Technology Report: The Evolving Landscape of IIoT Platforms · The Evolving Landscape of IIoT...

17
www.SmartIndustry.com -1- Technology Report: e Evolving Landscape of IIoT Platforms Big data analytics. IT/OT convergence. Smart machines that speak to one another. e Industrial Internet of ings is comprised of many parts--interconnected, for sure, but disparate in function and application. As such, proper platforms are necessary to fully adopt the IIoT (and to fully reap the rewards therein). A structured approach to digital transformation connects and secures assets, eases governance, facilitates proper data-collection and enables scalability, ultimately transform- ing the IIoT platform into an opportunity launchpad. TECHNOLOGY REPORT

Transcript of Technology Report: The Evolving Landscape of IIoT Platforms · The Evolving Landscape of IIoT...

www.Smart Industry.com-1-

Technology Report: The Evolving Landscape of IIoT PlatformsBig data analytics. IT/OT convergence. Smart machines that speak to one another. The Industrial Internet of Things is

comprised of many parts--interconnected, for sure, but disparate in function and application. As such, proper platforms are

necessary to fully adopt the IIoT (and to fully reap the rewards therein). A structured approach to digital transformation

connects and secures assets, eases governance, facilitates proper data-collection and enables scalability, ultimately transform-

ing the IIoT platform into an opportunity launchpad.

TECHNOLOGY REPORT

www.Smart Industry.com-2-

TECHNOLOGY REPORT

CONTENTS

Cars & cloud: Detroit’s past informs Seattle’s future

Enterprise IoT calls for robust, scalable platforms

A faster track to the Industrial IoT

Gap in industrial IoT stack presents edge challenges

Cloud-only IoT: stepping into a trap

New software for traditional hardware manufacturers

www.Smart Industry.com-3-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

Cars & cloud: Detroit’s past informs Seattle’s futureBy Michael Risse, Seeq

The surprising announcement of GE CEO Jeff Immelt’s retirement at the end of 2017sparked many articles comparing him to his predecessor, the leg-endary GE CEO Jack Welch. These reports raised questions about Immelt’s legacy, in particular his impact on GE’s stock price and investments in GE’s Predix cloud platform.

We know Mr. Immelt pushed GE to be a top 10 software company and own a new generation of software offerings for the industrial internet. We don’t know, yet, how the new CEO’s decisions will affect Predix’s success.

But questioning Mr. Immelt’s legacy in regard to GE’s cloud efforts is a fair line of inquiry. This topic will haunt many executives in the cloud industry as the number of cloud-computing providers shrinks from hundreds to just a few in a matter of years, which echoes as the American auto industry experience.

SEATTLE AS THE NEW DETROIT

Comparing the cloud industry to the auto industry has been happening for years. Just as the US auto industry was consolidated in Detroit (“Motor City”), the cloud industry has concentrated in Seattle. Bill Gates left New Mexico to return home to Seattle in 1979. Ama-zon founder Jeff Bezos left New York City for Seattle in 1994, lured by a pool of talented developers and a world-class resource in the University of Washington.

Today, a bird flying from the roof of Amazon’s downtown headquarters would quickly reach Mi-

crosoft headquarters, and on the return trip—with a slight jog north to Kirkland and then back over Freemont (a neighborhood of Seattle)—it could visit the development offices of Google’s cloud efforts. Along the way the bird would, with little more than a flap of its wings, also fly over Expedia.com, cloud-development centers for Facebook (1,000 employees and growing), Apple (it’s a secret!) and Oracle (700 employees), among other outposts for California companies and local cloud companies both big (Zillow.com, Avalara.com, Zulily.com) and growing (Avvo.com, Docusign.com, Socrata.com).

There are now more than 130 development centers in Seattle. In fact, the city’s explosive growth has The

Economist magazine arguing that Seattle and Silicon Val-

ley—with their horrendous traffic, income-inequality, and many corporate ties—are really a linked super-region rather than distinct geographies.

“Seattle as the new Detroit” is the easy comparison of the cloud industry to the auto industry: it’s in one place, and nobody gets hurt. But there is the more ominous American auto industry lesson: from hun-dreds of companies to just three leaders controlling 80% of the business, with another few on the margin, in the space of a decade. Consider what that means for the cloud, with more than 100 companies offering some form of IIoT platform, and still more join-ing every day. Getting to just a few survivors means brutal attrition, with enormous consequences for the winners and losers.

www.Smart Industry.com-4-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

THE COMING CONSOLIDATION

Not all companies will disappear, of course: many will exit in the form of acquisitions, vertical specialization, and by transforming into apps running on other com-panies’ clouds. In the time I spent on this article, for example, cloud IIoT platform Carriots was acquired by Altair, a move that mimics PTC’s ThingWorx and AutoDesk’s SeeControl purchases of a product-design company moving into “run-time” monitoring and analytics.

There are alternatives to a “Big Three” in the cloud space. We could witness a large number of compet-ing vendors. Perhaps there will be just one winner due to network effects, leading to a “winner take all” outcome like Google or Facebook. This doesn’t seem likely—not with customers so focused on ensuring competition. More likely we will see consolidation, with customers balancing their investments to avoid vendor lock-in. Mary Meeker’s latest report on the in-ternet notes that customers are increasingly concerned about vendor lock-in. And vendors are following suit—consider PTC’s (Thingworx) recent announcements on supporting multiple public cloud platforms, and SAP’s move to support Google’s cloud platform.

A few options—but not too many—is the most likely outcome.

Take the top three public clouds (Amazon, Micro-soft, Google) and the top two industrial offerings (Pre-dix, Mindsphere) along with the top IT-centric clouds (SAP, IBM Bluemix, PTC/Thingworx) and that equals eight. Why include Thingworx? Because while GE’s Predix has made the biggest marketing impact, PTC has made the biggest investment (as a percentage of its business) to build out a cradle-to-grave offering from PLM to monitoring to maintenance.

Eight companies. That’s it. Matt Littlefield at LNS Research is writing a report on twice that number of IIoT platforms and it’s hard to imagine (given the market size and clout of the first eight) who could be left? Of course, IIoT platforms are not the same thing

as public clouds, but it’s getting hard to tell them apart with respect to IIoT support. Google recently announced the beta of a sensor-data-ingestion service (IoT Core) backed by BigTable for data storage and a portfolio of AI technologies. That may not make it a full IIoT platform with device management and con-nectivity capabilities, but is there any doubt it is now in the race?

Eight “big” cloud platforms with obvious IIoT chops. Or 15 IIoT platforms on LNS’ radar screen. But imagine all the IIoT platforms these lists don’t include...all the Machine to Machine (M2M) leg-acy platforms from Sierra Wireless Aeris and Kore Telematics. Or cellular cloud platforms like Verizon ThingSpace, ATT M2X and Cisco’s Jasper platform. Or the whole alphabet soup of startup IIoT cloud plat-forms—from Alya Networks to Zatar—with Electric Imp, Loop and Meshify in between. This list won’t have companies that bought their way into the cloud, like SoftwareAG buying Cumulocity. On and on goes the list, and any list you make will leave out more vendors than it includes. These platforms can’t deliver all of the same features, but filling those gaps is just an acquisition or partnership away.

That’s why the Jeff Immelt question (What did you do for our cloud?) is so critical. Imagine growing your product offering 33% a year and failing to keep up with a 40% market growth. You could start from a small base and live for a while on an inflated growth rate, of course, but for the bigger players it’s either keep up or fall behind, and if you fall behind there’s no catching up through organic growth.

Through acquisition or partnership there may be op-portunities—vendor #3 buys vendor #5 to become the new number #2—but this is desperate territory because this is enormously expensive and very risky. If you con-sider the IIoT cloud market as a stack rank of players with everyone that isn’t Microsoft or Amazon taking measures to make up the gap, their actions become much clearer.

www.Smart Industry.com-5-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

SCALING UP TO DRIVE DOWN COSTS

The first auto-industry analogy for the cloud is location (Detroit vs. Seattle). The second is consolidation. The third is economy of scale. Every schoolchild knows the story of Henry Ford’s assembly line reducing produc-tion costs. Economies of scale will drive consolidation of the cloud market as well.

So what are the drivers of efficiency in the cloud and how do they affect key vendors?

First, the lowest cost of a reliable supply of electric-ity, which is hydro (if you’re in Seattle) and coal and natural gas across the country. This may change to solar and wind if the problem of electricity storage on a large scale can ever be solved. For now, those locales with a high percentage of solar and wind-generated power, like California, have some of the highest electricity costs in the US. While Seattle, in contrast, benefits from proximity to the mighty Columbia River and a series of dams with electricity costs below 5 cents/kilowatt. There is no obvious winner among the leader here, except to distance themselves from the fol-lowers who can’t buy or negotiate at the same scale.

The second economy of scale is the number of data centers: whomever has the most will win because once a data center is built, then a cloud provider has an incentive to fill it with customer data. The top three cloud platforms spent $30B last year creating data centers and infrastructure, so it’s hard to imagine many companies being able to keep up, especially if they aren’t growing at or above market rates. The likely outcome of this investment is that other cloud vendors will choose to exist only on someone else’s cloud, such as my earlier references to PTC and SAP running on the leading cloud platforms.

If infrastructure costs and investments are where the top vendors separate themselves from the pack, it is in services that they differentiate themselves from each other. Services include the benefits and advantages of

one leading cloud vs the others. Google is betting big on AI technologies. Microsoft is taking a balanced approach of existing CIO/IT relationships, database innovation like CosmosDB, and cognitive computing. Amazon is focused on customers with a cost-first ap-proach that dares anyone else to make a profit.

A winner-take-all model is the likely outcome for transition to the cloud; the most likely outcome of these aspects of economy of scale are simply more con-solidation more quickly faster. There will be relative advantages in delivering cloud functionality, driven by who can minimize electricity costs, invest the most in data-center construction, and make the smartest bets on capabilities. But it’s currently hard to see any of the leaders failing, due to their relative advantages.

THE ROAD AHEAD

The industry has a long road ahead in the business of IIoT cloud-platform offerings. This much is cer-tain. McKinsey & Company estimates that just 5% of IT data-center work has been transferred to the cloud, and only a fraction of the expected billions (trillions?) of IoT sensors have come online. The existing process-manufacturing market of DCS, SCADA, and HMI is largely untouched by cloud offerings, and manufactur-ers are the single largest creator of data in the world. Any of these momentous shifts in computing could reorder the market and change winners into losers.

While it’s far too early to predict those outcomes, barring something odd in domestic or legal require-ments for the cloud we can expect three things:

1. The road to cloud leadership will go through Seattle

2. There will be a steady march to consolidation3. The cloud question attached to Jeff Immelt’s

retirement is the right one—maybe the only one—worth asking of cloud-platform executives…What

did you do for our cloud business?

®

clearblade.com

103 E. 5th Street, Austin, Texas 78701 | 512-686-3037

ClearBlade is the enterprise Internet of Things software company to rapidly engineer and run secure, real-time, scalable IoT applications.

ClearBlade Enterprise IoT Platform and IoT Edge:The Foundation to build your IoT Solutions.

It is the only cloud agnostic IoT platform engineered with edge-compute designed to connect all things and devices.

Smart factory Connected job site

Predictive maintenance biometric identification

Connected products

Integrated security

Intelligent buildingsReal-time inventory Asset tracking

www.Smart Industry.com-7-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

Enterprise IoT calls for robust, scalable platformsBy Mike Bacidore, Control Design 

The Internet of Things (IoT) isn’t traditional opera-tional technology (OT) and it’s not quite information technology (IT), either. Instead, “enterprise IoT is a new platform context based on the ubiquitous nature of data itself,” according to Steve Jennis, senior vice president, corporate development, at PrismTech.Indeed, while an enterprise IoT system must interface with pre-existing silos of business information and manufacturing data, it also must connect with and facilitate the secure management of data among a wide array of intelligent machines, low-power sensor networks, gateways and protocol converters, mobile devices, data storage, cloud-based applications and more, Jennis explained.

Realizing and maintaining this unprecedented level of seamless data ubiquity is no longer a task appropri-ate to one-off integration efforts. Rather, the scope and nature of the IoT challenge means that scalable, enterprise-appropriate IoT solutions will increasingly be based on purpose-built IoT platforms and services. “I don’t think many people will be building this tech-nology from scratch,” Jennis said.

Jennis, together with GE Digital’s Amine Chigani, principal architect in the office of the aviation CTO, discussed desirable performance characteristics of IoT platforms at the Smart Industry 2015 conference in Chicago.

WHAT FEATURES TO LOOK FOR

While GE is a company that has the ability to build its own IIoT platform, few other companies have the scale, as well as the OEM and IT business acumen to pull it off. So, each company needs an organization

that will drive the value proposition, Chigani said.Writ large, key enterprise IoT platform requirements

include the ability to connect and secure assets, the ability to handle industrial big data and data science applications, as well as mobile/cloud connectivity, Chigani said. Further, platform differentiators include scalability, security, on-demand availability, gover-nance, interoperability, and a gated community where developers can share experiences and gain insight.For Jennis’ part, IoT infrastructure systems that un-leash the most valuable aspects of the IoT—the data—must provide:

• Secure, efficient and ubiquitous device-to-device and device-to-cloud data sharing;

• Scalable, automatic device discovery;• Elastic analytics;• Seamless application interoperability;• Integration of IT and OT domains;• Ease of integration with other IoT building blocks;

and, • Support for edge intelligence.“The platform technology also must address load balancing, API [application programming interface] management, edge management and data ingestion,” said Jennis.

“Over the next five years, we’ll see a huge invest-ment in this space,” predicted Jennis. “New technolo-gies will lower costs for cloud services and mobile device access. We’re seeing more and more people accepting that this journey is an imperative, rather than an option. It will affect the way they integrate, the way they talk to their suppliers and customers. It will change their business models.”

www.Smart Industry.com-8-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

A faster track to the Industrial IoTBy Keith Larson, Smart Industry

Many earliest integration efforts designed to con-nect machines with machines over the public internet and telecommunications infrastructure relied on one-to-one connections and one-off development efforts. That worked fine for a relatively simple connection to a handful of devices. But as the numbers of machines and desired functionality grew, many early developers found they faced an increasingly unmanageable situa-tion.

Such challenges around scalability—together with the desire to help businesses get to market with ap-plications more quickly—have led a diverse variety of technology suppliers to develop software and services designed to streamline implementation and manage-ment of such applications.

At the highest level, these include providers of cloud infrastructure, enterprise software and telecommu-nication services. But an array of IoT infrastructure specialists also has emerged to provide packaged func-tionality for the IoT, some of them specifically tailored for the industrial marketplace. For the most part, they build upon the public internet and telecommunica-tions infrastructure, using technology such as VPNs or lightweight open protocols such as DDS, MMQT, or AMQP to securely connect devices with one another and with cloud-based services and applications.

THE RISE OF THE INDUSTRIAL ISP

Some Industrial IoT (IIoT) specialists, such as Ei3 Technology, eWON and Skkynet, have focused on building out end-to-end network connectivity and cloud-based environments designed to help industrial end users and machine builders to more readily con-

nect with and manage distributed fleets of assets. GE Intelligent Platforms, for example, recently joined the fray with its Equipment Insights offering and already serves a growing number of large, small and medium-sized machine builders through this subscription-based service. Based on GE’s more broadly focused Predix platform, Equipment Insights is designed to collect and manage long-term data trends on indi-vidual machines—or global fleets of them—delivering pre-configured, role-specific key-performance indica-tors (KPIs) and alarms to personnel, including mobile operators and field service personnel.

“Today it’s not about technical feasibility, it’s about economic feasibility at scale,” notes Bernie Anger, general manager for GE Intelligent Platforms’ Control Solutions & Embedded business. “Companies need something that works, not building blocks.” Anger anticipates the rise of a growing number of what he calls “industrial internet service providers (IISPs),” that provide all the infrastructure and services needed, all the way from edge to cloud. “It’s very easy to step into information overload if this is not done correctly,” Anger notes. “Your IISP will have pre-solved many of these issues.”

Industrial automation suppliers also are creating new IIoT cloud services to complement their hardware and software with the intent of helping their customers to get to market with cloud solutions more quickly. Ad-vantech, for example, has developed its WISE-Cloud (for Wireless IoT Sensing Embedded) to provide IoT platform-as-a-service (PaaS) capabilities to the many systems integrators that rely on Advantech products. “IoT solution developers can rapidly build and deploy

www.Smart Industry.com-9-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

applications, or expand cloud applications into soft-ware-as-a-service (SaaS) applications, ensuring faster time to market,” says Albert Huang, vice president of Advantech’s industrial automation group.

DATA AT THE CENTER

Other IoT platform providers address the needs of industrial users by ensuring secure and deterministic data flows directly among connected devices and cloud applications. Centralized device management is an-other key deliverable of these more generally applicable platforms. “We don’t really talk much about the proto-cols,” says Stan Schneider, CEO of RTI, a supplier of IoT connectivity platforms. “It’s all about the data.” Indeed, leveraging a distributed “data bus” architecture based on the DDS standard, RTI, a high-performance networking company and supplier of IoT infrastruc-ture services, has solved the technical challenges required to coordinate large, real-time distributed systems, such as for air traffic control and for autono-mous vehicles. “One of the key challenges facing the

IoT community today is the integration of intelligent systems, including the ability to plug-and-play systems from different suppliers,” Schneider says.

“Technology is not the problem, it’s a corporate-wide infrastructure problem,” adds Steve Jennis, senior vice president, corporate development, for PrismTech, another provider of IoT platforms. “It’s a new way of thinking,” Jennis says, attributing many historical integration problems to an application-centric view of the world. “The data is the key asset, not the applica-tion. Whether new devices, legacy devices or cloud applications, they’re all end points of a publish-and-send,” Jennis explains. “They’re all glued together by a data backbone. The value of the IIoT is ubiquitous data access, it’s about enabling cross-domain integration.”

IoT is evolving beyond an enterprise bolt-on, and will now be the enterprise backbone, Jennis predicts. “All of the cost drivers are pushing that way. IoT now brings corporate-wide data accessibility on demand. Companies can readily add new services that align their offer with what their customers need.”

IoT now brings corporate-wide data accessibility on demand. Companies can readily add new services that align their offer with what their customers need.

www.Smart Industry.com-10-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

Many people want to implement IIoT in their factories, and with the abundance of IoT platform technologies out there, they think it’s a breeze. But many challenges await those who don’t think things through carefully—challenges for which traditional IoT platforms do not have effective solutions.

The first main challenge they will find is trying to figure out how the solution will communicate with all different legacy controllers, PLCs and devices found on the factory floor. They all utilize one protocol or another for communication, and data formats will not be standard across all these differ-ent pieces of equipment.

The second main challenge, and quite possibly the most important, is security. There are many vulner-abilities in an IIoT implementation’s security that can be overlooked at times. The 6 main levels of security that need to be implemented are:

• Connecting to devices• Transporting data• Isolating devices• Handling data-at-rest• Sending commands & controlling devices• Updating systemsWithout properly addressing all these vulnerabili-

ties, any IIoT implementation is at risk. It is danger-ous to implement an IoT platform without properly vetting its security features, as many do not have ways to securely address each one of these issues.

The third main challenge is management and deployment of an IIoT solution and how to scale distributed solutions. Without a centralized portal or management interface, it is extremely difficult to

manage devices, security and data collection for the many different types of industrial devices out in the field. There must be a complete management UI that encompasses the ability to host and utilize drivers for device connectivity via edge gateways, with the abil-ity to manage devices and deploy different applica-tions and analytics at the edge.

The fourth main challenge is figuring out how to make sense out of the data by running various appli-cations at the edge. You need to figure out a mecha-nism to install, update and manage applications for a large number of nodes at once. Having the ability to run applications like complex analytics, anomaly detection and machine learning tools at the edge is extremely beneficial for saving cloud and bandwidth costs for an IIoT implementation. By pre-analyzing and processing data at the Edge, less data or only processed data is needed to be pushed to the Cloud as a result. Without having a mechanism to control and manage this process for a large number of gateways at once, it becomes nearly impossible to do this kind of analysis.

Litmus Automation’s answer to these issues is an edge-gateway platform called LoopEdge. It can be installed on most types of gateways or industrial PCs on the factory floor level. With LoopEdge, manu-facturers have one software that can collect data via gateways by using the drivers that we have created for communication to legacy systems. From there, we provide various applications that can be installed on the gateway to utilize this data, including a local datastore, complex event processing engine, analytics, data filtering and cloud connectivity.

Gap in industrial IoT stack presents edge challengesBy John Younes, Litmus Automation

www.Smart Industry.com-11-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

With this extension of our cloud platform, manu-facturers have one software to manage a market-place of applications and industrial drivers to enable their gateways to interact easily with machines and legacy equipment. We have brought our data cleans-ing and standardization to the gateway level. With LoopEdge, we seek to fill a gap in the IIoT stack, including enabling communication with a variety of legacy machines and devices, security for con-nected devices and managing edge applications. Our

platform can reduce bandwidth costs because it helps clients perform analytics and processing at the edge, which reduces the level of data sent to the cloud. Our early tests have shown bandwidth costs can be cut by as much as 40%.

With a secure edge-level solution to connect to nearly all industrial devices and systems, manufac-turers can liberate, process and integrate the data from the factory floor into the cloud or on-premises enterprise systems in a new way.

With a secure edge-level solution to connect to nearly all industrial devices and systems,

manufacturers can liberate, process and integrate the data from the factory floor into the cloud.

Industrial-Grade IoT Platform.

www.Smart Industry.com-13-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

Cloud-only IoT: stepping into a trapBy Aaron Allsbrook, ClearBlade

Amazon, Microsoft, IBM and other vendors are all dictating that enterprises should build IoT solu-tions leveraging cloud-based macro processing across gargantuan quantities of data. While those vendors are telling feel good outcomes about curing cancer with magical algorithms, they are leading companies down an immature, unproven and high-risk path.cloud-only IoT solutions quickly run into three trouble areas:

DANGEROUSLY SLOW

If you are investing in an IoT solution your expecta-tions will be that it meets certain performance metrics and responsiveness. The reality is that data traveling all the way to the cloud and back can be an extremely timely exercise. During the mobile wave we had an ideal benchmark of 250ms for every transaction. That target is now closer to 100ms for IoT as users expect things to respond immediately. The idea that a sen-sor relaying data across a wireless protocol, then to a gateway, then to a cloud where it bounces from an API manager to a cloud function, to a big database and all the way back in under 100ms is extremely optimistic.

It is more likely the request will take over 10–15 seconds and during that time:

• A tired contractor walked through a hazardous asbestos zone

• A lucky thief drove away with a full haul• A gasping patient urgently called for help• A panicked guest can’t find their child at the

theme park• A hurried carpenter loses his finger in a band saw

Ultimately if a solution doesn’t solve these challenges, it fails to deliver the full promise and potential of IoT.

DAMAGING OUTAGES

IoT solutions are fundamentally built on an ac-tive connection to the internet, but the internet is not always consistent and available. We must have other core capabilities to guarantee reliable connectivity and uptime. Whether it’s an ISP not delivering the quality of service expected, a cloud vendor having scheduled/unscheduled outages, or an internal networking issue, internet delays and outages are a fact of life for every-one. The consequences of only using cloud-only IoT solution can mean:

• A factory stops production• A warehouse doesn’t ship any products• A home owner’s doors won’t unlock• A hospital postpones a surgery

IoT solutions must have the ability to run discon-nected and independent of the cloud vendors. Failure to build offline architectures results in financial losses, and real lives at risk.

EXPONENTIAL EXPENSE

Every IoT analyst is predicting there will be billions upon billions of connected things in the coming years. The IoT cloud platforms today have a transactional, easy-to-adopt-but-daunting-at-scale model for pricing. Each message costs you a little bit of money and in the beginning your solution costs only pennies. Sadly, if you achieve success, the micro costs quickly become exorbitant, far exceeding the cost of dedicated infra-structure or traditional licensing. This means that:

• Maintaining the temperature in your buildings will outweigh energy savings

• Tracking your warehouse inventory will cost more than the real-time benefit

www.Smart Industry.com-14-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

• Hiring an employee to control access to a phar-macy will be cheaper than automated monitoring

The biggest risk to the success of IoT solutions comes in the form of failed business models. Nothing exposes a flawed business strategy more than an unsustainable cost model.

CONCLUSION

The Cloud should be part of most IoT solutions that get created. Amazon, GE, IBM, Microsoft, Google are all adding value that should be leveraged. Unfortu-

nately the tools and models they offer today box com-panies into their specific cloud solutions and lead them down a path of failure. Without additional vendor support and the addition of other third party vendor solutions for edge computing, these early cloud-only solutions are doomed to fail.

IoT vendors that include gateway/edge based solu-tions, for real-time actionable events will be required for IoT solutions to succeed from adoption to scale.

For you to realize the value of IoT, you will need more than just another cloud vendor. 

For you to realize the value of IoT, you will need more than just another cloud vendor.

INDUSTRIAL Internet of Things [IIoT]

Support Higher Bandwidthin Harsh Environments

CONNECTION AND RELIABILITY

www.ofsoptics.com

DATA

SENSORS

CONTROL AUTOMATION

SMARTFACTORY

AUTONOMOUSROBOTS

INDUSTRIALINTERNET OF THINGS

Optical Fiber Solutions for IIoT Connections and Infrastructure

www.Smart Industry.com-16-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

New software for traditional hardware manufacturersBy Mark Patel, McKinsey & Company

With the transition to Industry 4.0 with its connected machines and sensors that continuously collect data and transmit it to central servers over WiFi, even machinery and equipment manufac-turers need to upgrade their products to digital. Other industries that used to be strictly analog have already made the switch. Today, the average car, for example, has more lines of software code than an Apple Macbook.

By 2012, smartphone makers already employed twice as many software developers as hardware de-velopers. And a good two-thirds of all machinery and equipment manufacturers now also offer their custom-ers software solutions.

So how do companies successfully tread the path from analog products to digitally ready products? How do they equip their machines with the right software? They need to bring in new skills and talent, as well as new organizational structures and processes. They need to focus on what creates value. 

Companies that previously specialized in the mechanics of their machinery will find it extremely difficult to suddenly develop a convincing strategy for installing software from a standing start.

What do customers want? How much are they prepared to pay? What are our competitors doing?

Unfortunately they lack the experience to answer these questions.

The following principles can help develop a software strategy that really delivers value:

Develop a detailed plan for the transformation that fits the company strategy

Software requires more frequent updates and ongoing support than traditional mechanical prod-ucts—which is why the company needs its own software strategy. This strategy must outline the software-specific capabilities that will differentiate the machines from rival products in the future, what type of software is needed, and the deadlines for achieving this. First, however, market research needs to identify which problems or inefficiencies customers encounter that could be solved by software.

Intel, for example, developed a range of digital assis-tants for its high-performance chips used in advanced analytics. In its market research, Intel discovered that customers often feel they are on their own when they run into problems—hence the development of these help programs. The strategic plan for software devel-opment is based strictly on the company’s overall strat-egy and its quantitative targets for the most important products. And if brand image is a crucial component of the strategy, this must be supported with particu-larly advanced and powerful software. Automaker Mercedes plowed extensive resources into establishing digital capabilities—from entertainment and naviga-tion systems to autonomous driving. 

Top management must be involved in the develop-ment of the strategy

Without the chief executives, nothing will work.

www.Smart Industry.com-17-

TECHNOLOGY REPORT: THE EVOLVING LANDSCAPE OF I IOT PLATFORMS

Without the impetus that only the top management can provide, transformation efforts will generally focus only on smaller projects, and never fully realize the potential that a full-scale rollout throughout the organization can deliver. And only top management can make the strategic decisions necessary in the event of target conflicts. For example, does the company primarily want to develop software to boost sales of hardware products, or does it want to achieve addi-tional revenues through software sales?

Focus on the company’s strengths rather than trying to emulate the strategy of a start-up

For most traditional manufacturers, it makes little sense to go into direct competition with start-ups when they lack their pace, agility, and specialist skills. Instead, they should concentrate on products where their strengths can help—their customer base, brand appeal, and industry knowledge. Aggressive new market entrants can even be combated by forming alli-ances with competitors to help develop better software. Audi, BMW and Daimler, for example, work together as partners in the mapping service Here, which they acquired from Nokia. Here delivers the accurate, auto-motive grade maps needed for autonomous driving—and since it also supplies other automakers, it keeps mapping service providers from outside the industry at a distance.

Strategic aim: Establish an unassailable position and achieve network effects

An ambitious target, but entirely feasible: Many companies have become indispensable in their par-ticular field because they offer unique products or services. Siemens, for example, succeeded in develop-ing machines and automation software for production lines that are now used by 14 of the world’s 15 biggest automakers, while capturing an 80% global market share in the industry. Companies that offer a strong product can also invite external software developers to develop apps—the more smart applications a product has, the greater its appeal. After launching the iPhone, for example, Apple set up its own App Store, which delivers very strong revenues.

Develop a pricing strategyCustomers don’t trust free products—and businesses

don’t like them because they generate no revenue. Which is why strategists should come up with lucra-tive pricing strategies: One option is the “freemium” model where the basic software is offered free with the purchased device, but a better version with more features costs extra. Another option is a pay-per-use model either for the software alone or for the overall package. And a third option is a subscription system regardless of use—again, either for the software alone or for the machine and programs.  

If brand image is a crucial component of the strategy, this must be supported with particularly advanced

and powerful software.