Manufacturers must break down IT/OT silos for effective digital transformation

As manufacturing adopts industry cloud solutions to leverage operational technologies (OT), information technologies (IT), and the internet of things (IoT), it is imperative to have a partner that understands how these enhance their services and products. However, choosing industry cloud solutions can be challenging for many manufacturers’ technology teams. With the future of the business riding on data and cloud, an incorrect choice for an industry-cloud solution could hamper all aspects of a business’ ability to compete in a rapidly changing market.

Therefore, to aid technology leaders in identifying actions they can take, HFS Research and Hitachi Vantara hosted a Digital Round Table to discuss the convergence of IT and OT and how adopting cloud services can overcome data and information challenges.

Exhibit 1: HFS’ Digital Round Table participants included technology leaders from Fortune 1000 manufacturing firms

Source: HFS Research, 2023

During the COVID-19 pandemic, the adoption of cloud services increased. However, there are multiple challenges when migrating data into the cloud:

• Operational security of data across IT and IoT devices
• Integrating business data as an asset across traditional and public cloud networks
• Developing talent to deal with converting apps and data to cloud architectures
• Ensuring compliance and other regulatory requirements
• Choosing the right cloud partner

Linking technology outcomes to business priorities is the key to overcoming these challenges. HFS found the top three technology areas crucial to the leadership agenda in manufacturing are digital modernization, security and governance, and using data as an asset (see Exhibit 2). In our panel, we expanded on this topic to hear how participants prioritize their digital transformation efforts to improve processes, create digitalization programs (like digital twins), and leverage multi and hybrid cloud. Second, we discussed how critical it is to meet information security and regulatory requirements. And third, we concluded that data from all sources, operational technologies, IoT, and information technology must become an active data asset.

Exhibit 2: The top three technology issues on the leadership agenda are ongoing digital transformation efforts, security, and using data as an asset

Sample: 58 executives across Global 2000 enterprises, HFS Pulse Dashboard
Source: HFS Research, 2023

Data management strategy is paramount, but it requires domain relevance

You must begin with a data strategy. If you don’t have a good grasp on your data needs, including where it’s created, how it’s secured, and where it’s delivered, your project may struggle to achieve the desired outcomes. Along with a plan for data, you must engage with partners, hyperscalers, and software firms to architect a new data framework for hybrid industry-cloud solutions.

Multiple times in our discussion, our leaders cited enterprise resource planning (ERP) as often being the first capability to be hosted in the cloud. However, its processes and data still straddle cloud and on-premises systems. This bifurcation creates the need to assess, build, run, and support a hybrid-cloud model that hosts, computes, and delivers data in a business context. A review of governance and security policies quickly rises to the top of the agenda. Dr. Goetz Wehberg, Senior Vice President, IT for Fresenius Group, offered an example:

There is a good reason to consider the hybrid cloud for the future. In pharmaceuticals, there is a need to document the serial numbers of products so they can be identified as genuine drugs. This is also a requirement from FDA. This requires traceability and trackability on the shop floor and the world outside. This is one of the key drivers to adopting cloud services in the pharmaceuticals industry.

Dr. Wehberg points out the need for hybrid cloud solutions in his example specific to the pharmaceutical manufacturing domain. A note to the wise: Success requires drilling into sub-industry domains, so be ready.

Bringing industry cloud and data together is the key

The increased adoption of cloud alongside industry-specific applications continues to emphasize the importance of data as a differentiating asset for forward-thinking manufacturing firms (see Exhibit 3). The ability to scale operations and deliver a holistic view of data relevant to a line of business or user boosts the efficiency and effectiveness of operations. Access to data is crucial to create value, cites Barney Carter, IT&D Senior Product Line Manager, Continuous Improvement and Maintenance, Reckitt:

It is difficult to get hold of data right away and analyze it. Bringing the required data points together before the release of a product for a quality control test requires controllers in place to understand the data to start with.

Adding operations data to the master data further boosts a firm’s operational effectiveness, but the firm must tightly manage the data. While the cloud makes it easy to capture data, extracting it requires controls. According to  Hitachi Vantara’s Siddharth Sharma, former Global Leader in IoT, OT, and Industry Cloud, Hitachi Vantara,

Organizations are creating ontologies of OT and IT data where all data is recorded but is not published until it is found to be relevant. To succeed, you need to know what data needs to be accepted or rejected because what is being rejected for one could be important for other use cases.

Exhibit 3: How important is data for a manufacturer?

Sample: 58 executives across Global 2000 enterprises, HFS Pulse Dashboard
Source: HFS Research, 2023

Could talent put cloud strategy at risk?

Digital operations in manufacturing add complexity to workforce requirements. Traditionally, expertise in manufacturing has been around ERP, but it is expanding to include cloud, data science, and analytics skills. Identifying the right strategic partners for building in-house center of excellence (CoE) capabilities is required to bridge the skill gap. Rash Jayasekara, Chief of Digital Manufacturing Rolls-Royce, mentioned,

From a talent perspective, one is about closing the digital skills gap of your current workforce, and the other is to scale adoption and get value out of it. One must use unconventional strategies to tap into the current talent market.

To address gaps, manufacturers are infusing talent strategies from the services industry. Panelist Abid Ameen, Head of Operations and Supply chain, Beverages, PepsiCo, shared a point that partners can fill the talent gap when he said,

Manufacturing industries are trying to overcome the hurdle of attracting the right talent, but in the meantime, there are opportunities to work with third parties to sourcing digital talent and partnering with them on digital projects.

The Bottom Line: Manufacturers must find data-savvy and industry-expert partners to level up their cloud and data strategies.

Manufacturers need partners that understand their industries, including talent, domain, and technology gaps. They need to bring data management and governance frameworks to ensure security, resilience, and adaptability.

The journey to a successful modernized manufacturing operation integration starts with unfolding the value of data, including management, security, governance, and setting business outcomes. Siddharth Sharma from Hitachi concluded our session by mentioning that industries must continue to invest in hybrid cloud solutions to scale their ability to deliver business outcomes driven by the growth of data from operations, devices, and transactions. However daunting this might be, given the work that has to be done, working with partners, hyperscalers, and business leaders will allow manufacturing firms to navigate challenges effectively.