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Larger companies are starting to change the way that they operate as the Internet of Things (IoT) takes hold, a report from Tata Consultancy Services found this month. The key takeaway? To truly realise gains from these connected device ecosystems, use them to generate customer value and find new business models.

Tata surveyed 795 participants, mostly in North America and Europe (6.3% of them were in Canada), to find out how they were using IoT and how useful it had been for them. Four out of five firms had an IoT initiative of some sort.

Companies with the greatest revenue increases from IoT projects tended to focus more on producing customer value, rather than just value for themselves, the report said. Typically, they did that by identifying new business models and product or service offerings. They were more likely to look at how they products were performing for customers using IoT technologies, while some monitoring usage patterns.

On average, it found that companies increased revenues by 16% last year, in business areas where they had an IoT initiative. However, these revenue increases varied widely by sector.

IoT is having its biggest effect in industrial manufacturing, where companies reported the largest average revenue increase (29%) from IoT initiatives. 40% of these companies are using sensors to monitor the products that they sell to customers. They also came second in IoT expenditures, shelling out $121 million per company. This was second only to the travel industry.

Perhaps that’s one reason why by far the most prevalent use of IoT is to track customers through mobile apps. Half the companies in the report do that today. The second most common activity is tracking products through production and distribution.

Seventy-nine percent of companies already use IoT technologies to track key aspects of their activities, such as customers, products, or supply chains.

Investment in the IoT is growing, the report found. Companies with IoT initiatives will invest $86 million (0.4% of revenue) each to expand their activity in this area, and they predict that IOT budgets will write 20% to $103 million by 2018.

Companies with more expensive products will spend far more on I0T. Companies whose products sell for more than $10 million on average (manufacturers of aircraft engines, for example) will spend $335 million each this year on IOT projects, compared to companies with products priced at $100 or less. They will spend $39 million on average.

These facts all tied together when you consider the potential for IoT to introduce new ways of selling products. For example, Rolls Royce works with some customers to offer engine thrust on a ‘power by the hour’ model, and other engine manufacturers are said to offer similar performance-based contracts. These arrangements are easier with IoT technologies.

The companies surveyed, which were spread across a variety of industry sectors, ranged in size, but were mostly large firms. One in five and less than $1 billion, while 16% made $50 billion or more.



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