IoT adoption has not happened as quickly as expected for most businesses, according to a report by the Economist Intelligence Unit (EIU). And yet, for those businesses that have achieved successful implementation, the return on investment (ROI) has been significant.
The Internet of Things (IoT) has almost reached the peak of Gartner’s well-known Hype Cycle. The transformative potential of this emerging technology is not disputed, but, in spite of extensive media enthusiasm, adoption rates have been slower than expected or desired from a business perspective.
This is the crucial conclusion in the EIU’s Internet of Things Business Index 2017, which surveyed 825 business leaders worldwide and found that 56 percent of respondents agree that their progress with IoT has been slower than expected.
While significant, this will not come as a surprise to many in the industry who have questioned whether previous IoT adoption predictions, from the likes of analyst house IDC, are “over-optimistic”.
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Practical challenges
The fact remains that, though many business decision-makers believe IoT technology can improve the productivity of their workforce and automate a number of internal processes to reduce costs, the practical challenges to IoT adoption are still significant.
As the EIU report shows, just one in five respondents feels IoT has had a “major” impact on their industry. This, respondents suggest, is largely due to the high costs of IoT infrastructure (29 percent) and fears around security and privacy (26 percent).
Security, in particular, remains a key issue, especially in light of recent distributed denial of service (DDoS) attacks targeted at domain name service provider Dyn and the security journalist, Brian Krebs.
Christian Renaud, an analyst with The 451 Group and interviewed by the EIU, attests to this.
“IoT security has been bubbling up in our data and our client conversations as a major concern for some time now, and these attacks will make it an even bigger priority,” Renaud said. He believes that incidents like the Dyn breach may prompt governments to mandate IoT security standards, which could in turn slow adoption.
However, while these are different concerns to those stressed in the EIU’s 2013 report on the same subject, whereby a lack of skills and knowledge at employee and management level were suggested as the major barriers to adoption, the end result remains the same: lack of IoT investment.
The EIU report indicates that most businesses have not yet moved past the research and planning phase they were in three years ago, and, surprisingly, in North America IoT adoption for monitoring and measuring internal operations has actually slipped.
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Positive signs, early ROI
Nevertheless, the report indicates that there are positive signs for IoT, as high-profile businesses like Danish facilities management firm ISS and German carmaker Daimler successfully transform their business models. Daimler, for example, now claims to be “mobility company, not a car company”. And across the survey base, there is still a significant appetite for adoption despite the challenges.
25 percent of respondents say IoT has “sparked a new wave of innovation [in our organization] thanks to data that gives us better insights”, while 22 percent claim it has “unlocked new revenue opportunities from existing products and services”, and 15 percent say IoT has lowered costs.
More promising, however, is that 55 percent of executives – seemingly undeterred by initial challenges – said they expect IoT to help them make internal cost savings and generate external revenue in the next three years. These businesses are learning from the early adopters and are seeking out external expertise and training to assist with implementation.
Thomas Lesser, head of R&D at Big Ass Solutions, a manufacturer of smart fans and lighting, corroborates this in the EIU report.
“While the IoT has been a challenge in some respects, we’re alive to the fact that there’s potentially a huge upside here for us in terms of using the diagnostic and preventative maintenance data generated by smart fans and smart lighting to create new customer service and support strategies,” he said.
“Right now, I’d say we’ll have to implement new layers of employee education and technical support deployment to take advantage of this, but over the long term we’ll definitely be able to scale up this aspect of our business.”
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Recipe for success
That just 32 percent of respondents still believe IoT will have a major impact on their business in future, suggests many businesses still need to be convinced that IoT is more than a gimmick and can deliver ROI.
But, as the report concludes, with many businesses laying the groundwork for IoT by learning from early adopters and adapting their own business models, a platform for success is forming.
Many businesses may still be in the early stage of adoption, but with 50 percent claiming to have the backing of the board for IoT projects, we can expect to see many more successful projects in the next three years.
This 2017 EIU IoT report was co-sponsored by ARM and IBM. The researchers surveyed 825 global company leaders from a range of sectors from banking to health and energy to infrastructure. More than half of the respondents were C-suite executives with a significant proportion working for firms with annual turnovers of more than $500 million.
Disclosure: Internet of Business Editor Jessica Twentyman was the lead author on this report, working in a freelance capacity for The Economist Intelligence Unit.