The Internet of Things (IoT) is moving from hype to reality as manufacturers in all industries find that real-time data can optimize a business process, prevent an equipment failure, and save them hundreds of thousands of dollars per year. Connected products are also beginning to touch everyone’s life – such as real-time monitoring of chronically ill patients and automatic alerts to caregivers sent from a smart medicine bottle cap indicating that a patient has skipped several doses.
While the sky’s the limit for the potential of IoT, companies will continue to adopt and implement these applications as they can. CIOs will have a big job in the coming months as they devise and implement strategies and manage risk. Dinesh Sharma, vice president of Marketing and Digital Economy at SAP, and David Sweetman, senior director of Internet of Things (IoT) Services Marketing for SAP Global and Service and Support Marketing, sat down with me to discuss how CIOs can best harness this opportunity.
Fred Isbell: The IoT is not one technology, but a hyper-convergence of many capabilities and innovations – such as smart sensors and predictive analytics. How do you view IT’s challenge?
Dinesh Sharma: Traditional enterprise applications were designed for human-to-human interactions. But now, we’re talking about machines interacting with systems. The concept of a core system that runs your business process and workflow and is aware of hyperconnectivity is essential in the future. Otherwise, the scenario in which data is directly captured and goes right into your supply chain to respond to demand in the stores won’t happen.
David Sweetman: Our wildest technology dreams are now becoming possible because we can gain insight from activities and machines and use them to better help people and businesses. For example, having an intimate understanding of a farmer’s habits when driving a tractor can be combined with weather information, chemical analysis of soil, and seed-growth patterns to make the best use of space, time, and resources. As we rely more on technology to apply real-time intelligence to actions, IT will need to become more involved in the customer’s activities. The CIO is accountable for providing guidance, security, and resilience to these solutions.
Isbell: How can the IoT engender better customer relationships?
Sharma: One of the digital economy’s key tenets moving forward is customer loyalty. Although this can manifest itself in many different ways, it’s most important to prove yourself to your customer every single day. It’s easy to switch. A lot of people say to me, “Well, it’s better to sell this capital asset to company X because you’re done with the sale.” I say, “Yes, but how can you maintain that level of connection to your customer and foster ever-increasing levels of customer loyalty?”
A manufacturer of cleaning equipment for shopping malls could offer predictive maintenance on a unit, so it never breaks down, by using sensor data. To go further, instead of asking the mall to pay $25,000 for cleaning machines, the company can offer a subscription fee for each square footage of cleaned floors. So, in the end, the company is selling the business outcome. And because the cleaning machine is predictably maintained, it will break down less and generate more money over its lifecycle than if a customer had bought it. The customer wins, and so does the supplier.
Sweetman: Amazing changes have occurred in the way companies can get “up close and personal” with their customers through technology. We hear how tapping directly into a customer’s usage patterns can improve products and services and drive loyalty. The IoT enables companies to move from infrequent, subjective insights that lead to “spray and pray” marketing tactics to empirical, use-based information tactics. By understanding the location, context, and use, recommendations can be directed more scientifically, consistently, and sustainably for deeper customer value.
Isbell: How can CIOs lower the risk of IoT initiatives?
Sharma: The great thing about the IoT is the possibility of doing anything for anyone at any time. The bad thing about the IoT is the possibility of doing anything for anyone at any time. It’s a completely unbounded problem. And they don’t tend to fare well. I think it’s important to frame this reality by considering and unearthing the areas of greatest impact through executive-level discussions. Consider a gas company, for example. Large cash reserves are typically needed to pay for a potential spill. However, if you have an active real-time monitoring system on your pipelines, you might be able to reduce that reserve because you have lowered your risk.
Starting small makes a lot of sense, especially in the area of asset utilization and optimization. A case in point is healthcare. There’s a typical overbuy within medical institutions for blood-pressure monitors because they typically tend to go haywire without notice. You pull back a curtain on the first floor, and there are 25 monitors in hiding. To be more efficient, a company could have a monitoring system to keep track of those assets, give a heads up as to when they are failing, and troubleshoot the issue or order a new one.
You don’t have to spend capital money on over-purchasing. You really can achieve better asset utilization.
Sweetman: CIOs are in an enviable and highly visible position with IoT strategies, yet they cannot expose the business to unmanageable risk around privacy, security, and compliance. IT must now advise the business on everything from the sensor to the dashboard – meeting the requirements of legal, processes, software packages, contracts, services, and customer issues. We find that companies drive excitement and results faster when they have a definable beachhead project. Quantifiable business results deliver visibility and executive support for the IoT and can spur more innovative projects.
Isbell: Will CIOs need to change the way they operate to successfully lead these initiatives?
Sharma: Companies need a different type of CIO. You don’t need someone managing a number of IT projects such as upgrading this system to that system. You need someone who can define where the puck is going and who becomes a critical business resource to the CEO.
We ran a survey with the Economist Intelligence Unit last year and found that six out of 10 CIOs believe that hyperconnectivity is the difference between success and failure for the business. That means the CIO needs to be ahead of the IoT game because any decision the CMO makes – such as placing sensors or beacons inside of a store – should demonstrate business value. The transformative CIO will look at that situation, provide the framework for taking sensor data and securing it and integrating it with supply chain and analytics systems, and deliver that information to all the lines of businesses inside the corporation. And then, true innovation begins to happen.
Sweetman: CIOs can seek simpler, highly accountable IT strategies and solutions. Moving applications to the cloud – either private or public and where the components can be managed, monitored, and maintained by the vendor – can free up internal resources and energy for IoT innovation. Choosing a partner that can provide the integrated platform, business network, applications, data, analytics, and service will ensure the solution is seamless and reliable through its lifecycle. The IoT is exciting for the office of the CIO, signifying a transition from systems management to digital transformation.
Isbell: Thank you, David and Dinesh, for your great insights. I imagine we’ll be hearing much more about the IoT at this year’s SAPPHIRE NOW conference. I look forward to learning more and catching up there!
Learn more about how the IoT and hyperconnectivity are reshaping the fundamental fabric of business and technology. Read the SAP Service & Support thought leadership inquiry “Who Will Lead Development of the Internet of Things Inside the Organization?”
About David Sweetman and Dinesh Sharma:
Dinesh Sharma is vice president of vice president of Marketing and Digital Economy at SAP. Dinesh is charged with driving thought leadership, awareness, and adoption of SAP solutions for the digital economy across industries and lines of business. Additionally, he is responsible for leading messaging, positioning, and go-to-market plans across the digital economy portfolio, as well as providing detailed analysis of industry and market trends, customer needs, competitors, economic environment, and emerging business opportunities. Sharma holds a Bachelor of Engineering degree in Electronic Engineering from University of Liverpool, UK. He lives in the San Francisco Bay Area with his wife and two small children.
David Sweetman is senior director of Internet of Things Services Marketing for SAP Global and Service and Support Marketing. David has worked for SAP over 20 years, concentrating on management, strategy, launch, business development, and marketing positions in enterprise software and consulting. His current focus is on the cloud portfolio from SAP, including SAP HANA Enterprise Cloud, SAP HANA Cloud Platform, and line-of-business cloud products and services. David holds a B.A (Hons.) in business and information systems from Huddersfield University in the UK and an MBA in management and international business from the University of Colorado.