Prioritize your ecosystem and innovation for IoT service delivery

The Situation: The internet of things (IoT) applications have transformed the enterprise operations landscape (monitoring, maintenance, workforce management, etc.) through their real-time actionable insights. To capitalize on this opportunity, organizations integrate IoT applications with other enterprise applications. The growing number of large-scale IoT deployments presents an opportunity for service providers, which should examine the critical execution and innovation parameters we highlight here for successful client relationship management.

Recently HFS published the HFS Top 10: Internet of Things (IoT) Service Providers, 2021 report, in which we evaluated 15 leading service providers across four broad criteria: execution, innovation, OneOffice, and voice of the customer. We interacted with 25 enterprise clients across industries during the study about their IoT engagements with these providers, exploring their challenges, opportunities, and experiences. These clients include both technology and business professionals who are associated with IoT initiatives encompassing use-case identification, business case development, roadmap formulation, service provider selection, and overall implementation. Overall, the discussions helped us understand clients’ perspectives on IoT outsourcing and service providers’ roles in deploying and supporting IoT engagements. For example, in industrial manufacturing, there were standalone IoT applications like predictive maintenance for a single site. But now, enterprises are developing centralized command–control centers, including asset monitoring platforms that can provide detailed asset health monitoring insights across different sites. This PoV discusses clients’ expectations and service providers’ performance across different execution and innovation parameters. The PoV acts as a guide for the enterprise leaders to evaluate and benchmark service providers’ performance in IoT engagements across key pointers.

Enterprises are satisfied with the providers’ technical capability, pricing models, and relationship management

We asked participating clients to rate their service providers on a scale of 1 to 10 for execution and innovation parameters. The results in Exhibit 1 show clients are more satisfied with the providers’ execution than innovation.

Exhibit 1: Clients rate service providers’ execution higher than innovation

Sample: 25 enterprise clients
Source: HFS Top 10: Internet of Things (IoT) Service Providers 2021

Clients are impressed with overall relationship management, service delivery, and industry expertise. Providers typically have a high CSAT score and a strong client relationship management practice in the form of consulting with a dedicated account manager or client partner. Enterprises are also impressed with providers’ industry capabilities and solution portfolios, for example, connected operation solutions for manufacturing and connected product and asset solutions across industries.

The convergence of other emerging technologies with IoT is becoming quite noticeable, fueling a new set of use cases. For example, we’ve seen 5G+IoT use cases in smart manufacturing and IoT+blockchain use cases in the supply chain. Enterprises expect service providers to proactively bring up many of these initiatives. We have also observed several examples of edge computing across both smart city and industrial IoT use cases.

Enterprises are also impressed with the providers’ pricing models (including pricing flexibility). Examples of non-linear pricing models have increased, and in most engagements, a non-linear pricing model is blended with fixed-price and time-and-materials models. Some providers like Atos and HCL have reported 50%+ IoT services revenue from non-linear pricing models.

The partner ecosystem and talent management are providers’ key areas for improvement

IoT applications involve various technology components that are often immature and not fully evolved, so a robust partner ecosystem is paramount. Independent software vendors have become key partners for service integrators. For example, with Microsoft, EY co-developed calibration-as-a-service (EY CALIBRaaS) for identifying malfunctioning sensors. TCS launched three sustainability solutions, Clever Energy, Intelligent Power Plant (IP2), and TCS Envirozone, on Microsoft’s Azure IoT platform. Besides traditional enterprise partnerships with hyperscalers and industrial independent software vendors, providers have built academic partnerships and a start-up ecosystem for collaboration on advanced innovative applications. Some providers have built ecosystem networks, including TCS’ Co-innovation Network, LTI’s NILE with collaborations of 9,000+ start-ups and leading educational institutions like MIT, IITs’ IISc and IIMs, and Atos’ Scaler program for co-innovation and joint go-to-market initiatives.

Talent retention is a major challenge for providers; clients prefer not to experience project staffing changes. Also, sometimes IoT projects demand specialized skills (for example, IoT platform knowledge) not readily available in the market. As a result, most providers have dedicated internal IoT training programs for upskilling.

The Bottom Line: Enterprise buyers expect providers to bring more innovation rather than maintain the status quo. Providers should leverage the partner ecosystem to access best-of-breed capabilities.

IoT initiatives are often a part of large enterprise transformation projects and are closely associated with cost efficiency programs, new business and operating models, and new offerings. Transformation projects demand out-of-the-box thinking to change how things are done. Service providers must innovate to contribute to transformation programs through successful IoT deployments.