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Fortify the IoT With Cybersecurity and R&D Tax Credits

As manufacturers adapt Internet of Things strategies to their business models, they should weigh these two often-overlooked elements.
By Chris Bard, Rick Schreiber and John Riggi
Nov 05, 2017

No manufacturer, regardless of size or ingenuity, is immune to technology disruption. The question companies need to ask themselves isn't whether they can afford to invest in the future of manufacturing—it's whether they can afford not to.

The MPI Internet of Things Study, sponsored by BDO, demonstrates the powerful opportunity the Internet of Things presents for modern manufacturers. In 2016, 72 percent of manufacturers improved their productivity and 69 percent increased their profitability thanks to IoT implementation in their plants and processes.

Left to right: Chris Bard, Rick Schreiber and John Riggi
These days, 60 percent of manufacturers have a strategy to apply the IoT to their processes, including 36 percent that are already implementing it. For the 40 percent of companies that have not yet considered how the IoT could benefit their bottom line and their customers, now is the time to do so.

As manufacturers adapt IoT strategies to their business models, our study found they should weigh two elements that are often overlooked: cybersecurity and research and development (R&D) credits.

Laying a Secure Foundation
While the IoT can afford many opportunities for growth and improvement, it is not without its challenges. According to BDO's 2016 Manufacturing RiskFactor Report, 92 percent of manufacturers cite cybersecurity as a top risk factor for their business, and it's no secret that the IoT increases potential vulnerabilities and entry points for hackers.

A data breach can result in angry customers and lost business, particularly if the victim company is deemed cyber-negligent. And for manufacturers that sell to highly regulated industries, including the government, an insufficient cyber posture—even if they haven't had a data breach—can knock them out of the running for new business or result in terminated contracts.

In 2015, the Department of Homeland Security's Industrial Control Systems Cybersecurity Emergency Response Team reported 97 cyber-attacks against transportation, metal, machinery and electrical equipment manufacturers, according to Reuters. With this year's WannaCry ransomware program affecting 75,000 targets worldwide, future incidents are bound to reach manufacturers' systems.

So when exactly should manufacturers begin to prioritize cybersecurity? The ideal moment is during the product conceptualization and design stage, which is when nearly half (47 percent) of manufacturers surveyed look to curb potential security issues. The Department of Homeland Security agrees: In November 2016, the agency ranked "Incorporate security in their design phase" as the first cybersecurity principle for the IoT.

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