IoT Services: A Customer’s Top 10 Considerations for 2018

We predict that 2018 will be another +30% growth year for professional services firms’ internet of things (IoT) business. The industry’s revenues from IoT-related projects soared past the $10 billion milestone in 2017. Its more than 100,000 engineers did roughly 10,000 projects for 8,000 clients. The IoT business is vibrant and growing rapidly. The IoT is core to the digitalization revolution and it touches every sector of society—it will sustain the services industry for decades to come.

Service providers have built some considerable IoT expertise by now. Fifteen of the players we researched each executed more than 200 IoT projects last year. Five did over 1,000. How are customer needs evolving? What requirements should they place on their services firms in the year ahead?

Expectation Driven by Experience

It requires a broad brush indeed to paint a picture of IoT. We are addressing a revolution—something that will impact on a truly global, societal scale. So, services firms must address the needs of the vastly experienced as well as those of the absolute beginners: consider large industrial conglomerates that have been employing IoT-like technology to manage cost, track assets, and control sophisticated manufacturing equipment for fifteen years or more versus a small lighting contractor that’s decided to deploy sensors to turn itself into an As-a-Service business. But, some trends are clear. They affirm a growing level of competence from both customers and service partners.

Customers are being more “outcome” focused. They are learning just what IoT is capable of and their expectations are rising. First, they want a service partner that can offer a full end-to-end solution. Then, there’s the issue of scalability. Customers know that if their “solution”, be it OT/cost or product-service focused, takes off, hundreds of end-points could turn into millions. (OT is Operational Technology, tech used in running factories, buildings, etc.).  Then, there’s the lifetime of the solution to think about. Is upgradeability going to be an issue? This forward-thinking approach, learned from experience, is leading to more contracts that consider end results, so outcome-based pricing is on the rise.

Customers are increasingly focused on enterprise transformation rather than just asset optimisation and cost management. Nowhere is this truer than in the industrial sector, with its decade or two of experience in utilising IoT-like solutions in factories. Proven ROI is encouraging the C-suite to deploy the technology across the company, thus butting IT against OT.

This dealing with the meeting of IT and OT is set to grow. It has the potential to cause huge problems as legacy infrastructure meets up-to-date, future-oriented technology. The tech is only half the problem, though. What of the clash between IT and engineering management cultures?

Security is high on customers’ minds. (There’s an understatement!) The sort-of-good-news is that it is now a known problem, and it gets big attention. Customers look to see that security is being addressed in every element of the project—from the communications deployed through the various elements of the IoT platform, the user interfaces, and down to the hardware and even the silicon.

Speaking of IoT platforms, there are apparently opposing trends here. Most customers are trending toward standard platforms like AWS, Predix, or Azure, rather than service-provider-proprietary offerings, but there is a growing number of customers that request solutions involving platforms customised to their product or solution alone.

When it comes to data, customers are looking for their services partner to utilise the latest and best data analytics techniques. They look to extract every last drop of value from the data generated by things and sensor arrays. A lack of the right analytics can be the downfall of a project.

On the theme of technology, customers consider services firms that have the capability of integrating artificial intelligence, virtual reality, augmented reality, “Alexa-like” voice interfaces, blockchain techniques, drones, wearables, or smart materials into their solutions.

The mix of projects is changing. In the past, cost optimisation and asset management dominated IoT. The manufacturing, utilities, and natural resources sectors led the way. However, product and service oriented engagements are on the rise. Customer-facing solutions that grow company revenues are taking a bigger share of the pie, with high-tech, consumer, healthcare, hospitality, media and telecoms, insurance, and financial sectors becoming much more active with IoT.

Competitive pressures are becoming a key motivation for customers, driving them to consider investing in IoT projects. This is a signal that IoT is starting to noticeably impact key sectors, whether it’s for managing costs or enhancing products and customer satisfaction.

The Edge vs. Cloud debate is growing along with the technology’s capability. Should the data from the Things be sent to the Cloud for processing and storage.  Or, does the operation require more immediate analysis and action that could be provided by a computing Gateway box situated close to the Things, on the edge of the network, in the field.  How should you partition your project’s compute and storage capability? Where should it reside? What data and analytics latency can you live with?

Bottom Line: A Customer’s IoT Checklist for 2018

Exhibit 1: Ten Critical Areas that Customers Should Address with Their Service Providers

Source: HfS Research, 2018

There is much experience to draw on from professional services firms if you are considering an IoT engagement, from strategic consulting through productization, deployment, and operations. Here is a checklist of things to look for when engaging a service partner on an IoT project.

1. Be outcome-driven and expect your service partner to contribute to your vision.
2. Choose a firm that offers a full end-to-end solution and that has experience with solving issues of scalability and upgradability. Expect your partner to be willing to have a stake in the project’s outcome.
3. Think beyond simple goals like asset optimisation and cost reduction. Work with your service partner to consider how IoT might transform your enterprise. They should be able to draw on considerable experience to help you.
4. In your ideation and visioning stage, consider solutions that could utilise artificial intelligence, virtual reality, augmented reality, robotics, voice interaction, drones, wearable tech, and so on. Good services firms have already completed contracts that have involved solutions using such technology.
5. Analyse your competition. Have they started using an IoT-based approach yet? Can you gain advantage over them through use of IoT?
6. Don’t underestimate the change to people and process that your IoT project will cause. This will generate push-back from all over your organisation, and could kill it. It is the single biggest reason projects fail.
7. Consider security and privacy at every step of the project.
8. Service providers are happy to offer a variety of IoT platforms to meet your needs—proprietary or standard. They can also customise to meet your needs.
9. IoT is all about what you do with the data generated. Expect your services firm to have access to sophisticated analytics solutions and great visual display tools.
10. Work with your service partner to think through the Edge vs Cloud decision. Where should compute power and data storage reside? Take into account scaling and upgradability again.

Please note: Our IoT Services Blueprint is on its way in the first quarter of 2018.