IoT – Understanding market revenue reporting to identify the real Business market that is emerging
Vice President and Principal Analyst, Constellation Research
Constellation Research
Andy Mulholland is Vice President and Principal Analyst focusing on cloud business models. Formerly the Global Chief Technology Officer for the Capgemini Group from 2001 to 2011, Mulholland successfully led the organization through a period of mass disruption. Mulholland brings this experience to Constellation’s clients seeking to understand how Digital Business models will be built and deployed in conjunction with existing IT systems.
Coverage Areas
Consumerization of IT & The New C-Suite: BYOD,
Internet of Things, IoT, technology and business use
Previous experience:
Mulholland co authored four major books that chronicled the change and its impact on Enterprises starting in 2006 with the well-recognised book ‘Mashup Corporations’ with Chris Thomas of Intel. This was followed in…...
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It seems to have become fashionable in some circles to suggest that IoT market is failing. Certainly if you were one of those people who just two years ago was predicting amazing numbers then, yes, IoT has failed to achieve those over ambitious levels. Business Market valuable solutions were never likely to match predictions that included numbers of household objects such as Toothbrushes. This blog aims to be a reality check by taking different reports each using different criteria to define IoT deployments.
To start, Forbes contributor Louis Columbus provided an excellent round up of the latest IoT market statistics and predictions in a Forbes online article published in November 2016. Entitle Roundup Of Internet Of Things Forecasts And Market Estimates, 2016, the article included, amongst other statistics, McKinsey estimating the 2015 shipped market for specialized IoT devices, i.e. sensor, gateways and dataflow management, to have been $900million. The article concluded by drawing attention to a new generation of ‘operational’ improvements using data originating from sensing, ending before ending with the statement;
It’s these sensor-driven strategies that drive the most reliable IoT and IIoT forecasts and predict the future of this industry. This statement by Louis Columbus, who publishes constantly thoughtful work on Business and Technology, clearly identifies where the first generation impact of IoT on business is being felt.
However if we measure the ‘success’ rate of IoT adoption solely in terms of sensors deployed, devices connected, terabytes of data moving, or any technology factors, then we miss the scale of the overall impact. The value of IoT technology lies in the value/scale/expenditure of Business solutions that it enables, and these are an integration of Clouds, and Apps, and new forms of Data Analytics.
Digital Economy Business solutions use all these technologies, and are even starting to add AI to the integration. Tracking the value of the IoT market as part of the Digital Business technology is a more accurate way to understand the Business value IoT is enabling/delivering. For though each technology is incorporated IoT is the crucial interconnection/interaction enabler of the whole. The relative success, even importance, of IoT to the technology market looks very different when viewed for its role in Digital Business solutions, rather than as a standalone technology.
This may explain the huge difference in the value of the ‘IoT market’ as reported in Business Cloud Review stating that Technology Business Research (TBR) has found IoT’s revenues grew 14.8% to $6.7 billion over the course of Q4. The article carries on to point out that; IoT solutions will drive increased use of diverse IT and OT products and services in addition to building interest in established IT products, commercial IoT will create growth in specialized business consulting, hardware, network, development, management and security components.
However there is still a further Business valuable technology to come, and once again IoT plays a major part in enabling its Business deployment. The hype wave is now firmly focused on Artificial Intelligence, AI, as the new creator of business competitive advantage. AI is a complex technology with many definitions, but none of them allow AI to function as a standalone technology. Conceptually AI is not new, but its recent transformation to becoming a usable commercial business tool relies on integration with the same group of technologies; IoT to transform the physical analogue environment into Digital representation for AI to process; Clouds to provide low cost abundant processing power on demand; and Apps that have changed Software development and deployment.
Enterprises don’t need to wait for AI to gain the benefits of better, and more timely data flows to improve their operational efficiency. At this stage of market maturity it is in Operational Technology, OT, rather the Information Technology, IT, where business benefit is most readily found. Benefits in OT have always been more closely linked to near real time ‘read and respond’ to Physical events via Industrial Automation. The role of IT has been to automate Office Automation, the recording of the commercial ‘paperwork’ transactions, required for compliance and to power Business Intelligence, BI, historical reporting.
OT, with its alignment to Industrial Automation, has long been associated with the use of sensors and sensing technology. IoT has updated and increased the capabilities as well as lowering costs, which added to the existing skills in deploying with business justification has led to the rapid take-up of IoT.
Fortune Magazine reported on this shift quoting Barclays Bank research stating that expenditure on ‘Business Technology’ is expected to rise 6.7% to $2.1 trillion by 2017 compared with last year. The same article went on to state that it's music to the ears of some technology companies, but not all of them as it introduced the shift away from many traditional IT related technology products.
Whilst there is no agreed name yet, the term ‘Business Technology’ works well to define Enterprises that apply technologies in a coherent manner across traditional boundaries. Digital Enterprise business models in Manufacturing are successfully blending new capabilities for increased operational efficiencies in OT, with the Enterprise commercial management of IT. Claims of up to a quarter of all IoT deployments being related to manufacturing industry fuel the statement by Klaus Schwab Founder of the World Economic Forum that IoT is driving the Fourth Industrial Age.
Does this answer the question as to what is driving the IoT market, and its (strategic?) importance as a key technology to enable the next generation of Digital Business? The advent of Business Technology demonstrates why many IT led IoT deployments are ‘add-ons’ to existing IT solutions, and cannot recognize the strategic capability. In contrast Industry Sectors where OT is strong are able to more easily grasp the value, and the ongoing potential.
This realignment of technology’s role across the Enterprise calls for a complex management initiative to form a partnership between their experts in Operational Technology and those of Information Technology. At the same time the Enterprise must execute on their strategy to develop a new business model to complete in the Digital Business economy. Leading Technology Systems Integrator Wipro has coined the term ‘Strategic Integrator’ to define the complex skills and relationship required.
Before examining the Wipro answer on how to achieve this, it is well worth spending the time to read an article written in Automation World based on the actual experiences of a CIO charged with bringing OT and IT teams and capabilities together. Entitled Creating a new breed of Manufacturing IT the following brief excerpt is provided for the sole reason of encouraging readership of the full article!
People trained to work in IT are focused on computer systems, networks and enterprise applications. They are used to reacting to trouble tickets and troubleshooting problems to get systems back online to avoid inconveniencing end users. OT folks, on the other hand, work proactively and in real time; their machine downtime doesn’t mean the company will miss a few emails, but rather a few hundred thousand dollars...
… Not only do these two groups work in different ways, but they also speak different languages—from the technology lingo to the actual communication protocols. As a result, traditionally, there’s been a clear line between these two domains, and never the twain shall meet—until now.
The full article covers includes the experiences of other Enterprises, comments from the head of Strategy at GE Predix, and an important link to the Control System Integrators Association (CSIA). For those from an IT background this organization has much to offer from its work to identify and standardize good practice for OT and Industrial Automation.
Wipro, a global leader in System Integration, believes it has developed an answer through an approach it calls Strategic Integration. The core skill of bringing together disparate technology elements, and vendors, to deliver a business requirement remain the right foundation. However, the past focus has been too much on technology, and the relationship with the IT department, now more direct engagement with the overall Business is required.
Rapidly emerging Digital Business models, usually accompanied by a strategic transformation, require direct business knowledge and engagement as much as the ability to deliver through Technology. Wipro define Strategic Integration as incorporating the Business Activities in the layer above the traditional IT operations in a single Enterprise cohesive approach. The result is a holistic approach to the entire enterprise – IT, OT, business, processes, products and services – progressing as an integrated whole, delivered through a continuous cycle of individual deployments occurring across the enterprise.
Wipro Strategic Integration offers an attractive approach both at Enterprise level as well as directly to individual Business Managers in developing their transformational thinking. Wipro offers a new level of relationship that combines the knowledge of the latest technology capabilities with the experience of business sector transformation.
The result is delivers substantial value in individual deployments and accumulative value to the Enterprise from the individual deployments working in an integrated manner. This could over come many of the difficulties currently reported of individual Business projects achieving their aims, but in isolation leading to a new level of Enterprise discontinuities. The approach aims to make full use of the value of existing IT, accumulated data and practices, with the addition of the direct business experience, combined to deliver fully integrated and optimised Business Transformation.
IoT, in its role of connecting Business Activities and Services, with the technologies of Clouds, Distributed Apps and AI, is perhaps the key enabler to all of this. The sheer scale of connected IoT Devices and orchestrations of Services working in a Stateless, loose-coupled architecture requires as much transformation of the IT department and the System Integrator as any other Business activity or sector.
Summary
It’s not just the market for IoT that is evolving to become better defined, its also becoming clear that a transformation in the relationship between Business and Technology is occurring as well. The Digital Enterprise is emerging through both internal improvements to near real-time Operational management and the external shift towards creating revenue by Smart Services. Enterprises are finding the need to create a new agility between Business and Technology staff; internally with the IT department and externally with Providers.
Hybridization is not just a desirable trait in Managers, it is equally necessary in Partners and their own staff, and the old model of IT and SI working together in set piece engagements has to change. Partners who work as collaborators, understand your industry, and can work to create an end-to-end blueprint for strategic integration, coupled with rapid flawless implementation are going to be very valuable. A new round of appraising System Integrators to understand how they have transformed their own approach seems likely!
New C-Suite
