Back to the Future—With IoT

To learn what IoT holds for 2021 and beyond, we need to go back to the future —2015 to be exact. I began having my first conversations with prospects about IoT in 2014, but it was really in 2015 that this started in earnest. Back then, I was told by our CEO to join a small tiger team to research the IoT market and come up with a winning strategy for the Industry 4.0 software space.

Being a Germany-based company, it was clear that our future would depend on grabbing a big part of this market. The first thing my team did was to read up on IoT analyst reports. There were some amazing predictions, and the analysts were tumbling over each other to quantify the rapid growth of this industry. None was so outrageous as the IBM prediction: 1 trillion connected devices in 2020 and a whopping value of $6 trillion to be added the economy.

Where Are We?

So, where do we stand in 2021? Did it all come together? Or are we way off?

The first thing to note is that, often, various predictions are clouded by the definition of a device. In our case, for IoT, we don’t want to count PC devices. If we look at “real” IoT-connected devices globally, we were at around 30 billion in 2020 (50 billion if you include computers). This is an impressive number, yes—but still three times below the early estimates.

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What is really concerning is not the number of devices connected, but the added value being received from them. This is the digital paradox we are seeing now: There appears to be resistance from the “real world” to merge with the “virtual world” due to a lack of perceived value. 

Quite simply put, there are three ways to reach value with IoT:

  1. Cost reduction
  2. Improved customer experience
  3. Disruption through new business models

While many companies are using IoT for reasons numbers one and two, few have embraced it for reason number three—disrupting with new business models. Despite top management stating that digital is important (20% of all top strategic initiatives in annual reports now include the word “digital”)—and that IoT is one of the most disruptive and necessary technologies to shape their markets—in reality, they are mainly using it to manage costs by improving efficiencies and enhancing customer experience by augmenting existing products. This is severely limiting organizations’ ability to gain new value.

Back to the Future

Let’s go back to the future to determine whether this digital dithering behavior will change for the upcoming period. One answer is “yes,” and for the following reason. CEOs are under enormous pressure to show value from digital investments. They need digital return on investment to counterbalance—and even supersede—losses caused by other difficult business issues. Competitive pressure is also growing, with VC-funded tech startups knocking on every industry’s door. 

At the same time, technology is coming to the rescue of many businesses as IoT technology matures. IoT platforms, which previously focused on new innovative features and functions such as digital twins, have gone through quality improvement cycles instead. Platforms have been made more rugged and enterprise-grade with new connection protocols such as OPC UA (Unified Architecture) and are now rolled out in completeness. Analytics that had previously needed to be implemented by developers (making any change a coding nightmare) now have easy-to-use self-service tools, with code-generation errors reduced to a minimum.

What’s Ahead

The clock is ticking. If we deduce that it takes 7 years to transform an industry then at the beginning of 2021 there are about 2 years left for industry incumbents to start disrupting themselves. They have to rebuild their businesses, this time with a digital core inside and making IoT a core competency in their non-tech markets.

In the end, what really matters is to stop looking at technologies separately. For example, IoT will only reach its full potential if the data that is derived from devices is not treated in isolation—rather its insights are shared through the whole enterprise.

Pre-renaissance, ESBs were connecting ERP and B2B systems, and API management systems were primarily used for exposing services to digital channels. Now, some very complex technologies—such as virtualization and containerization—are being used to solve multi-cloud setups with distributed architectures. We will see the next wave of enterprise integration as a meshing of all these services and applications—including IoT—into new solutions.

For the non-digital (so far) industries to stand a chance, their leaders must put digital indecisiveness and bickering aside. IT and business must heal their fractures and unite to apply digital and IT innovation and create productivity breakthroughs. They have to operate as truly connected enterprises to stand any chance. Otherwise, the future will come back to haunt them.


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