While the Internet of Things is about connecting physical objects, the cool thing is that they're connected, and integrated, which requires software to handle the complexity.
You can get a Som board with a Texas Instruments Omap 5, say from Phytec, running, well Android or Linux, or maybe a Exynos 5 running, well, Android or Linux. Or a plethora of others doing the same thing, like Raspberry Pi.
From the hardware viewpoint, it could be said that you do indeed eat the OS.
I should make myself clear that I'm thinking about hardware solutions that differ from current consumer products in the main, such as general purpose computers, or tablets and phones and so on.
But you're absolutely right that anything programmable requires software.
I think the software related value gains in non-tech industries are higher in the stack, on the application and integration levels. Amazon wouldn't be much if not for integration, for example.