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Why All This IoT Heel-Dragging?

Two impediments are keeping the Internet of Things from truly disrupting industrial companies.
By Rick Veague
Jul 28, 2019

There has been a clear trend of industrial organizations ramping up efforts to capture data—usually designed to enable an extended view of equipment health, asset status and other system components. A while back, I talked about how there's no point in compiling and analyzing data without having a plan for using it (see Operationalizing IoT Data to Drive Revenue in the Enterprise).

So has anything changed? Have organizations moved the needle when it comes to integrating the Internet of Things (IoT) with enterprise resource planning (ERP), enterprise asset management (EAM) or field service management (FSM) systems as part of their digital transformation journey?

From my firsthand experience and research, I would say the answer is a tentative "yes." There have been incremental steps toward embracing the full potential of the IoT, along with some isolated bright spots of rapid advancement. But there are also two areas of complexity that we need to address.

Issue 1: Lack of a Compelling Business Case
For some industries, rudimentary IoT is nothing new, and it has even reached a point of diminishing returns. For instance, manufacturing has long been involved in the IoT. Networked programmable logic controllers (PLCs) have been used to automate industrial processes, and data from supervisory control and data acquisition (SCADA) systems has enabled plant floor management visibility. All of this is based on data from connected devices, resulting in an increasingly autonomous manufacturing environment.

But even within manufacturing, we see very few companies realizing the IoT's immediate revenue potential. This could be achieved by pushing the IoT further into the structure of the business. Data from connected devices could be used to transform and lean out the business, simply by triggering events and transactions ranging from inventory reorders to maintenance work orders to customer orders. This could give manufacturers the ability to leapfrog competitors by dramatically compressing timelines, improving the customer experience or creating new service and product lines that generate new revenue.

But here's the rub: many companies still regard the IoT as just a mechanism to drive cost reduction. According to new research that IFS conducted in late 2018, most industrial companies planning to increase IoT investments are still looking primarily in areas associated with cost containment, instead of revenue generation. Sixty percent of respondents planned to increase spending on process automation, while 50 percent planned to spend more on condition-based maintenance. Yet less than 30 percent planned to increase IoT spending for field service and aftermarket service, which drives net revenue at margins higher than realized on the initial product sale.

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