IoT has extended our understanding of industrial equipment far beyond its original definition, and has imparted a vast and ever-expanding range of capabilities to this equipment. Commercially viable IoT solutions have been present in the marketplace for only a few years, but the initial pattern of concentration in a handful of industries is rapidly evolving into more balanced, cross-industry adoption. The implications of IoT for businesses with deployed infrastructure are substantial, not only in terms of optimizing field service operations, but also in terms of substantially improving the customer experience and creating new sources of revenue.
This post is part 1 in a 4-part series: “How Sentient Infrastructure Changes the Game for Field Services, and Why This Is Important”.
The Vision: Smart Infrastructure, Better Service, Superior Outcomes
Between the mid-18th and early-19th centuries, the Industrial Revolution changed the world’s thinking about automation and spawned an innovation cycle that shifted manual labor to machines. Well before the end of the 20th century, the term “industrial equipment” had already come to mean many different things, ranging from large-scale manufacturing hardware to integrated systems of aircraft components to automated stoplights, among thousands of other examples. With the advent of the Internet of Things (IoT), the definition of “equipment” has expanded yet further, raising questions about business models, changing the way we think about service, and creating new possibilities for value creation.
IoT has extended our understanding of industrial equipment to encompass single-purpose electronic components, specialized diagnostic equipment, sophisticated devices that can both sense changes in their environment and take appropriate action in response, and complex subassemblies that automate multiple tasks. A critical distinction between pre-IoT industrial automation and what we are beginning to experience with IoT is that these components, devices, subassemblies, and even non-electronic objects can be transformed into elements of an electronically networked system governed by intelligent rules to enable purposeful, coordinated action. Vehicles, equipment, and various types of fixed and mobile infrastructure that have historically not been “connected” in this sense are now being brought online and managed intelligently for the first time.
Commercially viable IoT solutions began emerging in the marketplace roughly six to eight years ago, but penetration was scant and limited to a few notable examples that were effectively proofs-of-concept. In a July 2012 report, industry analyst Gartner introduced its “Hype Cycle” analysis for IoT, and noted that its enterprise architecture analysts had received only two inquiries about IoT. Much has changed since then.
Recent Gartner analysis shows that IoT technology, once highly concentrated in a handful of industries, is steadily becoming more diffused and prevalent across industries and cross-industry use cases. As recently as 2015, 3 industry segments accounted for 2/3 of all IoT endpoints: Utilities, Manufacturing, and Natural Resources. While Gartner projects the installed base representation of these 3 segments to be essentially unchanged in 2017, their combined share is projected to fall to 57% by 2020. Retail Trade, Wholesale Trade, and Government are projected to be the next largest segments by 2020, representing 27% of the total IoT installed base, up from only 16% in 2015.
The Gartner analysis also shows that cross-industry use cases are exhibiting similar de-consolidation, but at a vastly accelerated pace. Physical Security and Information deployments represented 82% of the IoT installed base in 2015, but are projected to fall to 64% in 2017 and only 40% by the end of 2020. Which use cases are increasing their presence in turn? Automotive, Building/Facility Automation, and Energy are the three categories that are projected to grow so fast as to proportionately offset the entire installed base share of Physical Security and Information.
This diffusion of IoT technology into a wide variety of industries indicates that a once visionary concept is quickly becoming mainstream. As it does, we will observe how creating infrastructure that is not only connected, but that also absorbs and uses information to drive predefined actions, in turn creates the basis for new ways of doing business. As artificial intelligence capabilities are incorporated into IoT ecosystems, the connected infrastructure becomes capable of learning patterns and regulating itself even more efficiently. At this point, we can evolve beyond describing IoT-enabled infrastructure and begin referring to it as truly sentient infrastructure.
The implications for businesses with deployed infrastructure, including for their field service operations (FSO) organizations, are immense. Deployed equipment that regulates itself, identifies functional issues, and seeks to resolve those issues without human intervention fundamentally transforms the field service business model. With IoT-enabled FSO, organizations accustomed to the break-fix approach to field service experience higher availability of the equipment upon which they rely, emerging equipment failures are detected and remediated before entire systems go offline, and equipment failures that do occur are more rapidly addressed. The quality of the customer experience increases substantially, while the cost of delivering that experience (i.e. the cost-of-service) declines markedly.
Increasingly sophisticated IoT endpoints also expand the possibilities of new revenue sources. Greater device intelligence, integration of various types of devices into multi-function subassemblies, and embedding smart components into different types of physical infrastructure enable new market offerings. Each connected product or solution introduced into the market implies revenue not just from the initial hardware sale, but also from subscription sales for ongoing core service, as well as for technical maintenance service. Additionally, the data that this connected, smart, and sentient infrastructure collects provides increasingly rich insight into the business. Businesses can use this data to improve operational and financial performance, not merely on a periodic basis, but as a cornerstone of how they operate on a continuing basis.
Simply put, IoT eliminates “blind spots” in the technical performance of industrial equipment, in the efficiency of workflows and operational processes, and in the revenue and profit potential of service-oriented business models.
About the author:
John Mack is an enterprise technology marketing executive and member of the board of directors of ThingLogix, Inc, a provider of Internet of Things solutions, solution components, and advisory services.