I plugged my iPhone into my new (fuel-emission friendly) VW this week and – for the first time – my car was connected to by digital life. Siri (finally) came alive and started sending my contacts voice to text messages, my favorite Spotify soundtrack was arranging itself in all its glory on my vehicle dashboard, and I didn’t have to worry about tuning radio stations, pairing devices that barely talked to each other, or getting stuck using some horrible proprietary technology my previous car had forced me to use, or those awful attempts at being “appy” from the cable TV providers that look nice, but require months of frustration to figure out.
My car was finally seamlessly connected with my personal apps that run my life, and my suicidal urge to text and drive has been cured by Siri finally doing it for me! While it’s been pretty cool to program the air-con using a mobile app or have automated replenishment of new coffee capsules… being able to take your digital life into your moving vehicle is what IoT is all about. It’s high-time to get past the buzz about IoT being bigger than IT itself – it’s really about sensors, data and most importantly what we can do with this data, and how we can create digital experiences outside of our traditional mobile and laptop screens.
So, without further ado, let’s take a look at the 2017 landscape for IoT service providers and have a chat with report co-author and manufacturing-engineering analyst guru himself, Pareekh Jain, about the emerging landscape for IoT services…
Phil Fersht, Chief Analyst and CEO, HfS: Pareekh, how do you see the IoT market evolving and what are the key IoT trends you have been observing?
Pareekh Jain, Research Vice President, HfS: Phil, the current state of IoT revolves around sensors and data collection and its use in sub-process or process optimization, but there is not enough visible thought or action by IoT service providers in exploiting the potential of data for the business reimagination of the Digital OneOfficeTM. Take the example of Amazon Go – the concept store where there will be no checkout queues (seriously). Shoppers can pick… and just go. The combination of IoT with artificial intelligence and machine vision is what makes Amazon GO possible. This is just one of the business reimagination possibilities of IoT, where these true digital experiences come alive, and we’re finding this kind of conversation depressingly absent in our discussions with some of the service providers.
Having said that, we do see real progress with the foundations of IoT over the last couple of years and are observing five key trends in our IoT research.
1) IoT is for real, but is limited in scale and scope at present. We found many examples of PoCs and actual customer engagements. The customer engagements are small and limited in scope to a couple of business or geographical units. The organization-wide IoT strategy and implementations examples are rare.
2) IoT update is pervasive and use cases are cropping up across all industry sectors. The highest number of IoT examples we have seen are in manufacturing or Industrial IoT, smart cities, and connected cars.
3) Efficiency or cost optimization are the major drivers in IoT projects at present. This is probably to chase the low-hanging fruit and develop business cases for organization-wide IoT implementations.
4) IoT is too industrial and The role of end consumer in IoT is under-appreciated. The majority of current IoT projects are in B2B areas and smart cities, and advantages of IoT to the end consumer are too often a mere afterthought.
5) There is a lack of discussion on the role of algorithms in IoT. The majority of discussion is focused on the use of sensors, connectivity, data collection, data storage and dashboards. People think that analytics is a known capability and, once they have IoT data, they can analyze it in the similar way that they have been doing with their big data analytics. But there are differences in IoT data, namely the formats of data (be it a picture, video, temperature record, etc.), and frequency or volume of data (for example, one can have a continuous stream of temperature recording at every second). Some insights from IoT data can be derived by leveraging existing algorithms, but the broader IoT value will only be nurtured when the enterprise clients and their service providers create new IoT-specific algorithms.
Phil: Why is IoT adoption limited untill now, Pareekh. What are some of the challenges enterprises are facing in their IoT strategy and implementation?
Pareekh: The IoT services offerings are still evolving, and this sector is facing several roadblocks from enterprise clients, service providers, and technology evolution. We are observing four challenges faced by enterprises that are stunting adoption:
1) Enterprise technology complexity is inhibiting IoT proliferation. As older enterprise systems do not have the capacity to handle so much data flow, legacy stacks need to be modernized. Thus, a lot of investment commitment is needed, restricting the scope of IoT implementation. Also, for organizations, greenfield IoT implementations are very rare, so service providers need to carefully select API, SDK, and gateways for easy integration of IoT solutions with other enterprise applications.
2) The lack of alignment of IoT with other enterprise digital and transformation initiatives is limiting IoT’s value potential. The value of IoT is much more powerful when it is combined with other technologies, such as artificial intelligence, machine vision, intelligent automation, etc. as discussed earlier in Amazon Go example. As IoT initiatives must be aligned with the broader digital strategies of the organizations, planning is very important for that purpose. Service providers need to get involved from the digital strategy formulation stage of clients and have to be very strong in IoT consulting.
3) Fragmentation of IoT platforms and IoT standards are creating interoperability issues. At present, 300+ IoT platforms are available, hence service providers are facing challenges developing platform-specific solutions for easy integration. We expect there will be major consolidation in the IoT platform space, similar to what happened in the ERP market in the last couple of decades, but, for now, the major challenge for the service providers is to identify the right IoT platforms they can invest in.
4) Lastly, data security is becoming a major concern for IoT services. Service providers are building capabilities to address the security concerns in IoT, but this takes time to prove the security robustness of solutions.
Phil: And how did the IoT Blueprint analysis turn out?
Pareekh: This Blueprint analysis was interesting and we evaluated 18 service providers for this study.
The As-a-Service Winners are service providers that are being entrepreneurial alongside their clients and innovating in IoT activities, building new markets, paradigms, digital systems, and data flows around a breadth of different types of connected devices. The service providers included in this quadrant are Accenture, Atos, Cognizant, EPAM, Harman, IBM, HCL, TCS and Tech Mahindra. Accenture leads the pack due to its strong consulting base and execution scale in different industry verticals. Atos has a strong client base in Europe and good manufacturing and analytics capability. HARMAN is a mature player in industrial IoT, with a strong vertical focus, including automotive. Now with Samsung’s acquisition of HARMAN, its IoT capabilities will be augmented further. Cognizant has a very solid experience with its clients’ digital journeys and imparts Design Thinking in IoT implementation. EPAM has a good breadth of IoT portfolio and has a full stack approach. A strong partnership environment, engineering heritage, and IoT implementation capability are key strengths of HCL in IoT implementation. IBM is focusing on delivering cognitive IoT solutions and has a broad array of platforms and tools for IoT offerings, with real potential in develop IoT specific algorithms. TCS has deep competencies in multiple industry verticals, possessing the talent and skills to manage large-scale IoT projects. Tech Mahindra leverages its manufacturing heritage in IoT and has a strong implementation record.
High Performers are service providers that execute well around older Industrial M2M models, and are exploring and investing in newer IoT. The capabilities are also related to evolving demonstration of more traction with clients in defining and delivering at scale against business outcomes and co-innovation. The service providers included in this quadrant are Dell, Infosys, NTT DATA, NIIT Technologies, Syntel, and Tieto. Infosys has a strong IoT capability in multiple industry verticals and also has a deep focus on IoT security related features. Dell Services is strong in IoT infrastructure area, and NTT DATA can become a major global player in IoT with integrating the Dell Services offerings into its portfolio. NIIT Technologies is very focused on IoT solutions mainly in the travel and insurance industries and has the capability to scale up the IoT offerings in other verticals. Syntel has strong capability in IoT integration area and can capitalize its IT client relationships. Tieto is co-investing with customers in IoT and has a great portfolio of verticals in the Scandinavian region.
Execution Powerhouses are service providers which have deep pedigrees and competencies in Industrial Internet work on a global scale, with tremendous resources but have to catch up in modern IoT innovation and entrepreneurship. Genpact and Luxoft reside in this quadrant. Luxoft is very strong in automotive & BFSI domain and has a good delivery presence in both Europe and North America region. On the other hand, Genpact has strong partner ecosystem in manufacturing with the lean digital approach.
High Potential service providers demonstrate vision and strategy in IoT implementation but have yet to gain momentum in the execution of it. VirtusaPolaris has high potential with post-merger growth showing promise through rapid maturation as a modern IoT player.
Phil: So what should we be watching for in the next few years in IoT?
Pareekh: Over next few years, we will observe more IoT adoption. We will be watching six key trends.
1) Mega outsourcing deals in IoT services might become a reality. If IoT has to realize trillions of dollars in value as predicted by many analysts, the billion dollar IoT services outsourcing deals should not be far away. As IoT point solutions become more effective and mature, organizations will go for large scale implementation of IoT.
2) More IoT adoption and application of IoT in other verticals apart from manufacturing. Also, the usage of IoT will expand beyond traditional large companies to customers of different sizes including SMBs and also in different consumer applications.
3) IoT partnerships likely to grow further as ecosphere expands. As IoT services need both the hardware and software components, the IoT service providers will collaborate with both software and hardware providers for the IoT network and connectivity related requirements. Also, service providers will develop APIs for IoT integrations and vertical specific digital plug and play solutions for rapid implementation of IoT solutions.
4) More robust security standards will evolve for data security so that data flow can be communicated easily among IoT and other enterprise applications. IoT platform winners may start emerging, which will give confidence and clarity to both enterprises and service providers.
5) The IoT market will see M&As as the Global and Indian service providers look for specialization and boutique consulting in the IoT space to get rapid access to industry domain and technical capabilities. For example, Samsung has acquired HARMAN recently to expand its IoT portfolio (Read here).
6) Lastly, service providers will integrate their IoT offerings as a part of a broader digital transformation or Digital OneOfficeTM offerings by involving cloud, mobile, analytics, automation and security divisions. The IoT consulting expertise will become a genuine differentiator. With IoT analytics, service providers will develop more predictive and prescriptive IoT analytics capabilities and will talk more about algorithms.
Phil: What are your plans for IoT coverage in 2017?
Pareekh: There are three aspects of our IoT coverage. Firstly, IoT is an important component of Digital OneOfficeTM so we will cover IoT extensively along with other HfS analysts as part of our Digital OneOfficeTM coverage. Secondly, we will segment the IoT market and provide deeper insights into individual segments. Currently, we are doing Industry 4.0 services study which will provide deeper insights into manufacturing IoT market. We plan to cover smart cities IoT and consumer IoT separately in upcoming Blueprints. Finally, IoT is all about the ecosystem and we plan to extend our IoT coverage beyond traditional service providers. We plan to cover IoT platforms, telecom players, hardware players and emerging startups also along with service providers.
Phil: Last question, if you have to sum up the state of IoT in one sentence for our readers, what would you say?
Pareekh: I will say that IoT is for real but not transformational for consumers yet. As you said earlier, we need those real digital experiences coming alive with IoT!
A free copy of the HfS IoT Services Blueprint is available to download from hfsresearch.com for a limited time. Register your account and get your copy!
(Cross-posted @ Horses for Sources)