Guest Column | December 20, 2017

The Driving Forces Of IoT

Michael Blumberg

By Michael Blumberg, President, Blumberg Advisory Group

News about the Internet of Things (IoT) is everywhere. Indeed, IoT is one of the largest and fastest growing segments of the IT industry. The number of deployments of connected devices is forecasted to increase from 6.4 billion in 2016 to 20.4 billion by 2020, according to industry analyst firm Gartner Group.

Those of us who have been involved with the field service industry for some time will tell you that the concept of IoT and its cousin Machine to Machine (M2M) are nothing new. Remote monitoring and diagnostic tools have been around for decades. As early as the mid-1980s, capital equipment manufacturers like Honeywell, Texas Instruments, and AT&T had deployed these solutions to improve the troubleshooting and maintenance of their systems.

It is only within the last couple of years that the number of IoT deployments has begun to sky-rocket. Let’s look at some of the forces that are making this possible:

  • Social Forces: One of the reasons why we are seeing a surge in connected is the recognition that data drives business. For service providers, it is no longer just about finding ways to reduce the time and cost associated with troubleshooting and maintenance. To optimize productivity and efficiency, and to facilitate innovation, Field Service Organizations (FSOs) need data. While service executives have understood this for some time, end-customers now understand and appreciate that they also need access to this same data to optimize their operations. Data about the condition of assets and machine performance is part of a larger network of systems which need to work in tandem to ensure that that the entire enterprise works smoothly and efficiently.
     
  • Economic Forces: The cost of implementing IoT solutions has reduced significantly over the last decade. In the past, remote monitoring was achieved through dedicated land line data communications which were very costly to implement and maintain. Today communication is much more accessible and affordable through technologies like Internet Protocol, ZigBee, and Wireless. Furthermore, the cost of collecting, receiving and storing data has improved significantly. Earlier solutions required expensive and clunky Programmable Logic Control (PLC) platforms and data storage devices. Now data collection and storage is made possible through low-cost sensors and cloud storage solutions. Furthermore, the financial justification for IoT has improved. Not only is access to investment capital cheaper than ever but manufacturers are now finding ways to monetize IoT solutions resulting in a profitable revenue stream, higher ROI, and faster payback period. More importantly, the financial model associated with IoT deployments is changing. In the past, manufacturers would first attempt to sell individual customers on the benefit of adding remote monitoring to their capital equipment purchase. In turn, the customer needed to incorporate the cost of a remote monitoring solution into their capital expenditure and cash flow projections. The economics of IoT have now made it possible for service providers to make IoT solutions available as a subscription model, thus enabling end-customers to turn a high fixed cost investment into a variable expense.
     
  • Technology Forces: As noted above, the technology (e.g., data communications, sensors, storage, etc.) associated with IoT is becoming cheaper, easier to implement, more secure, and flexible. In addition, we now have access to much more robust, cheaper, and flexible data repositories and analytic tools. Not only has the cost of storage improved but the advent of Big Data solutions enables us to leverage information collected by IoT in ways we have never known before.

For service executives who are dissatisfied with service being an afterthought in their organization, now is the time to look toward IoT as platforms for innovation and new sources of profitable revenue. To achieve this outcome, service providers need to develop an overall service business strategy around IoT as opposed to merely a technology plan for connecting devices with back-end systems. While addressing concerns with respect to security and risk are critical to any IoT deployment, the optimal strategy must incorporate a service centric philosophy, receive full endorsement by C-suite executives, and be formulated with active participation of the service leadership team.