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Hitachi: the Lumada IoT platform

© Analysys Mason Limited 2018

COMPANY PROFILE

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HITACHI: THE LUMADA IOT PLATFORM

Ahmed Ali



Founded

Hitachi: 1910

Hitachi Data Systems: 1989

Hitachi Insight Group: 2016

Hitachi Vantara: 2017

Offices Headquarters: Tokyo, Japan

EmployeesConsolidated number of employees: 303 887 (March

2017)

Regional focus Global

Revenue USD84.8 billion (JPY9162 billion) (FY2016)

Selected IoT

customers

Caterpillar Marine, Curtin University, Daicel, Daikin,

Okuma, Penske

Selected IoT

Partnerships

Atos, BT, Capgemini, Cisco, DGI, DXC Technology, GE

Healthcare, HCL, IBM, Infosys, Intel, M1, Microsoft,

Oracle, SAP, Telus, T-Systems, Tata Consultancy Services,

Tech Mahindra, VMware, Wipro

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Figure 1: Hitachi company factsHitachi is a multinational corporation that contains groups of

companies operating across different industries and technologies

including consumer electronics, power systems and information

technology systems.

Hitachi’s first move into information technology was in 1989 when

it established Hitachi Data Systems (HDS) as a mainframe

company. In 1999, HDS expanded into the storage business.

Over the years, the company has built and strengthened its data

management and analytics capabilities through acquisitions such

as oXya, Pantascene and Pentaho, as well as internal

development. As of 2016, Hitachi has 2700 research and

development employees and its spend on R&D was equivalent to

3.5% of its revenue in FY2016.

The Hitachi Insight Group was established in May 2016 as the

group’s Internet of Things subsidiary with the Lumada IoT platform

as its core solution. The division is built on and supported by other

Hitachi platform solutions such as the Pentaho Big Data platform

and the Hitachi Content Platform (HCP).

Hitachi merged its platform businesses HDS, Hitachi Insight Group

and Pentaho to form Hitachi Vantara in September 2017, to offer

solutions and services for digital transformation including IoT, big

data, analytics and machine learning. The Japanese IoT market

remains under Hitachi’s management while its worldwide

business is managed by Hitachi Vantara.

Company summary



Figure 3: Hitachi’s revenue by region, worldwide, FY 2016

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Hitachi has nine business segments; Social Infrastructure &

Industrial Systems (23% of revenue), Information &

Telecommunication Systems (20%), High Functional Materials &

Components (14%), Electronic Systems & Equipment (12%),

Automotive Systems (10%), Construction Machinery (7%), Smart

Life & Eco-friendly Systems (6%), Others (6%) and Financial

Services (2%).

In FY2016, ending in March 2017, Hitachi’s revenue fell by 9% YoY

to USD84.8 billion because of the lower sales in the Information &

Telecommunications Systems, High Functional Materials &

Components, Smart Life & Eco-friendly Systems and Financial

Services. Also, there was a significant 48% revenue drop in the

Others segment due to the restructuring of some units such as

Hitachi Transport System. The company’s revenues and profit

declined by 2% since 2013 (Figure 2).

Hitachi’s local market of Japan is the company’s biggest,

generating 52% of FY16 revenue. Almost 10% of the total revenue

came from China. Including the rest of the Asia-Pacific market,

Hitachi’s generated 72% of its revenue in the region.

North America and Europe sales made 12% and 11% of the total

revenue, respectively. With 2% YoY increase in revenue, Europe

was the only region that showed growth. This is because of the

increased sales in the Electronic Systems & Equipment segment

and the Social Infrastructure and Industrial Systems segment

which relates to the growth in the railway business in the region.

Figure 2: Hitachi’s revenue and gross profit, worldwide, FY2013–FY2016

Company summary: financials

89.5 90.5 92.984.8

23.1 23.9 23.8 22.0

0

20

40

60

80

100

FY13 FY14 FY15 FY16

(US

D b

illio

n)

Revenue Gross Profit

Source: Hitachi

52%

20%

12%

11%

5%

Japan

Asia

North America

Europe

Other regions

Total revenue:

USD84.8 billion

Source: Hitachi


© Analysys Mason Limited 2018 4

Hitachi’s main IoT offering is the Lumada platform which offers

device management, application enablement and analytics

capabilities. The platform also integrates with other Hitachi’s

platforms and products such as the IoT Appliance and Pentaho

Data Platform which provides advanced analytics capabilities.

Hitachi operates in the IoT edge and fog computing space with its

IoT Appliance. Supported by Hitachi’s server business, the IoT

Appliance brings computing and storage resources to the

enterprise with a preloaded Lumada platform.

Hitachi utilises the platform in different ways to generate revenue.

First, the platform is the key enabler for its co-creation business

where Hitachi works with partners to develop end-to-end IoT

solutions. Second, the platform is licensed separately based on a

PaaS model. Third, Hitachi uses the platform internally within its

units.

The co-creation approach allows Hitachi to use a range of its

services portfolio and be involved in different stages of the IoT

project development including business consulting, proof of

concept execution, commercial rollout and service management.

In FY2016, the overall Lumada business generated around

USD8.3 billion (JPY900 billion) in revenue. The company is

expecting the revenue to grow by 8% by FY2018, reaching more

than USD9.3 billion (JPY1 trillion).

IoT business overview

SIM management, subscription management

Huawei PartnersKey

Hitachi IoT Appliance

Lumada

Lumada

Industrial Energy Smart cities Partners’ apps

Pentaho (Analytics)

Co

-cre

ati

on

ser

vice

s

Fog and edge

computing

Connectivity

management

Device & Data

management

Application

enablement

Applications

Clo

ud

Ed

ge

Analysys Mason’s IoT

platform stackHitachi’s IoT platform stack

Figure 4: Hitachi’s IoT Platform stack



Hitachi is trying to increase IoT platform revenues and move

away from relying on the co-creation services

Hitachi’s main IoT revenue stream is coming from services related

to partner co-creation and system integration rather than from its

platform sales. At the moment, Hitachi is trying to compete in the

IoT platform market by promoting its operational technology (OT)

expertise and integration services as differentiators. Targeted

customers in such scenarios will be customers with limited-to-

none IoT deployment experience.

The company, however, is aiming to expand on its platform-as-a-

service (PaaS) delivery model. Hitachi is planning for Lumada core

sales to become the main growth driver for Lumada business in

the next two years.

To do so, Hitachi is leading a campaign to demonstrate the

capabilities of its platform by increasing the number of IoT use

cases and diversifying them through collaborating with partners

as well as using the platform internally. The Lumada’s 270-

member development team is continuously collecting insight from

the platform current deployments to improve future collaborations.

Based on 203 Lumada deployments in FY2016, Hitachi identified

four primary reasons for customers to use the platforms. These

are to boost sales, cost optimisation, risk mitigation and cost

visualisation. By listing these different business benefits, Hitachi

expects to accelerate the market recognition of the platform.

The adoption of the platform by Hitachi’s own units is an

important part of the company’s IoT strategy as a technology

provider.

First, internal operations support expanding the use case library

and feed back into the overall platform development efforts. Also,

by leveraging the platform internally, Hitachi will raise the

confidence in the platform’s capabilities in industrial applications,

given the extent of Hitachi’s own industrial operations.

Second, the platform will help transform Hitachi’s own products

and operational efficiency which are integral parts of its overall

business expansion strategy across verticals and regions.

In vertical markets, Hitachi is targeting growth in four main

domains which are utilities, urban environment, power and energy,

and healthcare, public and finance services. Lumada is a key

enabler for the company to extract additional revenue from these

sectors based on the customised solutions.

Regionally, Japan has been Hitachi’s strongest market However,

the company aims to leverage Lumada to expand its business

globally outside Japan, focusing on Europe and North America

regions. Hitachi anticipates 15% and 13% growth in these regions

respectively by FY2018. Overall, the company plans to increase its

international sales to account for 55% of its total sales in FY2018

compared to only 48% in FY2016.

IoT strategic direction



Figure 5: Hitachi’s key acquisitions and mergers, 2007–2015

Key acquisitions and mergers

Date Company Description

May 2015 oXya Founded in 1998 in France, oXya, provides cloud services and implementation solutions for users of SAP systems

including SAP HANA. oXya operates as a wholly owned subsidiary of Hitachi Vantara.

February 2015 Pantascene Founded in 2011 in the USA, Pantascene developed video and sensor interoperability solutions for security and public

safety applications. The technology is now part of Hitachi’s visualisation suite.

February 2015 Pentaho Founded in 2004 in the USA, Pentaho developed an open source big data integration and analytics platform. HDS

acquired Pentaho for an undisclosed amount as part of its move towards IoT. Pentaho is now the main analytics and big

data component in Hitachi Vantara.

August 2014 Sepaton Founded in 1999 in the USA, Sepaton offered hardware and software solutions and consulting services for enterprise

data protection, backup and recovery. The technology is now part of Hitachi Vantara’s Data Protection Solution.

September 2012 Cofio Founded in 2006 in the USA, Cofio offered solutions to unify and orchestrate data protection in the enterprise. The

technology is now part of Hitachi Vantara’s Data Protection Solution.

September 2011 BlueArc Founded in 1998 in the USA, BlueArc developed a unified storage solution for data-intensive applications. The solution

is now integrated into Hitachi Vantara’s Network Attached Storage (NAS) platform.

August 2010 Parascale Founded in 2005 in the USA, Parascale offered cloud storage solutions to ingest and store structured and

unstructured data at scale.

February 2007 Archivas Founded in 2003 in the USA, Archivas developed solutions that allow customers to manage and protect their online

content. The company was acquired for USD120 million and now is integrated into Hitachi Content Platform (HCP).



Figure 6: Hitachi Lumada’s solution components

Product summary

Product Functions Description

IoT Platform • Device connectivity

• Data acquisition

• Data management

• Application enablement

• Edge analytics

• Analytics

• Machine learning

An open architecture platform that can be deployed on-premise, in the cloud or at the edge. Lumada provides

device management and connectivity capabilities like device on-boarding, device configuration, data

aggregation, protocol translation and information routing. Device data and metadata are exposed to the

applications, services and analytics engines through open APIs.

Through the studio component, the platform enables application development with a set of pre-built modules.

It allows developers to integrate with existing systems and applications. The platform analytics and rule

engines support advanced algorithms for machine learning.

Co-creation

Services

• Strategy analysis

• Proof of concept

• Planning, deployment

integration

• Production

• Service management

These services leverage Hitachi’s industry expertise to create tailored solutions for specific markets and

customers at different stages of IoT adoption. These include consulting and evaluation services,

collaboration on application and solution development, service deployment as well as service management.

Solution Cores • Industrial IoT

• Energy IoT

• Smart Cities

Pre-packaged solutions that provide sets of capabilities and support for certain verticals. Industrial IoT core

leverages analytics and machine learning to deliver smart manufacturing solutions such as Dynamic

Scheduling for production optimisation and Predictive Quality for predictive maintenance.

Energy IoT core utilises AI to solve financial, environmental and efficiency–related challenges in energy

sectors. It allows customers in the energy trading businesses (generation and distribution) to forecast prices,

predict demand and optimise production. It also provides solutions for customers on the receiving end to

reduce their energy consumption.

Smart cities focus on public safety and traffic management for public venues such as airports, hospitals,

transportation hubs and shopping malls through features like facial and object recognition, video integration

and streaming analytics. Related products and services include Hitachi visualisation suite, video management

platform and video analytics.



Figure 7: Hitachi’s selected customers

Use cases

Customer Country Scope

Daicel Japan Daicel is a manufacturer of chemical products including cellulosic derivatives, organic chemicals, plastics and pyrotechnic

devices. The company experienced major recalls for its automotive airbag inflators, which caused Daicel to reconsider its

quality control system and look for ways to analyse the process and the formula data automatically to understand and then

prevent the root cause of the defects,

With Daicel, Hitachi developed an image analysis system that uses cameras to assess activities in the plant and connect

with other manufacturing execution management systems. The solution statistically compares real-time activities with

standard behaviour models that have been pre-defined. It allows the manufacturer to detect failures in the production lines

promptly and lower the risk of product recalls.

Penske USA Penske Corporation is a privately-held company offering diversified transportation services including truck leasing, retail

automotive, motorsports and logistics. The truck leasing division operates more than 240 000 vehicles across 1000

locations.

Penske wanted to develop a connected vehicle solution to improve their vehicles uptime and drivers’ safety. The company

also wanted to keep the customers updated about the status of their leased vehicles. Hitachi collaborated with Penske to

develop the solution combining their own expertise in the big data analytics and artificial intelligence through Lumada with

the customer’s expertise in the vehicles’ data and operations.

Curtin

University

Australia Curtin University covers 300 000 sqm of floor space and is one of the largest universities in Western Australia with more

than 60 000 students and 4000 staff members. The university wanted to deploy an IoT solution to manage its campus

operations and support building utilisation.

Through sensors distributed across the campus, the university will collect contextual data and trends about students and

staff behaviours such as study patterns and course attendance. These will also be supported by building insights such as

the building dynamics and the environmental health in the library. To enable this, Hitachi provided several components

including Pentaho analytics, video analytics and the visualisation solution.



OPPORTUNITIES

THREATS

STRENGTHS

WEAKNESSES

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Analysis: strengths, weaknesses, opportunities and threats

▪ Through its parent company, Hitachi Vantara has easier access to the

wider Asia-Pacific market than other European and American platform

providers like GE and HPE.

▪ Hitachi has been selling platform solutions like Pentaho, HCP and the

Visualisation Suite and has established a customer base that Lumada

can expand into.

▪ Hitachi subsidiaries cover a wide range of verticals, products and

services which provide different channels to promote and sell Lumada.

▪ The industrial and manufacturing vertical is one of the most competitive

markets for IoT platforms. Hitachi is competing against established

vendors like GE Digital, PTC, Siemens and SAP, which are investing

heavily to assert their dominance in this space.

▪ Regional expansion will also be challenging for Hitachi as companies

such as PTC and SAP are well recognised in Europe and North America.

▪ Local dominance is not also guaranteed as companies such as NEC and

Mitsubishi Electric are also becoming active in Japan’s IoT platforms and

smart manufacturing markets.

▪ Hitachi’s experience in both OT and IT translates into strong capabilities

in device and data management, visualisation and real-time alerts.

▪ Hitachi is very active in branding itself as an IoT platform and solution

provider and is working to increase Lumada’s presence in the industry.

▪ The consulting, support and deployment services through the co-creation

offering can be an attractive proposition for companies starting their IoT

projects.

▪ Hitachi reveals limited information about its customers. The company

claims 203 use cases for Lumada but most of the involved customers

are not disclosed.

▪ The platform is not targeted at the wider application developer

community. Instead, customised applications are developed in

collaboration between Hitachi and its customers.



Ahmed Ali (Senior analyst) is the lead analyst for Analysys Mason's IoT Platforms and Technology research programme. His research covers IoT

software, applications and solutions used by service providers to enable their IoT offerings. Prior to joining Analysys Mason, Ahmed worked as a

senior analyst at ABI Research for more than 3 years, where he was part of the next-generation mobile network research programme, covering

wireless and core mobile markets like small cells, in-building solutions, network virtualisation, unlicensed spectrum, and other 4G and 5G

technologies. Ahmed holds a master's degree in Electronics Communications and Computer Engineering from the University of Nottingham and

a bachelor's degree in Electrical Engineering from the University of Khartoum, Sudan.

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