Internet of Things deployments worldwide have overwhelmingly focused on simple use cases that are fast to deploy and show a quick return on investment but fall well short of the transformational potential promised. That is the key finding from the latest research from new analyst firm Transforma Insights. The research comprised analysing hundreds of real-world deployments of IoT, AI and other digital transformation technologies with a view to understanding what, how and why organisations are deploying new technology. The overwhelming indication is that IoT deployment has focused on straightforward incremental enhancements to business operations, such as remote monitoring or asset tracking, rather than being used as a truly disruptive competitive differentiator, for instance through switching to an ‘as-a-service’ business model.
The first indicator that IoT is still immature is the average timeline for projects. Over 70% of IoT projects take less than a year to deploy, while almost 45% of IoT projects have a payback time of less than a year. Almost by definition this is the low-hanging fruit. It’s also interesting to note that these aren’t short-term projects. Almost 70% are expected to last over 5 years, with 20% going beyond 10 years. It seems to be accepted that these projects will have long deployment horizons, but only those that pay back in only a year or two are given the go-ahead. Short-term thinking.
IoT has the potential to be severely disruptive to companies and industries around the world. Transforma Insights analysts like to talk about it as the competitive differentiator of the 21st Century. With that in mind it’s sobering to see that the vast majority of projects have a significant impact only on internal organisational processes. Almost 70% of projects had a significant or transformational effect on process efficiency, but the equivalent impact on value proposition (i.e. changing the organisations’ external offering) was below 25% and barely 5% could be described as disruptive to the industry as a whole. The implication is that IoT is predominantly being used only as a way to shave a few dollars off the bottom line.
As part of the analysis of the deployments, the Transforma Insights analysts also dug into the complexity of the deployment, focused on three factors: the functionality of the application, the number and complexity of relationships between the stakeholders and the global scale of the deployments. Only 22% of projects had a high or very high level of functional complexity, 4% had comparable level of stakeholder complexity and only 11% had to support deployments in large numbers of countries. Again this is indicative of a focus by deploying companies on low friction deployments.
One more of the hundreds of data points collected is noteworthy. The Transforma Insights analysts also assessed the level of operational risk associated with the solution, including the potential to disrupt operations and the criticality of potential disruptions. Less than 5% of organisations engage in IoT projects that rate above a ‘medium’ risk. Not only that, but over 40% of projects are aimed at de-risking, i.e. they are specifically intended to reduce operational risk.
The picture painted by all this information is clear: IoT today is being deployed in a very narrow way to make incremental changes to existing operations with the intention of reducing costs. There are, of course, some lighthouse deployments that show us what is possible, but in most organisations the adoption of IoT shows a stark lack of ambition. The good news is that the IoT journey still has a long way to go and the opportunities for truly disruptive use of IoT are still there to be embraced.