for different reasons. For example, a smart oven that you can turn on from your living room. Or sensors in the agriculture sector that monitor humidity levels and rainfall. There are literally billions of physical objects that would be considered an IoT device. Image:

Now let’s consider organisational applications of IoT devices. For example, let’s consider how transit companies would utilise IoT devices. A heavy goods vehicle might be fitted with a tracking device so that the transit company can find out where their vehicles are. Furthermore, an IoT device would be used to enable adaptive cruise control.

IoT devices are also widely used in industrial applications such as manufacturing and agriculture. In industrial applications, the devices would typically be used to acquire and analyse data and monitor and control equipment. In agriculture, IoT devices are used to collect data on factors such as temperature, soil content, and humidity. Further, the equipment can be managed remotely using IoT devices.

Hopefully that show give you a good idea of what Internet of Things means. But next let’s consider how IoT actually works.

How Does Internet of Things Work?

After that quick overview of what Internet of Things means, you’re hopefully a little wiser. But now I’m going to explain how Internet of Things actually works. I’m going to explain this as simply as possible, because there are so many articles online packed with technical jargon that’s simply inaccessible to non-technical people.

To explain how Internet of Things works, I’ll explain:

  • The components of an IoT system
  • How data is collected, transferred, analysed, and acted upon

Firstly, let’s have a look at the components of an IoT system. I’ll explain what these components are, how they work together, and give a few examples of these devices in use.

The Components of An IoT System

There are 4 components of an IoT system:

  • Sensors/devices
  • Connectivity
  • Processing
  • Interface

At the minute, they’re just words and probably don’t mean an awful lot to you! I’ll explain what each is in more detail, but here’s a handy infographic that gives you a brief explanation of what each component is and what it does.

That’s a brief look at all the components of an IoT system, but now I’ll explain them all in more detail and give some examples.


The sensor or device is the component responsible for collecting data. The sensor could be something that picks up the temperature in a room, or the device could be a CCTV camera that’s recording a video stream that it’s sending to the cloud. In the transit example I’ve given before, it could be a GPS device with a SIM card that’s sending location data to the cloud.

There are literally billions of sensors and devices out there for a multitude of purposes. These sensors and devices are used in personal, household, business, and industrial deployments. For instance, a smartphone is a device with numerous sensors contained within (camera, GPS, etc.). Most modern vehicles contain a number of sensors for numerous purposes, such as GPS and driving metrics.

To give an industrial example, manufacturers often use IoT sensors and devices to ensure the production process is perfect. This allows for automated, unmanned monitoring, reducing costs and saving time.

Anyway, the sensor/device collects the data. At this stage, the data has to go somewhere. That brings us onto the next IoT component: connectivity.


So the sensor/device has collected data. Now it somehow needs to get to the cloud. That brings us to connectivity, another crucial component of any IoT system.

The sensors/devices that are collecting data can be connected to the cloud in numerous ways:

  • Cellular (with a SIM card)
  • WiFi
  • Bluetooth
  • Wired (via Ethernet)

Different sensors and devices connect to the cloud in different ways. The way that they connect to the cloud doesn’t really matter; the main thing is that the sensors/devices have connectivity to transmit data. No matter how connectivity is achieved, the goal is always the same: to get the sensor data to the cloud. And that brings us onto the next component of any IoT system: processing the data once it reaches the cloud.


Once the data reaches the cloud, it’s time for the software to process it in some way. So the software does something with the data. For example, it will check whether the temperature falls within a suitable data range in the example of a smart thermometer. In another example, the software will process the data that shows where your vehicle with the GPS tracker is.

Once the data is analysed, the software will send instructions back to the sensor or device depending on the sensor/device you are using and its functionality. For instance, if the temperature of a room is too low, the instruction will be sent back to increase the temperature of the room if you’re using a device capable of automatically making adjustments.

Alternatively, some actions will require the intervention of a human operator. That brings us onto the last of the four key components of any IoT system: interface.


Some actions cannot be handled by IoT devices. Instead, they require human interaction. For instance, if your IoT CCTV security system detects an intruder on your site, the system can’t do much. That’s usually going to require intervention from a human operator.

Any IoT device will have an interface of some kind for human operators. This might be a website that you sign in to that simply gives you the data picked up by the sensor. For example, in agricultural deployments, you may log into a portal that contains sensor data such as humidity level, temperature, and soil data.

You don’t just get notified of what your sensors/devices have detected, either. Depending on the sensors and devices in use, the interface may allow you to make perform actions remotely. For instance, you may be able to remotely change the temperature if it’s too low or too high using the interface. To give a popular, well-known example of this, I’ll refer to the Hive Home ‘smart’ thermostat. In this case, you can have an application on your phone that enables you to turn your heating on and off no matter where you are. For instance, you can turn on the heating from work before you drive home.

Some actions are controlled automatically depending on the sensors and devices that you’re using. For instance, your thermostat might automatically adjust the temperature according to rules you have set out. Referring back to the security system example, your system could automatically alert the authorities rather than simply notifying you of an intruder’s presence.

Why Are Businesses Embracing IoT?

Onto the last section of this blog post, let’s consider why businesses are embracing Internet of Things technologies.

I think it’s evident why businesses are embracing IoT tech:

  • Less human involvement needed: With Internet of Things technology, less human involvement is needed in general. Some processes can be automated whereas some that previously required manual, on-site involvement can be done remotely. Typically, this means fewer human operators are needed which is advantageous in two ways: your company can successfully operate with fewer team members and there are fewer opportunities for human error.
  • Access sensor/device data anywhere: You can manage Internet of Things technology no matter where you are. Providing you have the right permissions and login details, you can access the interface and interact with your IoT systems from anywhere. All you need is a connection to the internet.
  • Access to more information: Using IoT systems can provide you with more information. It goes without mentioning that this information is more accurate than anything a human alone can keep track of.

I hope this blog post has helped you to learn a lot more about Internet of Things technology. I’d love to hear your thoughts in the comments below, so please feel free to leave a comment.

Jack Mitchell

Jack Mitchell has been the Operations manager at telecoms and MSP Optionbox for more than 4 years. He has played a crucial role in the company, from marketing to helpdesk, and ensures that the IT requirements of over 300 clients are continuously met. With his innate passion for technology and troubleshooting and a particular interest in Apple products, Jack now delivers the most comprehensive tech guides to make your life easier. You can connect with Jack on LinkedIn.

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