In 2016, IIoT Discussion Pivots to Business Cases

As we start to discuss 2017 and possible developments, the Industrial Internet of Things (IIoT) discussion in 2016 has moved from pilot projects to the much larger beast of business cases and, to some degree, Return-on-Investment (ROI).

Successful internal and external pilot projects have appeared in many business journals, paving the way for business case discussion this summer and in the conference season. Joe Barkai goes further, to some degree, with business cases and defines as “enterprises and businesses moving to an ‘outcome economy,’ in which companies will “create value not just by selling products and services (using IIoT), but by delivering complete solutions that produce meaningful ‘quantifiable business outcomes’ for customers.”

>> Related Content | Joe Barkai Interview: IIoT Implications for the Outcome Economy

GE Digital has been demonstrating its  predictive maintenance solutions internally for the past couple of years, with its acquisition of Meridium’s asset management technology  and its Predix platform push. Recently, GE announced a successful predictive analytics initiative with Brazilian steel producer, Gerdau, based on a successful pilot project. Now, the Gerdau use GE’s SmartSignal, historians, services and remote monitoring for more than 600 assets in eleven steel plants in Brazil.

A recent post from Panoramic Power Blog discusses the possibility for accelerated IIoT installations at legacy plants. The post cites LNS Research and it really depends on the industry and application fits, such as remote monitoring solutions in Oil and Gas.

According to the findings of an industry analysis conducted by LNS Research, last year companies took a careful approach – installing sensors on only a small percentage of assets.

Reading between the lines of the above chart, one can reasonably infer that last year’s pilot deployments proved successful, as this year there are plans to increase smart, connected asset retrofits by over 50%.

As always, market adoption will be a function of ROI. LNS Research expects adoption to increase at an accelerated pace as organizations enjoy quick wins from pilot deployment and pursue full-scale legacy “smartification”.

The last point about “quick wins” is interesting as many old-guard manufacturers need ROI in less 18 months for projects to go forward. So, which way is the wind blowing for management when it approaches IIoT deployments going into 2017?

As Joe Barkai pointed out in our conversation, below, a transition could take place for enterprises:

One of the ideas that I proposed is to think about investment in IOT borrowed from a model in economics called real options.  To do injustice to the definition which is to make it very simple, the idea is that some investments that an enterprise makes are foundational, they’re platforms.  They are the platform for future business.  

In the case of IOT, instrumenting devices, creating the cloud infrastructure, creating some of the prediction algorithms, dealing with security, these are all foundational.  They themselves have no business value but they enable future business value which is exactly the idea of the real options in economics.