Over 80% of companies increased revenue by investing in Internet of Things, a new study has found.
While there already may be more than two connected devices accessing the web for every person on Earth, this is merely the ground floor of the Internet of Things’ gargantuan promise.
In fact, new data from Juniper Researcher has revealed that the number of smart devices is expected to surpass 38.5 billion in 2020, up from 13.4 billion in 2015, constituting an increase of 285%. And though it may appear that connected home-centric applications have been the focus of attention as of late, it will actually be the industrial and public services sector – such as retail, agriculture, buildings and smart grid applications – that will form the majority of the user base.
The report goes on to list Michelin and John Deere as examples of companies who have successfully transitioned their businesses towards being service-based companies through the use of IoT, as opposed to their previous incarnations as product vendors. Most notably, the tire maker has begun deploying sensors in trucks to monitor driver performance and better mange fuel consumption, while the tractor giant has been using smart machinery to provide real-time analysis to farmers.
Juniper notes that interoperability will play a pivotal role in the IoT’s progression. While conflicting standards continues to slow down its pace, there are signs that standards bodies and alliances are beginning to come together to overcome these hurdles.
“The IoT represents the combination of devices and software systems, connected via the Internet, that produce, receive and analyze data. These systems must have the aim of transcending traditional siloed ecosystems of electronic information in order to improve quality of life, efficiency, create value and reduce cost,” Juniper added.
Aside from that, Tata Consulting Services has published a study that suggests 26 companies (including 14 in the United States) plan on spending $1 billion or more on IoT initiatives this year. These organizations will stem from seven industries: six from banking and financial services, five from automotive, four from travel, hospitality and transportation, four from high tech, three from insurance, two telecommunications firms, one from retail and another from healthcare.
Manufacturing along with the travel, hospitality and transportation sectors are planning to spend 0.6% of revenue this year, while media and entertainment companies will dish out 0.57% — this is significantly more than the 0.4% average spending in banking and financial services. The report also shows that companies predict their IoT budgets to continue increasing year-on-year, with spending expected to grow by 20% by 2018 to $103 million.
“Across the board, those companies investing in IoT are reporting significant revenue increases as a result of IoT initiatives with an average increase of 15.6% in 2014. Almost one in ten (9%) saw a rise of at least 30% in revenue,” TCS writes. “Company executives still see the IoT as a growing area for businesses, with 12% identifying a planned spend of $100 million in 2015 and 3% looking to invest a minimum of $1 billion among the 795 companies surveyed.”
Companies at the very forefront of this drive for innovation through IoT have seen the biggest benefits from their investments. The top 8% of respondents, based on ROI from IoT, demonstrated a staggering 64% average revenue gain in 2014 as a direct result of these investments. TCS points out that the biggest business impact, at the moment, is that companies can offer their customers more bespoke products and services. Yet, by 2020, this will convert from marketing functions to increased sales, through adding considerable value to the customer.
This is reflected in the finding that the most frequent use of IoT technologies by companies is tracking customers through mobile apps, used by almost half of all businesses (47%). Over 50% of IoT leaders admit to investing in IoT to track their products and how these were performing, whereas this is only the case with 16.1% of the respondents with the lowest ROI from IoT. What’s more, nearly eight in 10 enterprises (79%) surveyed claim to have IoT initiatives in place at the moment to better understand customers, products, the locations in which they do business with customers or their supply chains.
According to the study, revenue increases are being experienced worldwide with all regions reporting double-digit growth in 2014. However, it’s the U.S. firms that have enjoyed the largest gains of 18.8%. Europe as a whole is seeing a 12.9% jump, while APAC has shown a 14.1% rise and Latin America an impressive 18.3%.
Meanwhile, North American companies will spend 0.45% of revenue this year on IoT initiatives, while European companies will spend 0.40%. APAC companies will invest 0.34% of revenue in the IoT, and Latin American firms will spend 0.23% of revenue. This has led to North American and European companies more frequently selling smart, connected products than are APAC and Latin American companies.
Despite the encouraging data on investment and its impact on revenue growth, the report found that major challenges remain in realizing the promise of the Internet of Things for businesses across all sectors, namely corporate culture (ability to get employees to change the way they think), leadership (having top executives who believe in the IoT) and technology (questions around big data, integration with enterprise systems and security).
The healthcare sector has been hailed as having the greatest potential to benefit from the IoT, but remains one of the most underdeveloped industries due to regulatory restrictions and data security concerns that currently hinder innovation. The sector plans to spend just 0.3% of revenue in 2015, but will be increasing this investment by at least 30% come 2018. In comparison, executives in the industrial manufacturing sector are reporting the largest increase in revenue from IoT, with an average 28.5%, followed by financial services (17.7%), and media and entertainment (17.4%). The automotive industry has the lowest revenue gain with just a 9.9% increase.
[Image: Tata Consultancy Services]