Enterprises expand their expectations of IoT technology adoption and spending

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Andy Castonguay - Principal Analyst, Machina Research

An exclusive article by Andy Castonguay, Principal Analyst, Machina Research.

As with many significant technology shifts, the growth of the Internet of Things (IoT) has suffered from the industry hype cycle of inflated growth expectations. At Machina Research, our most recent survey highlights that for many enterprises, IoT has already become a strategic endeavour in both planning and spending. In fact, the path of adoption continues to advance at a significant pace with 38% of US-based companies reporting that they are actively using IoT solutions, which they increasingly consider a key approach for maintaining competitive advantage in their industries. As a result of the growing recognition of the strategic value of IoT data throughout the enterprise, Machina Research’s survey indicates that 81% of US enterprises will have deployed an IoT solution by year-end 2018. This rapid adoption rate will have significant impact on enterprise technology spending, reflected by the expectation of survey respondents that IoT spending will make up 43% of their IT budgets by 2020.

The Machina Research enterprise study of 420 US-based business decision makers, conducted in July 2016, reveals a growing and complex market for enterprise IoT solutions. The quick pace of enterprise IoT implementations coincides with a growing acceptance that data generated from connected things has strategic value in many aspects of the enterprise including product development, customer service, operations, and finance, among others. While the overall pace of IoT project implementation underscores the increasingly relevance of IoT, the most promising aspect of the study is the extent of which US companies are beginning to leverage the data from IoT solutions in many facets of their organizations. With the vast majority of US companies expecting to have IoT solutions in place by year-end 2018, the coming years will be a remarkable period of opportunity for the IoT vendor community to help companies integrate IoT into their operations and products. As one of the world’s leading IoT markets, the US remains an important indicator of global IoT adoption in developed economies, so the results of the survey highlight the promise of the IoT industry in major markets across the globe.

One of the more interesting shifts in IoT adoption is the manner in which companies are structuring their internal decision processes. While product managers and developers continue to play a key role in initiating project efforts, this most recent survey indicates that IT departments are beginning to play a stronger role in leading overall IoT strategy decisions (at 54% of companies) as well as taking on a leadership role for actual implementations (at 61% of companies). This reflects the growing maturity of IoT solutions and the strategic nature of the implementations that often have far-reaching implications for the broader enterprise. In fact, the survey respondents indicated that 70% of short-term IoT investment will address the complexities of integrating IoT solutions with legacy operational, resource management, and CRM systems. For these complicated integrations, enterprises appear to be consolidating overall decision making with IT to ensure better interoperability of IoT systems across the enterprise and focus on longer-term future proofing.

Despite the growing involvement of IT and C-level executives in IoT strategy and in IoT solution development, most companies simply do not have all the internal resources and areas of expertise required to build an IoT solution with only in-house staff. As a result of this common situation, the majority of enterprises turns to third party vendors for implementation guidance and execution. Overall, the majority of companies looks to full-service partners to help with end-to-end integration and implementation. Among the most trusted organization types is systems integrators, with 48% of companies choosing systems integrators and software platform companies as the most trusted partners in the design and execution of the projects. This underscores one of the key concerns that companies have about IoT projects: complexity of implementation. While security remains the top enterprise concern about adopting IoT solutions, the complexities of integration and implementation represent key challenges to the IoT adoption process, which is further complicated by a highly fragmented ecosystem of solution vendors and relevant technologies.

Despite the common challenges of IoT solution implementation, the survey confirms that enterprises increasingly view IoT solutions and the associated data as crucial tools to understand product performance, gain insights into customer usage behavior, and provide both product development and customer service organizations with important, data-driven feedback that can drive further improvements in product design and customer engagement. While just 15% of companies currently leverage IoT data in this manner, a full 69% of participating companies report that they have plans to develop this kind of data reporting mechanisms for their products and systems, underscoring the value of IoT-generated data in their businesses. Ultimately, this changing pattern of data usage reflects the expanding value of IoT-generated data for all aspects of a company’s business. This highlights the need for short-term partnerships for the design and implementation of IoT solutions, but also the longer-term organizational transformation that will be required for companies to truly gain new levels of efficiency and insight from IoT data from end products to supply chain partnerships.

The views and opinions expressed in this blog post are solely those of the author and do not necessarily reflect the opinions of IoT Business News.
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