79% of enterprises surveyed have Internet of Things (IoT) initiatives in place today to better understand customers, products, the locations in which they do business with customers, or their supply chains.
45% of enterprises use IoT technologies to monitor production and distribution operations.
40% of Enterprises Are Growing Their Services Businesses With Internet of Things Initiatives.
Manufacturers expect Internet of Things initiatives to drive an average 27.1% revenue increase by 2018.
These and many other insights are from Tata Consulting Services’ TCS Global Trend Study 2015 – Internet of Things: The Complete Reimaginative Force (186 pp., PDF, opt-in) published earlier this week. You can find the methodology of the report here, and on page 173 of the report. A summarized report of survey demographics are provided here and also on pages 176 – 182. The TCS Global Trend study is based on interviews 795 executives from multinational enterprises operating in North America, Europe, Asia-Pacific and Latin America with average revenues of $22B. The TCS research team created four high-level categories of IoT business usage including premises monitoring, product monitoring, customer monitoring and supply chain monitoring.
Key take-aways from the study include the following:
- Globally enterprises expect to increase revenues 16.3% between 2015 and 2018 using IoT initiatives, with North American companies projecting an average 18.1% revenue gain. Asia-Pacific companies expect a 17.9% revenue gain in the forecast period and Latin America, 17.8%.
- Providing mobile apps to customers (46.5%), production and distribution operations to track product flow to customers (44.9%), digital sensors in products that send data to the company on how products are performing (25.2%) are the three leading uses of IoT technologies today. Digital sensors in distribution and supply chain locations (25.3%) and digital devices that are used for tracking customer usage (13.5%) are the remaining two of the top five ways enterprises are using IoT technologies today.
- Industrial manufacturers predict IoT initiatives will increase revenue 27.1% from 2015 to 2018. Of the thirteen industries included in the study, industrial manufacturing is by far the most optimistic with regard to IoT’s ability to drive increased revenues from 2015 until 2018. High tech sees strong potential as well, predicting 19.4% revenue growth from today through 2018.
- Travel, transportation and hospitality, industrial manufacturing and banking & financial services are the top three industries when ranked on average IoT spend per company in 2015. Travel, hospitality and transportation also leads IoT spend as a percentage of revenue (0.60%) across all thirteen industries surveyed.
- 54% of enterprises place sensors on products valued between $1M and $10M. The more expensive the product, the higher probability there is an integrated sensor designed to track the products’ performance over time. TCS found that overall only 26% of enterprises are using digital sensors today. This percentage skews to high end products as the following graphic illustrates. Manufacturers are using the data provided by these sensors to sell aftermarket and maintenance, repair and overhaul (MRO) services.
- Enterprises who sell products valued more than $10M are the most likely to invest in IoT initiatives. Manufacturers of capital-intensive products are projected to spend $334.9M on IoT initiatives this year globally. Conversely, companies whose products sell for less than $100 are projected to spend just $39.1M of IoT initiatives in 2015. Manufacturers are seeing the opportunity to create information services for complex, expensive products based on each assets’ performance history, sold to their customers using a subscription –based revenue model.
- Product monitoring (31.1%), customer monitoring (26.6%), supply chain monitoring (23.2%) and premises monitoring (19%) are the priorities enterprises are assigning to IoT initiatives. Product monitoring is dominated by manufacturers who sell products with prices from $1M to $10M and $10M and above. Customer monitoring includes fitness wearables and the subscription services offered to customers of these devices, providing them with insights into how they are progressing to health and fitness goals.
- Increasing the service business (40%) and driving revenue with customer product usage data (27%) are the top two areas where business models are being redefined by IoT initiatives. Streamlining supply chains to make them more efficient and more leasing activity of company products including adoption of a product-as-a-service model (15.4%) are also starting to emerge as a catalyst of business model change.
- By 2020, IoT initiatives are projected to increase the services business (40.3%), drive greater revenue with product usage data (28.7%), and bypass entities in the distribution channel (22.8%). The following graphic breaks down projected business model changes that TBS found from their analysis.
- 47.7% of market leaders are driving revenue from customer product usage data versus 20% of IoT follower companies. One of the most fascinating areas of this study is the section on Learning from the Leaders. This section provides a thorough analysis of enterprises leading their industries in IoT investment versus IoT followers. The following graphic compares IoT leaders and followers by business model changes made as a result of IoT initiatives.
- The following video is an excellent summary of the study results and provides several useful insights into the industries analyzed and spending forecast of IoT initiatives. TCS provides a summary of average investments by enterprise and predictions of revenue growth through 2018 in this video:
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