Farms today are raising more than crops. They’re also raising data. Companies such as Tom Farms of Leesburg, IN, are using sensors, apps, and drones to track and analyze soil, weather, and other conditions to help them optimize yield and use resources more efficiently. These new data sets let a farm produce more high-quality crops with fewer resources – a blending of economic and environmental advantages.
This supercharged form of business-process optimization, otherwise known as the Internet of Things (IoT), can save a large organization hundreds of millions of dollars a year. In manufacturing, smart sensors within equipment that stream data to mobile apps can alert managers to errors and issues that could lead to a major production breakdown. Having access to timely, granular data can save a company precious time fixing problems, improve results, and increase the life
Mercedes-AMG made notable improvements to an important daily process – engine testing – by using sensors to monitor the interactions of up to 100 engine components. Combined with a high-performance analytics engine using in-memory technology and predictive software, the platform detects engine failures immediately so that engineers can terminate testing and start troubleshooting. The new monitoring system gives back the equivalent of one day a week of testing capacity, cutting ample overhead from the testing process.
Although the various components of the IoT, such as networks, smart devices, and Big Data analytics, have not yet reached their full potential and may not do so for years to come, now is the time to begin experimenting with the IoT and creating a long-term strategy, says Mike Kavis, VP and principal architect at Cloud Technology Partners, an IT consultancy. Those who choose to ignore the trend will suffer the consequences. “They’re going to fall behind because all their competitors are using these technologies,” he adds.
The hyperconnected economy is growing in size and impact:
- The worldwide IoT market, consisting of devices, IT services, and connectivity, will grow to US$1.7 trillion in 2020, at a compound annual growth rate of 16.9%, according to IDC.
- By 2020 there will be 25 billion connected things, Gartner reports
- According to a new global IoT decision maker survey from IDC, 73% of respondents have already deployed IoT solutions or plan to deploy them in the next 12 months. Nearly 60% of respondents consider the IoT a strategic initiative, with 72% of healthcare industry respondents, 67% of transportation industry respondents, and 66% of manufacturing respondents identifying the
IoT as strategic.
- Six of ten CIOs surveyed by the Economist Intelligence Unit say that not being able to adapt for hyperconnectivity is “the gravest risk their company faces.”
The IoT will transform IT
The question becomes who should lead the development of IoT within the organization. IT executives will be integral players in the game. But the person who can best take the corporation forward has a line of sight to procurement, supply chain, the workforce, the digital and physical assets, and all the customers: the CIO. This kind of CIO is one with vision, someone who can define where the puck is going.
Beyond leadership, a new type of IT organization will be needed. It will need to be more agile and distributed across the business. Companies will also need to redesign data center and application architecture to deliver real-time data intelligence when and where it’s needed. Integration needs to occur not only between internal systems but with external data sources, including sensors, mobile apps, and partner Web sites. This complex integration architecture must be high performing and have 24×7 support. In other words, cloud computing.
None of this will be easy and it will require a team of committed executives to pull it off. Creating the right vision from the start will help avoid painful backtracking later on.
Defining the opportunity
Encapsulating the IoT into a single strategy or even a single set of technologies will be difficult. “IoT is a fancy word for ‘everything technology’ moving forward, because nearly almost everything will be connected at some point,” says Samuel Greengard, author of The Internet of Things. “It is the superhighway for all these connected devices that allows for more agile, faster capabilities.”
The IoT offers an opportunity that has no boundaries, and CIOs need to determine how to make the business case. Here are some ideas:
Target a single area for business gain.
A gas company might need a large cash reserve to pay for a potential spill, but with an active real-time monitoring system on its pipelines, the company might be able to reduce that reserve because of the lower risk.
Look to other industries for inspiration.
When a life sciences company developed technology that analyzes blood flow, a construction company CIO applied the theory to monitoring water pipes for leaks, recalls Martha Heller, president of IT executive search firm Heller Executive Search.
Partner with a senior executive.
CIOs can get started on the IoT by going directly to the CEO or other senior executives with their ideas. Then, says Heller, they can create a minimally viable product to show the potential, market it internally like crazy, and then improve it.
Since the IoT is a broad area for potential applications, one risk is that departmental heads will go off ad hoc, says Jonathan Reichental, CIO of the City of Palo Alto, CA (see “Palo Alto’s CIO hopes to build a truly smart city”). “I think if anyone went out there and looked at one of the high-profile smart cities, they’d quickly realize it’s a mix of innovative and interesting things, but it doesn’t really tie anything together,” he adds. As the CIO, it’s important to connect the dots with a strategic framework.
Lean on outside expertise.
BeThat holistic approach extends to engaging partners that can help with both strategy and implementation. The ideal IoT provider delivers consulting, service, and support that is highly integrated with the business and the technology infrastructure.
Partnering inside the business and out
CIOs should lead the charge on the IoT vision, but they shouldn’t go it alone. The reality is that IT spending is now shrinking after several years of growth; Gartner predicted a decline of more than 5% in 2015.7 Amid resource constraints, CIOs will need to develop close partnerships with senior business counterparts: the CFO, CMO, and VPs of product and operations. Those alliances will help CIOs devise new ways to tackle a painful and costly process or generate new revenue streams.
“To have a seat at the table, CIOs will need an understanding of finance and the customer so that they can articulate ways to generate revenue and more profitability through these initiatives,” says Greg Kahn, an IoT advisor to corporations and IT vendors.
The CIO’s primary job in the shift to hyperconnected organizations is as chief collaborator and negotiator, one who gains influence by guiding business units, not by dictating actions. “It’s no longer people coming into my office and asking for permission,” says Reichental. “They are going to start projects on their own, and we’d better have a framework by which they can plug into the overall vision.”
CIOs need more effective ways to integrate with the business. Here are just two ideas that companies
Business technology task forces
When Kathy McElligott was the CIO of Emerson Electric, she determined that although the company was collecting mountains of usage data from sensors in its products, IT wasn’t really capitalizing on that data, writes Heller.8 As a result, McElligott created a business IT strategy board with senior executives from across the company. The group gets together regularly to discuss important technology-driven strategies and how to increase their value to the business.
New reporting tools
IT can help by using simple tools to deliver the right kind of metrics to business executives. These metrics should deliver a real-time pulse on the business, looking at sales, operations, and financial data and analyzing it quickly through an easy-to-use dashboard. That data will increasingly stream from Web sites, devices, and sensors as mobile and IoT applications grow across the business.
CIOs also need to facilitate external partnerships that are core to the success of the IoT. Industry-specific ecosystems are forming to develop solutions that work beautifully for the customer. This has played out in the smart-home market as big companies such as Google collaborate with Nest Labs (which Google now owns) and Asus to create solutions for customers. The Nest thermostat learns the temperatures you like and programs itself to adapt while telling you when a setting is saving energy. The Google-ASUS OnHub router allows you to wave your hand above it to prioritize Wi-Fi to a specific device in your home.
Partnering for IoT success should include these strategies:
Create IT product managers. When an IoT idea comes up from within the business, the CIO can assign a staffer to act as product manager to follow the idea, vet whether it’s viable and potentially revenue generating, and determine the requirements, says Heller.
Send IT missionaries to make friends in the business. CIOs shouldn’t expect open arms from business managers when they come looking for collaboration. When a CIO asks for help in creating something mind-blowing, the response, says Heller, may be: “Yes, yes, but could you fix our e-mail?” When biases rear up, send an IT manager or analyst who’s well connected with the business counterpart involved to start the conversation, Heller suggests. These nonthreatening fact-finding missions can help the CIO gain leverage faster with business units.
Meet with executives from other industries. Kahn convenes thought leadership discussions around the country with senior business managers from different verticals. When the VP of design from a consumer products company meets with the head of smart-home products from a cable company, new ideas for solving problems can flow back and forth. The key is to get that conversation going between different industries. Winning companies in the future will have mastered the art of collaboration, Kahn says.
Develop close relationships with technology vendors. Vendors are quickly developing new solutions and services that can help CIOs tackle (and offload) the complexity involved in IoT strategies. Some of those solutions include cloud computing and infrastructure management, security advice and protection for hyperconnected systems, integration services, and data management and analytics. Start with your core vendors first, since they already know your business and are best equipped to handle the technical and
Avoid dead ends. By working with a partner that is broad enough to cover the applications, network, data and analytics, platform, and service components, IT will ensure that solutions can be easily integrated, adapted, and maintained over time.
The future IT organization: productized and integrated with the business
Cloud computing began the trajectory for IT departments to move core infrastructure and IT management activities outside of the company. That trend is accelerating with the IoT because CIOs must make an even tighter connection between technology and the business. Technology and data are core components of product development, not just enablers of business processes. Internal IT teams will have enough on their plates to build the right strategy, design the architecture, and collaborate with business teams. Outsourcing the day-to-day activities frees IT to work on these bigger projects.
Developing and managing the technology to enable IoT is highly complex, however, and IT will need help there too. Large cloud infrastructure and software vendors are delivering IoT toolkits to help CIOs get started and manage costs. IT departments at midsize to large companies will likely depend on a mix of outsourced and internally managed systems and processes, although it may be hard to justify the DIY approach going forward. “The smart IT shop would leverage SaaS [software as a service] and other vendor solutions that do this as a core competency,” says Kavis.
Internal skill sets will also need to change. Many roles will spin different functions to enable the creation, measurement, and refinement of IoT-driven business models, says Greengard. “Some companies are embedding business thought leaders on their IT teams.”
IT staff will require new knowledge for technology integration and orchestration, since the party of players is bound to grow when multiple applications, technologies, devices, and service providers collide to bring forth a single solution. Analytics and Big Data skills and knowledge will also be in high demand.
CIOs will need to reassure people who must transition to new jobs, says Kavis. “It’s about helping IT staff realize that even if their jobs change, they can move to a higher-value role, such as a database-as-a-service expert or a security expert, rather than being an expert on a particular vendor’s product,” he says.
There’s also been a lot of talk recently about bimodal IT structures, in which one IT group manages operational IT issues such as e-mail and the help desk and the other leads revenue-driving projects involving mobility, cloud, and the IoT. In a traditional company with legacy IT systems, the bimodal structure makes sense, says Kahn. Smaller, digital-native companies have the ability to outsource a large portion of the IT grunt work while focusing their internal efforts on analytics and strategy.
Some IT organizations will choose to focus on domain technology expertise and homegrown solutions. GE recently hired 1,000 software developers and data scientists to help spearhead its IoT initiatives.9 The company is investing millions on industrial software solutions and services by enabling machine connectivity from their equipment to the software and hardware of major IT vendors.10 “They think it’s important that their IT people and engineers are closely tied to the business,” says Kavis.
No matter how the work is sourced, speed is going to be imperative. Keeping hyperconnected applications always up and running while bringing forth new capabilities means a dramatic change in how IT teams operate. “The goal is a very flexible and fast IT approach,” says Greengard.
New IT requirements
Enabling and supporting IoT applications requires massive orchestration of applications, devices, and sensors to collect and integrate the data. Creating a reliable platform that spans multiple sensor technologies, integrates with business networks and supply chains, and offers innovation without constraint is not an easy proposition:
- The optimal platform will incorporate in-memory analytics to power
real-time processing and intelligence.
- Companies will need a flexible database architecture to collect, merge, and process data from any number of devices and systems within minutes.
- Predictive software and dashboards bring the complex analysis to support decision-making on PCs, tablets, and phones.
- Enabling and supporting IoT applications requires massive orchestration of applications, devices, and sensors to collect and integrate the data. Creating a reliable platform that spans multiple sensor technologies, integrates with business networks and supply chains, and offers innovation without constraint is not an easy proposition:
In addition, IT vendors will need to integrate their products with the many different sensor types. Traditional enterprise applications were designed for interactions with people; now it’s about machine interactions with systems. The concept of a core system that runs your process and workflow for your business but is aware of hyperconnectivity is essential in the future.
Getting this right enables complex scenarios, such as placing in a physical store beacons that can report higher levels of customer traffic in one department or aisle and then automatically trigger a process to increase supply of particular products by integration with supply chain systems and procurement networks. Merging those traffic patterns with in-store and e-commerce purchase data can deliver deeper context.
And this is just the beginning. Much of the technology infrastructure for the hyperconnected business is still uncharted territory. Securing these systems is going to be top priority.
Jeep recently suffered the consequences of an incomplete IoT security system when a hacker discovered a vulnerability in its onboard computer system, allowing vehicle controls such as brakes and steering to be disabled remotely. IoT hackers can do far more harm than simply stealing information, such as credit card numbers. The IoT gives attackers opportunities to compromise systems that can result in physical consequences, such as harming or killing people, warns Lance Hayden, a professor at the University of Austin’s School of Information and managing director at Berkeley Research. “Network-enabled medical devices, among others, are being looked at closely for their risk of harming a patient if hacked,” he says.
CIOs and CSOs will need to pay close attention to the security practices of their suppliers and partners and set rules and standards for other providers that connect to their platform in order to minimize risk.
The CIO’s greatest feat
IT executives leading IoT initiatives aren’t just engineering another big project, they are leading digital transformation. They must be able to partner effectively within the business, partner strategically outside of the business, map out the most cost-effective technology and vendor strategy to enable innovation, set the vision, redesign IT organizations, and encourage experimentation everywhere. More than ever, they will have to get their hands deep into the weeds of the technology. “CIOs will need to be more technical to figure all this out,” Heller says. “They cannot be high level.”
Getting this right might just be the greatest feat the CIO will ever accomplish, with ample rewards along the way. Many CIOs are looking at the IoT as a rebirth of the value of their role.
Dinesh Sharma is VP of Marketing, Internet of Things, SAP.
David Sweetman is Senior Director, Cloud Global Marketing, SAP.
Polly Traylor is a freelance writer who reports frequently about business and technology.