The Internet of Things: TCS Global Trend Study 2015-A Manufacturing Industry Perspective

Manufacturers Gear Up for the Internet of ThingsIn the still unfolding story of the Internet of Things (IoT), a star has emerged among industries: manufacturing. In fact, manufacturing firms achieved the highest revenue gain from their 2014 IoT initiatives among the industries examined in our latest Global Trend Study, 'Internet of Things: The Complete Reimaginative Force.'¹

Industry leaders like General Electric are investing significantly to make their products smarter and transform their businesses to offer new services. They're tapping into previously unavailable data to create those services, and reimagining business models as a result.

TCS surveyed 795 executives from four regions (North America, Europe, Asia-Pacific, and Latin America) to learn what business leaders are doing now, and what they plan to going forward, for the Internet of Things (digital hardware and software embedded in items ranging from consumer goods to industrial machines). This report presents the manufacturing perspective of the broader study.

The study focused on four issues:

n Who’s investing the most in IoT initiatives, and what magnitude of investments do they plan to make in the next few years? Moreover, what exactly are they investing in?

n What IoT technologies are companies using, and what are they doing with them? In what aspects of their business are they using them (marketing, sales, service, supply chain, and so on), and how have they improved functional performance? �

n Has the IoT enabled some companies to fundamentally change their business models – the very products and services they offer, and thus how they make money?

n What are the key lessons companies have learned in trying to make money from their IoT initiatives – either by generating new revenue or reducing costs? What differentiates the companies that have generated the greatest revenue from the IoT from the ones that have yielded the least? �

We also delved deeply into how companies are using IoT technologies in four main ways:

n Supply chain monitoring – sensors, digital cameras, RFID, and other devices to track business operations and monitor conditions as well as products as they move through production and distribution en route to customers.

n Premises monitoring – digital cameras, video cameras, and sensors deployed to monitor customers and employees in the locations in which companies do business (such as auto dealerships, plants, workshops, and so on).

n Product and service monitoring – digital sensors, embedded software, and other technologies that are in the products that companies sell to customers.

n Customer monitoring – mobile apps and other technologies that monitor customers’ own digital devices (including smartphones, tablet computers, and wearable digital devices).

03

[1] TCS Global Trend Study 2015, “Internet of Things: The Complete Reimaginative Force,” July 2015, http://sites.tcs.com/internet-of-things/

Manufacturers Gear Up for the Internet of ThingsIn the still unfolding story of the Internet of Things (IoT), a star has emerged among industries: manufacturing. In fact, manufacturing firms achieved the highest revenue gain from their 2014 IoT initiatives among the industries examined in our latest Global Trend Study, 'Internet of Things: The Complete Reimaginative Force.'¹

Industry leaders like General Electric are investing significantly to make their products smarter and transform their businesses to offer new services. They're tapping into previously unavailable data to create those services, and reimagining business models as a result.

TCS surveyed 795 executives from four regions (North America, Europe, Asia-Pacific, and Latin America) to learn what business leaders are doing now, and what they plan to going forward, for the Internet of Things (digital hardware and software embedded in items ranging from consumer goods to industrial machines). This report presents the manufacturing perspective of the broader study.

The study focused on four issues:

n Who’s investing the most in IoT initiatives, and what magnitude of investments do they plan to make in the next few years? Moreover, what exactly are they investing in?

n What IoT technologies are companies using, and what are they doing with them? In what aspects of their business are they using them (marketing, sales, service, supply chain, and so on), and how have they improved functional performance? �

n Has the IoT enabled some companies to fundamentally change their business models – the very products and services they offer, and thus how they make money?

n What are the key lessons companies have learned in trying to make money from their IoT initiatives – either by generating new revenue or reducing costs? What differentiates the companies that have generated the greatest revenue from the IoT from the ones that have yielded the least? �

We also delved deeply into how companies are using IoT technologies in four main ways:

n Supply chain monitoring – sensors, digital cameras, RFID, and other devices to track business operations and monitor conditions as well as products as they move through production and distribution en route to customers.

n Premises monitoring – digital cameras, video cameras, and sensors deployed to monitor customers and employees in the locations in which companies do business (such as auto dealerships, plants, workshops, and so on).

n Product and service monitoring – digital sensors, embedded software, and other technologies that are in the products that companies sell to customers.

n Customer monitoring – mobile apps and other technologies that monitor customers’ own digital devices (including smartphones, tablet computers, and wearable digital devices).

03

[1] TCS Global Trend Study 2015, “Internet of Things: The Complete Reimaginative Force,” July 2015, http://sites.tcs.com/internet-of-things/

0%

10%

20%

30%

04

Exhibit 2: Percentage of Companies Surveyed by Revenue Clusters

20.0%

24.3%

10.7%

17.1%

7.1%

20.7%

0% 5% 10% 15% 20% 25% 30%

Less than $1 billion

$1 billion toless than $5 billion

$5 billion toless than $10 billion

$10 billion toless than $30 billion

$30 billion toless than $50 billion

$50 billion or more

1.4%

3.6%

3.6%

4.3%

5.0%

7.9%

8.6%

10.0%

12.1%

18.6%

25.0%

0% 5% 10% 15% 20% 25% 30%

Logistics/distribution

Marketing

Other

Strategic planning / corporate development

Customer service

Finance

R&D / product design / product development/product engineering

Corporate level (CEO, chief operating officer, president, business unit general manager)

Manufacturing/production

Sales

Information technology (IT)

05

Respondents came from a range of functional roles, including 25% from IT, 18.6% from sales, and 12% from manufacturing or production. Members of the C-suite made up 10%. (See Exhibit 3.)

Exhibit 3: Percentage of Responders by Function/Department

About, 10.7% of the respondents were CEOs or COOs or divisional or business unit heads, 14.3% were first level executives, that is, the head of business function (for example, chief marketing officer, chief sales officer, chief information officer), 47.9% were second level executives who directly report to a first level executive, and the remaining indirectly reported to first level executives. (See Exhibit 4.)

Exhibit 4: Percentage of Responders by their Role in the Organization

73% of the respondents were either CEOs, division heads, C-suite employees or those who directly reported to them.

27.1%

47.9%

14.3%

10.7%

0% 10% 20% 30% 40% 50% 60%

Third-Level Manager:Indirect report to afirst-level executive

Second-Level Executive:Direct report to a

first-level executive

First-Level Executive:Head of business function

(For example,, chief marketing officer,chief sales officer,

chief information officer)

CEO/COO/divisionalor business unit head

About the Manufacturers in the StudyTo gather insights into these questions, we surveyed 140 executives from manufacturing companies. Thirty-five percent were from the U.S., with Germany (18.6%), the UK (12.9%), Japan (7.9%), Brazil (7.1%), India (2.9%), and Australia (2.9%) also represented. (see Exhibit 1). Most of the participants (80%) had annual revenues of more than $1 billion, with about one in five at more than $50 billion. (See Exhibit 2.)

Exhibit 1: Percentage of Companies Surveyed by Country

35.0%

0.7%

18.6%

12.9%11.4%

7.9%

2.9% 2.9%

7.1%

0.7%

UnitedStates

Canada Germany UnitedKingdom

France Japan India Australia Brazil Mexico

40%

0%

10%

20%

30%

04

Exhibit 2: Percentage of Companies Surveyed by Revenue Clusters

20.0%

24.3%

10.7%

17.1%

7.1%

20.7%

0% 5% 10% 15% 20% 25% 30%

Less than $1 billion

$1 billion toless than $5 billion

$5 billion toless than $10 billion

$10 billion toless than $30 billion

$30 billion toless than $50 billion

$50 billion or more

1.4%

3.6%

3.6%

4.3%

5.0%

7.9%

8.6%

10.0%

12.1%

18.6%

25.0%

0% 5% 10% 15% 20% 25% 30%

Logistics/distribution

Marketing

Other

Strategic planning / corporate development

Customer service

Finance

R&D / product design / product development/product engineering

Corporate level (CEO, chief operating officer, president, business unit general manager)

Manufacturing/production

Sales

Information technology (IT)

05

Respondents came from a range of functional roles, including 25% from IT, 18.6% from sales, and 12% from manufacturing or production. Members of the C-suite made up 10%. (See Exhibit 3.)

Exhibit 3: Percentage of Responders by Function/Department

About, 10.7% of the respondents were CEOs or COOs or divisional or business unit heads, 14.3% were first level executives, that is, the head of business function (for example, chief marketing officer, chief sales officer, chief information officer), 47.9% were second level executives who directly report to a first level executive, and the remaining indirectly reported to first level executives. (See Exhibit 4.)

Exhibit 4: Percentage of Responders by their Role in the Organization

73% of the respondents were either CEOs, division heads, C-suite employees or those who directly reported to them.

27.1%

47.9%

14.3%

10.7%

0% 10% 20% 30% 40% 50% 60%

Third-Level Manager:Indirect report to afirst-level executive

Second-Level Executive:Direct report to a

first-level executive

First-Level Executive:Head of business function

(For example,, chief marketing officer,chief sales officer,

chief information officer)

CEO/COO/divisionalor business unit head

About the Manufacturers in the StudyTo gather insights into these questions, we surveyed 140 executives from manufacturing companies. Thirty-five percent were from the U.S., with Germany (18.6%), the UK (12.9%), Japan (7.9%), Brazil (7.1%), India (2.9%), and Australia (2.9%) also represented. (see Exhibit 1). Most of the participants (80%) had annual revenues of more than $1 billion, with about one in five at more than $50 billion. (See Exhibit 2.)

Exhibit 1: Percentage of Companies Surveyed by Country

35.0%

0.7%

18.6%

12.9%11.4%

7.9%

2.9% 2.9%

7.1%

0.7%

UnitedStates

Canada Germany UnitedKingdom

France Japan India Australia Brazil Mexico

40%

06

IoT Spending Among ManufacturersManufacturers will spend an average of $108.2 million per company in 2015 on IoT initiatives, or 0.45% of average revenue. That falls in the top half of industries in the study, much more than the energy industry, but not as much as the travel or telecommunications industries. (See Exhibit 5).

Why are manufacturers spending heavily on IoT initiatives? In today’s competitive world, manufacturing companies are under constant pressure to reduce their costs, find new business models to reach customers, and create smart products. More companies are looking to gain first mover advantage, and therefore manufacturing companies are placing their bets on IoT. This is also evident from our survey results. (See Exhibit 5.)

For years, many of these companies have had technology embedded or attached to their products that alerted them to downtime (for example, elevator manufacturers).

Industry

Average IoT 2015

Spend Per

Company (in $

millions)

Average Revenue Per Company/Industry (in $

millions)

IoT Spendas a

Percentageof Revenue

Travel, transportation, and hospitality $128.87 $21,491.02 0.60%

Banking and financial services $117.35 $26,425.66 0.44%

Telecommunications $110.67 $20,223.81 0.55%

Manufacturing $108.18 $23,859.29 0.45%

High technology $96.91 $24,717.54 0.39%

Insurance $77.67 $25,990.91 0.30%

Energy $74.89 $33,686.29 0.22%

Utilities $67.74 $14,411.54 0.47%

Healthcare and life sciences $56.20 $16,986.36 0.33%

Media and entertainment $47.15 $8,241.67 0.57%

Retail $41.80 $13,473.16 0.31%

Consumer packaged goods $41.20 $17,430.42 0.24%

Exhibit 5: Average Industry Spend on IoT Initiativesas a Percentage of Company Revenue during 2015

17.2%

21.6%

25.7%

35.5%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Premises monitoring: tracking thecustomer experience at our company’splaces of business '(for example, stores,

branches, offices)

Customer monitoring: monitoring thestatus of our customers through digital

devices they carry (including mobileapps) or wear while they’re using ourproduct and/or service(for example,

through digital wristbands)

Supply chain monitoring: tracking ourproducts and/or service operations

(for example, production, warehouse, distribution and other processes)

Product monitoring: tracking ourproducts and/or services after they’re

sold or leased to customers

07

Manufacturers are devoting more of their IoT budgets to product monitoring (35.5%) than to the other three areas (supply chain monitoring, customer monitoring, and premises tracking). That's a bigger allocation to product monitoring than any other industry in the study – but not surprising as these are capital intensive asset based investments that are used for transforming raw materials into products for consumption. Supply chain monitoring and customer monitoring also figure prominently in spending. (See Exhibit 6.)

Exhibit 6: Percentage of IoT Spend by Core IoT Business Area during 2015

Other industries also are allocating more IoT budget to product monitoring (31%) in 2015 than to other areas. The entire survey respondent pool will spend 23% of its IoT budget on supply chain monitoring and 19% on premises monitoring, in each case slightly more than manufacturers.

By 2020, for manufacturers, the percent of budget allocation for product monitoring will decrease slightly (33.1%) though this will still be the highest among the four areas. There will also be a slight dip in budget allocation for premises monitoring. (See Exhibit 7.)

In both 2015 and 2020, manufacturers are expected to allocate most of their IoT budget for product monitoring.

Exhibit 7: Projected Percentage of IoT Spend by Core IoT Business Area during 2020

16.8%

23.3%

26.7%

33.1%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Premises monitoring: tracking thecustomer experience at our company’splaces of business (for example, stores,

branches, offices)

Customer monitoring: monitoring thestatus of our customers through digital

devices they carry (including mobileapps) or wear while they’re using ourproduct and/or service (for example,

through digital wristbands)

Supply chain monitoring: tracking ourproduct and/or service operations

(for example, production, warehouse, distribution and other processes)

Product monitoring: tracking ourproducts and/or services after they’re

sold or leased to customers

The manufacturing sector invests heavily in IoT, and this investment is only expected to grow.

06

IoT Spending Among ManufacturersManufacturers will spend an average of $108.2 million per company in 2015 on IoT initiatives, or 0.45% of average revenue. That falls in the top half of industries in the study, much more than the energy industry, but not as much as the travel or telecommunications industries. (See Exhibit 5).

Why are manufacturers spending heavily on IoT initiatives? In today’s competitive world, manufacturing companies are under constant pressure to reduce their costs, find new business models to reach customers, and create smart products. More companies are looking to gain first mover advantage, and therefore manufacturing companies are placing their bets on IoT. This is also evident from our survey results. (See Exhibit 5.)

For years, many of these companies have had technology embedded or attached to their products that alerted them to downtime (for example, elevator manufacturers).

Industry

Average IoT 2015

Spend Per

Company (in $

millions)

Average Revenue Per Company/Industry (in $

millions)

IoT Spendas a

Percentageof Revenue

Travel, transportation, and hospitality $128.87 $21,491.02 0.60%

Banking and financial services $117.35 $26,425.66 0.44%

Telecommunications $110.67 $20,223.81 0.55%

Manufacturing $108.18 $23,859.29 0.45%

High technology $96.91 $24,717.54 0.39%

Insurance $77.67 $25,990.91 0.30%

Energy $74.89 $33,686.29 0.22%

Utilities $67.74 $14,411.54 0.47%

Healthcare and life sciences $56.20 $16,986.36 0.33%

Media and entertainment $47.15 $8,241.67 0.57%

Retail $41.80 $13,473.16 0.31%

Consumer packaged goods $41.20 $17,430.42 0.24%

Exhibit 5: Average Industry Spend on IoT Initiativesas a Percentage of Company Revenue during 2015

17.2%

21.6%

25.7%

35.5%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Premises monitoring: tracking thecustomer experience at our company’splaces of business '(for example, stores,

branches, offices)

Customer monitoring: monitoring thestatus of our customers through digital

devices they carry (including mobileapps) or wear while they’re using ourproduct and/or service(for example,

through digital wristbands)

Supply chain monitoring: tracking ourproducts and/or service operations

(for example, production, warehouse, distribution and other processes)

Product monitoring: tracking ourproducts and/or services after they’re

sold or leased to customers

07

Manufacturers are devoting more of their IoT budgets to product monitoring (35.5%) than to the other three areas (supply chain monitoring, customer monitoring, and premises tracking). That's a bigger allocation to product monitoring than any other industry in the study – but not surprising as these are capital intensive asset based investments that are used for transforming raw materials into products for consumption. Supply chain monitoring and customer monitoring also figure prominently in spending. (See Exhibit 6.)

Exhibit 6: Percentage of IoT Spend by Core IoT Business Area during 2015

Other industries also are allocating more IoT budget to product monitoring (31%) in 2015 than to other areas. The entire survey respondent pool will spend 23% of its IoT budget on supply chain monitoring and 19% on premises monitoring, in each case slightly more than manufacturers.

By 2020, for manufacturers, the percent of budget allocation for product monitoring will decrease slightly (33.1%) though this will still be the highest among the four areas. There will also be a slight dip in budget allocation for premises monitoring. (See Exhibit 7.)

In both 2015 and 2020, manufacturers are expected to allocate most of their IoT budget for product monitoring.

Exhibit 7: Projected Percentage of IoT Spend by Core IoT Business Area during 2020

16.8%

23.3%

26.7%

33.1%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Premises monitoring: tracking thecustomer experience at our company’splaces of business (for example, stores,

branches, offices)

Customer monitoring: monitoring thestatus of our customers through digital

devices they carry (including mobileapps) or wear while they’re using ourproduct and/or service (for example,

through digital wristbands)

Supply chain monitoring: tracking ourproduct and/or service operations

(for example, production, warehouse, distribution and other processes)

Product monitoring: tracking ourproducts and/or services after they’re

sold or leased to customers

The manufacturing sector invests heavily in IoT, and this investment is only expected to grow.

08

Manufacturers are expected to spend 11% more on IoT in 2018.

Exhibit 9: Projected Spend for IoT Initiatives during 2018

The projected budget allocation for the entire survey pool suggests a similar trend with product monitoring (30.4%), customer monitoring (28.5%), supply chain monitoring (22.1%), and premises monitoring (18.9%).

Regarding IoT spending plans for 2018, manufacturers expect funding to remain steady, projecting an average per-company investment of $120.2 million. (See Exhibit 8.) That would be 11% more than what they spend this year, and a higher-than-average budget than other industries. Only telecommunications and banking and financial services companies plan to spend more than manufacturers in 2018. (See Exhibit 9.)

Exhibit 8: Projected Budget for IoT Initiatives during 2018

120.23

5.81

0

20

40

60

80

100

120

140

Mill

ion

US

Dol

lars

Mean Median

63.27

67.20

120.23

3.19

5.89

5.81

0 20 40 60 80 100 120 140 160 180

Utilities

Energy

Manufacturing

Million US DollarsMedian Mean

102.8611.25

Insurance

49.063.97

Retail

121.29

12.38High technology

67.562.89Consumer

packaged goods

72.6510.31

Media and entertainment

169.5313.13

Telecommunications

153.4826.25Banking and

financial services

73.73

8.25Health care and life sciences

108.90

4.08Travel, transportation,and hospitality

09

How Manufacturers Are Using IoTIn several ways, manufacturers can use IoT initiatives to gain insight into the cradle-to-grave lifecycle of their products, and at the same time exploit opportunities to include value added services to meet customer needs. (See Exhibit 10.)

Close to half (48%) monitor product flow in production and distribution. Visibility into connected supply chains is a key driver for IoT initiatives. By maintaining traceability of raw materials into the finished products, and finished product movement to end customers through the supply chain network of logistics, transportation, warehousing, and distribution, manufacturers are trying to gain visibility. In addition, RFID tags, which have been in extensive use in inventory management for close to a decade, have recently gained ground as sensors are more affordable and energy efficient. Companies can use these tags to track material-holding pallets and improve supplies replenishment.

For example, the $34 billion Germany-based tire manufacturer Continental AG uses Wi-Fi sensors on carts holding sheets of rubber and other tire components. Transmitting data about their location to an inventory management system, the sensors help Continental track materials and improve production efficiency.² In a production monitoring example, European aircraft maker Airbus is developing applications using smart glasses and tablet computers to scan aircraft elements during the manufacturing process to ensure quality assembly, such as how much torque a bolt needs.³

A little more than a quarter (26.4%) track how products are performing. GE's predictive maintenance applications also collect and share data with customers about the performance of machines. On an energy pipeline, for example, data from intelligent sensors as well as other sources (on weather, seismology, population centers, health care facilities, and schools) enable GE to prioritize repairs and manage risk.

Almost a quarter (24.3%) track customers using mobile apps. Network-connected cars, equipped with mobile user interfaces, provide an attractive opportunity to track customer behavior. Infotainment systems helps track consumption patterns for online services consumed, and other preferences through financial transactions, linked to ownership, demographics, and more. Insurance firms are already tracking driving patterns to define insurance premiums, using tools ranging from advanced telematics to simple mobile apps.

The German automotive supplier ZF Friedrichshafen AG has developed an intelligent auto transmission system that monitors and analyzes a truck driver's habits. Sensors analyze the driver's behavior, correlated to topographical data about the road, to advise drivers on when to shift gears. This saves fuel and lengthens the life of the transmission system.⁴

About 22% observe customers on their premises through sensors and other devices. For example, Nest thermostats learn to adjust the temperature themselves, which helps in the reduction of energy usage.⁵ The self-learning programmable thermostats analyze the data collected on the behavior of occupants - including their presence and absence in the space - and the temperature and humidity conditions inside and outside the house to identify patterns of energy usage.

Nearly half of the companies use the IoT in production and distribution to monitor flow of products to customers.

[2] “Internet of Things in Logistics,” a report by DHL and Cisco, 2015, http://www.dhl.com/content/dam/ Local_Images/g0/New_aboutus/innovation/DHLTrendReport_Internet_of_things.pdf

[3] Beth Stackpole, “Internet of Things Use Cases Show Progress,” SearchManufacturingERP.com, May 21, 2015, http://searchmanufacturingerp.techtarget.com/news/4500246770/Internet-of-Things-use-cases-show-progress

[4] World Economic Forum in collaboration with Accenture, “Industrial Internet of Things: Unleashing the Potential of Connected Products and Services,” January 2015, http://www3.weforum.org/docs/WEFUSA_IndustrialInternet_Report2015.pdf

[5] Bloomberg Business, “IPod of Thermostats Saves Energy With Pizzazz,” January 2012, http://www.bloomberg.com/news/articles/2012-01-04/ipod-of-thermostats-saves-energy-with-pizzazz-rich-jaroslovsky

08

Manufacturers are expected to spend 11% more on IoT in 2018.

Exhibit 9: Projected Spend for IoT Initiatives during 2018

The projected budget allocation for the entire survey pool suggests a similar trend with product monitoring (30.4%), customer monitoring (28.5%), supply chain monitoring (22.1%), and premises monitoring (18.9%).

Regarding IoT spending plans for 2018, manufacturers expect funding to remain steady, projecting an average per-company investment of $120.2 million. (See Exhibit 8.) That would be 11% more than what they spend this year, and a higher-than-average budget than other industries. Only telecommunications and banking and financial services companies plan to spend more than manufacturers in 2018. (See Exhibit 9.)

Exhibit 8: Projected Budget for IoT Initiatives during 2018

120.23

5.81

0

20

40

60

80

100

120

140

Mill

ion

US

Dol

lars

Mean Median

63.27

67.20

120.23

3.19

5.89

5.81

0 20 40 60 80 100 120 140 160 180

Utilities

Energy

Manufacturing

Million US DollarsMedian Mean

102.8611.25

Insurance

49.063.97

Retail

121.29

12.38High technology

67.562.89Consumer

packaged goods

72.6510.31

Media and entertainment

169.5313.13

Telecommunications

153.4826.25Banking and

financial services

73.73

8.25Health care and life sciences

108.90

4.08Travel, transportation,and hospitality

09

How Manufacturers Are Using IoTIn several ways, manufacturers can use IoT initiatives to gain insight into the cradle-to-grave lifecycle of their products, and at the same time exploit opportunities to include value added services to meet customer needs. (See Exhibit 10.)

Close to half (48%) monitor product flow in production and distribution. Visibility into connected supply chains is a key driver for IoT initiatives. By maintaining traceability of raw materials into the finished products, and finished product movement to end customers through the supply chain network of logistics, transportation, warehousing, and distribution, manufacturers are trying to gain visibility. In addition, RFID tags, which have been in extensive use in inventory management for close to a decade, have recently gained ground as sensors are more affordable and energy efficient. Companies can use these tags to track material-holding pallets and improve supplies replenishment.

For example, the $34 billion Germany-based tire manufacturer Continental AG uses Wi-Fi sensors on carts holding sheets of rubber and other tire components. Transmitting data about their location to an inventory management system, the sensors help Continental track materials and improve production efficiency.² In a production monitoring example, European aircraft maker Airbus is developing applications using smart glasses and tablet computers to scan aircraft elements during the manufacturing process to ensure quality assembly, such as how much torque a bolt needs.³

A little more than a quarter (26.4%) track how products are performing. GE's predictive maintenance applications also collect and share data with customers about the performance of machines. On an energy pipeline, for example, data from intelligent sensors as well as other sources (on weather, seismology, population centers, health care facilities, and schools) enable GE to prioritize repairs and manage risk.

Almost a quarter (24.3%) track customers using mobile apps. Network-connected cars, equipped with mobile user interfaces, provide an attractive opportunity to track customer behavior. Infotainment systems helps track consumption patterns for online services consumed, and other preferences through financial transactions, linked to ownership, demographics, and more. Insurance firms are already tracking driving patterns to define insurance premiums, using tools ranging from advanced telematics to simple mobile apps.

The German automotive supplier ZF Friedrichshafen AG has developed an intelligent auto transmission system that monitors and analyzes a truck driver's habits. Sensors analyze the driver's behavior, correlated to topographical data about the road, to advise drivers on when to shift gears. This saves fuel and lengthens the life of the transmission system.⁴

About 22% observe customers on their premises through sensors and other devices. For example, Nest thermostats learn to adjust the temperature themselves, which helps in the reduction of energy usage.⁵ The self-learning programmable thermostats analyze the data collected on the behavior of occupants - including their presence and absence in the space - and the temperature and humidity conditions inside and outside the house to identify patterns of energy usage.

Nearly half of the companies use the IoT in production and distribution to monitor flow of products to customers.

[2] “Internet of Things in Logistics,” a report by DHL and Cisco, 2015, http://www.dhl.com/content/dam/ Local_Images/g0/New_aboutus/innovation/DHLTrendReport_Internet_of_things.pdf

[3] Beth Stackpole, “Internet of Things Use Cases Show Progress,” SearchManufacturingERP.com, May 21, 2015, http://searchmanufacturingerp.techtarget.com/news/4500246770/Internet-of-Things-use-cases-show-progress

[4] World Economic Forum in collaboration with Accenture, “Industrial Internet of Things: Unleashing the Potential of Connected Products and Services,” January 2015, http://www3.weforum.org/docs/WEFUSA_IndustrialInternet_Report2015.pdf

[5] Bloomberg Business, “IPod of Thermostats Saves Energy With Pizzazz,” January 2012, http://www.bloomberg.com/news/articles/2012-01-04/ipod-of-thermostats-saves-energy-with-pizzazz-rich-jaroslovsky

Approximately 7.9% observe customers through the digital devices they wear. This is still an emerging idea in manufacturing. Although some companies have started exploring this idea by asking employees to wear devices that can be monitored. For example, 'pickers' who work in Amazon distribution centers wear GPS labels and have a handheld scanner that lets them know the most productive course to take to gather a thing for conveyance.⁶

Also, automobile manufacturers could develop wearable devices like the Apple Watch to provide personalized experiences to consumers while walking through a showroom.

10

22.1%

24.3%

26.4%

48.6%

Through digital sensors and other devices inthe locations in which we do business with

customers (for example, stores, branches, offices)

Through mobile apps that customers useon their smartphones, tablet computers

or other digital devices

Through digital sensors in your productsthat send data to your company on how

those products are performing

In our production and distribution operationsto track product flow to customers

[6] Bloomberg Business, “Wearable Technology Creeps Into The Workplace”, Aug 2015 http://www.bloomberg.com/news/articles/2015-08-07/wearable-technology-creeps-into-the-workplace

Of the companies that don't use digital technologies today, 31.6% say that by 2020 they will use digital sensors in their products to know how products are performing. A similar percentage will use production and distribution operations to track product flow to customers. Others will use mobile apps (26.3%) and digital sensors in locations (10.5%). (See Exhibit 11.)

Exhibit 11: Ways in which Companies are Planning to use IoT Technologies in 2020

10.5%

26.3%

31.6%

31.6%

0% 5% 10% 15% 20% 25% 30% 35%

Through digital sensors and other devices inthe locations in which we do business with

customers (for example, stores, branches, offices)

Through mobile apps that customers useon their smartphones, tablet computers

or other digital devices

Through digital sensors in your productsthat send data to your company on how

those products are performing

In our production and distribution operationsto track product flow to customers

Exhibit 10: Ways in which Manufacturers use IoT Technologies

7.9%

13.6%

0% 10% 20% 30% 40% 50% 60%

My company does not plan to use digitaltechnologies to monitor our products

and customers

Through digital devices that customers can wear(for example, digital bracelets), which allow your company

to track customer usage of your products or services

11

How the Internet of Things Has Improved Manufacturers' Businesses Our study shows that companies in every industry are using the Internet of Things to gain visibility into their customers, their processes for making and selling goods and services, and the locations in which they do business. For manufacturers, that includes using sensors to gather data, and then analyzing that data to glean how parts and products move through production and the supply chain. It also includes a better understanding of how customers are using their products, and how those products perform in real world conditions. For companies gaining value from their IoT initiatives, these fresh sight lines can provide opportunities to improve products, create new services, and open new areas of business.

As described by respondents, the biggest business improvements from IoT initiatives to date, are as illustrated in Exhibit 12.

Automakers, having equipped cars with global positioning system (GPS) devices for years, continue to find ways to expand their use of sensors. For example, a joint venture

7 Biggest Improvements from IoT to Date in Manufacturing (four elements tied for first place; three tied for second place)

1. More proactive service: Identifying product problems before customers are even aware of them. Predictive diagnostics and performance prognosis is the emerging story – patterns of product or equipment performance allow advanced machine learning systems to identify future possibilities and address them ahead of time.

2. Better service because of more informed service reps (they can view data on how customers are using the product and/or service.) Technicians can be equipped with a direct connection to products as well as the wearables that help trouble shoot.

3. Improved existing products through a much better understanding of what features or functions customers are using or not using. Pay per use models will emerge based on understanding of usage patterns. We see some car companies approaching the problem through production of fully feature-loaded cars, with the option of enabling features on request by remote, for a finite period of time, allowing customers to pay per use.

4. More tailored customer segmentation.

5. Lower field service costs through remote diagnosis of product problems (and, therefore, less need to send technicians into the field).

6. More tailored marketing and/or marketing campaigns. Focused on segment of one campaigns for a specific customer, using low cost social channels that directly reach the customer or the influencer groups.

7. More R&D with insights on new product testing. Product performance and usage insights provide remarkable insights to design engineers to define the right features that will deliver on specific end uses.

Exhibit 12: Business Impacts of IoT initiatives on Manufacturing

Approximately 7.9% observe customers through the digital devices they wear. This is still an emerging idea in manufacturing. Although some companies have started exploring this idea by asking employees to wear devices that can be monitored. For example, 'pickers' who work in Amazon distribution centers wear GPS labels and have a handheld scanner that lets them know the most productive course to take to gather a thing for conveyance.⁶

Also, automobile manufacturers could develop wearable devices like the Apple Watch to provide personalized experiences to consumers while walking through a showroom.

10

22.1%

24.3%

26.4%

48.6%

Through digital sensors and other devices inthe locations in which we do business with

customers (for example, stores, branches, offices)

Through mobile apps that customers useon their smartphones, tablet computers

or other digital devices

Through digital sensors in your productsthat send data to your company on how

those products are performing

In our production and distribution operationsto track product flow to customers

[6] Bloomberg Business, “Wearable Technology Creeps Into The Workplace”, Aug 2015 http://www.bloomberg.com/news/articles/2015-08-07/wearable-technology-creeps-into-the-workplace

Of the companies that don't use digital technologies today, 31.6% say that by 2020 they will use digital sensors in their products to know how products are performing. A similar percentage will use production and distribution operations to track product flow to customers. Others will use mobile apps (26.3%) and digital sensors in locations (10.5%). (See Exhibit 11.)

Exhibit 11: Ways in which Companies are Planning to use IoT Technologies in 2020

10.5%

26.3%

31.6%

31.6%

0% 5% 10% 15% 20% 25% 30% 35%

Through digital sensors and other devices inthe locations in which we do business with

customers (for example, stores, branches, offices)

Through mobile apps that customers useon their smartphones, tablet computers

or other digital devices

Through digital sensors in your productsthat send data to your company on how

those products are performing

In our production and distribution operationsto track product flow to customers

Exhibit 10: Ways in which Manufacturers use IoT Technologies

7.9%

13.6%

0% 10% 20% 30% 40% 50% 60%

My company does not plan to use digitaltechnologies to monitor our products

and customers

Through digital devices that customers can wear(for example, digital bracelets), which allow your company

to track customer usage of your products or services

11

How the Internet of Things Has Improved Manufacturers' Businesses Our study shows that companies in every industry are using the Internet of Things to gain visibility into their customers, their processes for making and selling goods and services, and the locations in which they do business. For manufacturers, that includes using sensors to gather data, and then analyzing that data to glean how parts and products move through production and the supply chain. It also includes a better understanding of how customers are using their products, and how those products perform in real world conditions. For companies gaining value from their IoT initiatives, these fresh sight lines can provide opportunities to improve products, create new services, and open new areas of business.

As described by respondents, the biggest business improvements from IoT initiatives to date, are as illustrated in Exhibit 12.

Automakers, having equipped cars with global positioning system (GPS) devices for years, continue to find ways to expand their use of sensors. For example, a joint venture

7 Biggest Improvements from IoT to Date in Manufacturing (four elements tied for first place; three tied for second place)

1. More proactive service: Identifying product problems before customers are even aware of them. Predictive diagnostics and performance prognosis is the emerging story – patterns of product or equipment performance allow advanced machine learning systems to identify future possibilities and address them ahead of time.

2. Better service because of more informed service reps (they can view data on how customers are using the product and/or service.) Technicians can be equipped with a direct connection to products as well as the wearables that help trouble shoot.

3. Improved existing products through a much better understanding of what features or functions customers are using or not using. Pay per use models will emerge based on understanding of usage patterns. We see some car companies approaching the problem through production of fully feature-loaded cars, with the option of enabling features on request by remote, for a finite period of time, allowing customers to pay per use.

4. More tailored customer segmentation.

5. Lower field service costs through remote diagnosis of product problems (and, therefore, less need to send technicians into the field).

6. More tailored marketing and/or marketing campaigns. Focused on segment of one campaigns for a specific customer, using low cost social channels that directly reach the customer or the influencer groups.

7. More R&D with insights on new product testing. Product performance and usage insights provide remarkable insights to design engineers to define the right features that will deliver on specific end uses.

Exhibit 12: Business Impacts of IoT initiatives on Manufacturing

12

of Volvo, logistics company DHL, and other partners, is developing a commercial truck that autonomously determines when it requires a maintenance service. Sensors installed in oil and damper systems detect machine wear and transmit data to a maintenance system for analysis. The system alerts drivers and maintenance crews when service is required. The system improved vehicle uptime by up to 30%.⁷

Such IoT applications enable manufacturers to create new service lines, improve product design, and inform engineers about the actual use of the engines they design so they can make improvements that are most relevant to customers.

Already, IoT initiatives have had a significant impact on revenues for companies that have them. In the study, manufacturing firms reported a 19.7% revenue increase in 2014 over 2013 in the areas of the business that implemented an IoT initiative - the highest increase of any industry in the study. Banking and financial services ranks second at 17.7%. (See Exhibit 13.)

Consider General Electric Co., the firm that sprang from Thomas Alva Edison’s New

[7] “Internet of Things in Logistics,” a report by DHL and Cisco, 2015, http://www.dhl.com/content/dam/ Local_Images/g0/New_aboutus/innovation/DHLTrendReport_Internet_of_things.pdf

Exhibit 13: Revenue Impact of IoT Initiatives (2014 vs. 2013)

Manufacturing firms experienced the highest increase in overall revenue than any industry in the study.

Jersey laboratory in 1878. Since 2011, the $149 billion industrial manufacturing company has committed more than $1 billion to IoT initiatives, an investment that is expected to yield revenue of more than $1 billion this year. What’s interesting is that the proselytizing is coming from the highest level at GE — from CEO Jeffrey Immelt.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

17.4%

Med

ia a

nd e

nter

tain

men

t

12.5%

Health

car

e an

d

life

scie

nces

13.1%

Cons

umer

pack

aged

goo

ds

14.8%

Reta

il

12.5%

Ener

gy

11.3%

Utiliti

es

15.1%

Hig

h te

chno

logy

15.6%

Tele

com

mun

icat

ions

15.5%

Insu

ranc

e

16.2%

Trav

el, t

rans

port

atio

n,

and

hosp

italit

y

19.7%

Man

ufac

turin

g

17.7%

Bank

ing

and

finan

cial

serv

ices

13

Exhibit 14: Revenue Impact of IoT Initiatives by 2018

20.4%

7.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Mean Median

By 2020, the top five predicted impacts on manufacturers include:

1. A shift from capital expenditures to operating expenses. Customers will value the services they gain from manufacturers' offerings just as much or more than the physical products. Predictive maintenance analysis on cars, jet engines, and other equipment provides not just a machine, but a new level of uptime and reliability.

2. Extended shared mobility. As exclusive ownership patterns shift to shared ownership of cars, car subscription services and apps like Uber and Lyft will have a deep impact on the revenue models of automotive OEMs and dealerships.

3. Driverless cars, also known as autonomous and augmented vehicles, will be on the road, driving a whole new ecosystem of smart system environments while enabling traffic optimization and energy conservation.

4. Virtual plant operations will allow heightened levels of production flexibility and agility, driving high asset utilization and productivity improvements.

5. Sales channels will be disrupted, as customers and manufacturers' transactions move to connected products that provide increasing levels of reliability - making traditional services redundant.

In terms of revenue, by 2018, the mean impact of IoT on an organization's total revenue will be 20.4% and median impact will be 7.4%.This is much more than the projected mean impact of all the industries put together (16.3%). (See Exhibit 14.)

Hewlett-Packard's printer business provides a foreshadowing of the business model changes under way. The HP Printing and Personal Systems Group, due to be split from the company's enterprise division in November 2015, sold $23 billion in ink in 2014. As consumers' mobile devices and workers' on-the-go habits have challenged the traditional printer business model, HP's 'razorblade strategy,' where the majority of profit comes from ink, has taken on a new meaning with the IoT. IoT connectivity can turn almost any digital device into a service, and HP is working to make its printers IoT hubs in homes. Connecting consumers' social media accounts to their web-connected printers is just one example. Connected printers also let HP remind consumers to order more ink when supply is running low.

12

of Volvo, logistics company DHL, and other partners, is developing a commercial truck that autonomously determines when it requires a maintenance service. Sensors installed in oil and damper systems detect machine wear and transmit data to a maintenance system for analysis. The system alerts drivers and maintenance crews when service is required. The system improved vehicle uptime by up to 30%.⁷

Such IoT applications enable manufacturers to create new service lines, improve product design, and inform engineers about the actual use of the engines they design so they can make improvements that are most relevant to customers.

Already, IoT initiatives have had a significant impact on revenues for companies that have them. In the study, manufacturing firms reported a 19.7% revenue increase in 2014 over 2013 in the areas of the business that implemented an IoT initiative - the highest increase of any industry in the study. Banking and financial services ranks second at 17.7%. (See Exhibit 13.)

Consider General Electric Co., the firm that sprang from Thomas Alva Edison’s New

[7] “Internet of Things in Logistics,” a report by DHL and Cisco, 2015, http://www.dhl.com/content/dam/ Local_Images/g0/New_aboutus/innovation/DHLTrendReport_Internet_of_things.pdf

Exhibit 13: Revenue Impact of IoT Initiatives (2014 vs. 2013)

Manufacturing firms experienced the highest increase in overall revenue than any industry in the study.

Jersey laboratory in 1878. Since 2011, the $149 billion industrial manufacturing company has committed more than $1 billion to IoT initiatives, an investment that is expected to yield revenue of more than $1 billion this year. What’s interesting is that the proselytizing is coming from the highest level at GE — from CEO Jeffrey Immelt.

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

17.4%

Med

ia a

nd e

nter

tain

men

t

12.5%

Health

car

e an

d

life

scie

nces

13.1%

Cons

umer

pack

aged

goo

ds

14.8%

Reta

il

12.5%

Ener

gy

11.3%

Utiliti

es

15.1%

Hig

h te

chno

logy

15.6%

Tele

com

mun

icat

ions

15.5%

Insu

ranc

e

16.2%

Trav

el, t

rans

port

atio

n,

and

hosp

italit

y

19.7%

Man

ufac

turin

g

17.7%

Bank

ing

and

finan

cial

serv

ices

13

Exhibit 14: Revenue Impact of IoT Initiatives by 2018

20.4%

7.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Mean Median

By 2020, the top five predicted impacts on manufacturers include:

1. A shift from capital expenditures to operating expenses. Customers will value the services they gain from manufacturers' offerings just as much or more than the physical products. Predictive maintenance analysis on cars, jet engines, and other equipment provides not just a machine, but a new level of uptime and reliability.

2. Extended shared mobility. As exclusive ownership patterns shift to shared ownership of cars, car subscription services and apps like Uber and Lyft will have a deep impact on the revenue models of automotive OEMs and dealerships.

3. Driverless cars, also known as autonomous and augmented vehicles, will be on the road, driving a whole new ecosystem of smart system environments while enabling traffic optimization and energy conservation.

4. Virtual plant operations will allow heightened levels of production flexibility and agility, driving high asset utilization and productivity improvements.

5. Sales channels will be disrupted, as customers and manufacturers' transactions move to connected products that provide increasing levels of reliability - making traditional services redundant.

In terms of revenue, by 2018, the mean impact of IoT on an organization's total revenue will be 20.4% and median impact will be 7.4%.This is much more than the projected mean impact of all the industries put together (16.3%). (See Exhibit 14.)

Hewlett-Packard's printer business provides a foreshadowing of the business model changes under way. The HP Printing and Personal Systems Group, due to be split from the company's enterprise division in November 2015, sold $23 billion in ink in 2014. As consumers' mobile devices and workers' on-the-go habits have challenged the traditional printer business model, HP's 'razorblade strategy,' where the majority of profit comes from ink, has taken on a new meaning with the IoT. IoT connectivity can turn almost any digital device into a service, and HP is working to make its printers IoT hubs in homes. Connecting consumers' social media accounts to their web-connected printers is just one example. Connected printers also let HP remind consumers to order more ink when supply is running low.

14

26.4%

49.3%

20.7%

5.7%

18.6%

8.6%

The most important business model change due to IoT is increase in services business; it is projected to remain the same in 2020.

Exhibit 15: Business Model Changes Made by Companies due to IoT Technologies

Exhibit 16: Business Model Changes Companies will make by 2020 due to IoT Technologies

0% 10% 20% 30% 40% 50% 60%

Other

We have made no changes to datein our business model

Much greater leasing of our products(not just selling them outright, that is,,

shifting to product-as-a-service model)

Making money from customer productusage data (that is, selling it to third parties)

Increasing our service business(support and repair) because we can now

monitor product usage by customers

Bypassing entities in our distribution channeland resupplying our end customers directly

15

[8] S. Ramachandran, “Innovative Use Cases for the Adoption of Internet of Things in Indian Manufacturing,” IDC Manufacturing Insights, May 2015, available via

http://www.wipro.com/documents/insights/innovative-use-cases-for-the-adoption-of-internet-of-things.pdf

Strategy and technology top the list of success factors, while culture is also important.

Indeed, respondents in the study cite business model changes as a key consequence of implementing IoT initiatives. All but 18% of manufacturers have seen some aspect of their business model change as a result of IoT work. Almost half (49.6%) have increased their service business. About one in four (24%) has generated revenue from customer usage data. Others have resupplied customers directly through automated orders (14%) and have increased their sales of leased products or products as a service (14%). (See Exhibit 15.)

Asked to project changes to their business models by 2020, respondents said they expected to see further changes along the same lines: increase their services business (49.3%), generate more revenue from customer usage data (26.4%), resupply customers directly through automated reorders (20.7%), and do more leasing of products versus sales (18.6%). (See Exhibit 16.)

Wherever you find an IoT initiative in manufacturing, there is likely to be an evolving business model. New Holland Fiat (India) launched the GPS and the GPRS technologies on its tractors under the name of 'Sky Watch' in 2012, according to its media release. This technology will enable farmers to monitor and trace their tractors' health and performance for better control and maintenance, easy operations, and improved productivity. This launch can represent a new product-as-a-service business model. More than 30% of the tractor owners are projected to rent out their tractors. This will help owners know the hourly usage and track the performance and maintenance of trackers when they are rented out.⁸

Succeeding with IoT: 5 Key Success Factors for ManufacturersOur study pinpointed five key success factors for manufacturers implementing IoT initiatives:

1. Identifying and pursuing new business opportunities. Analysis of IoT-related data has the potential to turn hypotheses about customers' product usage into real data about their experience. That data should reveal areas where customers need help, or more functionality, or reveal a different view of customer segmentation. Are customers using the products as you intended and designed? Companies can analyze, learn, and adjust. Intel, for example, is examining new business models based on data from sensors embedded in its processors that track computer hardware performance. One potential example: a manufacturing company could create a service that aggregates data from a plant's sensors and other devices to maximize productivity. Such a system requires customers to buy into the arrangement, to share data in return for the value they gain from it. As data provider and potential analyst, Intel would gain business while providing a new kind of service. In another example, aircraft engine maker Rolls-Royce Holdings PLC rents its engines to airlines and charges for the hours they are used.

2. Deciding what data to capture from the Internet of Things. There is no shortage of data, but not all data is created equal. The data must be relevant to the IoT initiative and the desired outcome, such as improved customer service.

3. Getting managers and workers to change the way they think - about customers, products, and processes for serving those customers. The insights provided by IoT-based systems show the truth about product usage - and thus have the potential to upend long-held assumptions that have guided business decisions and customer service practices. Leaders at GE and Intel say support from the C-suite is mandatory for the culture change associated with IoT initiatives.

4. Determining what technologies to develop internally and externally. GE, for example, has made developing internal talent around IoT and Big Data a priority.

5. Integrating Internet of Things data (from sensors and other digital devices) with enterprise systems. Connecting the IoT initiative to enterprise systems that are supporting management decisions helps executives augment their understanding of the business.

0% 10% 20% 30% 40% 50% 60%

1.7%

14.0%

14.0%

24.0%

49.6%

Other

Bypassing entities in our distribution channeland resupplying our end customers directly

Much greater leasing of our products(not just selling them outright, that is,

shifting to product-as-a-service model)

Making money from customer productusage data (that is, selling it to third parties)

Increasing our service business(support and repair) because we can now

monitor product usage by customers

18.2%We have made no changes to date

in our business model

- Increasing our service business(support and repair) because we can now

monitor product usage by customers

- Making money from customer productusage data (that is, selling it to third parties)

- Bypassing entities in our distribution channeland resupplying our end customers directly

- Much greater leasing of our products(not just selling them outright, that is,

shifting to product-as-a-service model)

- Other

- We have made no changes to datein our business model

14

26.4%

49.3%

20.7%

5.7%

18.6%

8.6%

The most important business model change due to IoT is increase in services business; it is projected to remain the same in 2020.

Exhibit 15: Business Model Changes Made by Companies due to IoT Technologies

Exhibit 16: Business Model Changes Companies will make by 2020 due to IoT Technologies

0% 10% 20% 30% 40% 50% 60%

Other

We have made no changes to datein our business model

Much greater leasing of our products(not just selling them outright, that is,,

shifting to product-as-a-service model)

Making money from customer productusage data (that is, selling it to third parties)

Increasing our service business(support and repair) because we can now

monitor product usage by customers

Bypassing entities in our distribution channeland resupplying our end customers directly

15

[8] S. Ramachandran, “Innovative Use Cases for the Adoption of Internet of Things in Indian Manufacturing,” IDC Manufacturing Insights, May 2015, available via

http://www.wipro.com/documents/insights/innovative-use-cases-for-the-adoption-of-internet-of-things.pdf

Strategy and technology top the list of success factors, while culture is also important.

Indeed, respondents in the study cite business model changes as a key consequence of implementing IoT initiatives. All but 18% of manufacturers have seen some aspect of their business model change as a result of IoT work. Almost half (49.6%) have increased their service business. About one in four (24%) has generated revenue from customer usage data. Others have resupplied customers directly through automated orders (14%) and have increased their sales of leased products or products as a service (14%). (See Exhibit 15.)

Asked to project changes to their business models by 2020, respondents said they expected to see further changes along the same lines: increase their services business (49.3%), generate more revenue from customer usage data (26.4%), resupply customers directly through automated reorders (20.7%), and do more leasing of products versus sales (18.6%). (See Exhibit 16.)

Wherever you find an IoT initiative in manufacturing, there is likely to be an evolving business model. New Holland Fiat (India) launched the GPS and the GPRS technologies on its tractors under the name of 'Sky Watch' in 2012, according to its media release. This technology will enable farmers to monitor and trace their tractors' health and performance for better control and maintenance, easy operations, and improved productivity. This launch can represent a new product-as-a-service business model. More than 30% of the tractor owners are projected to rent out their tractors. This will help owners know the hourly usage and track the performance and maintenance of trackers when they are rented out.⁸

Succeeding with IoT: 5 Key Success Factors for ManufacturersOur study pinpointed five key success factors for manufacturers implementing IoT initiatives:

1. Identifying and pursuing new business opportunities. Analysis of IoT-related data has the potential to turn hypotheses about customers' product usage into real data about their experience. That data should reveal areas where customers need help, or more functionality, or reveal a different view of customer segmentation. Are customers using the products as you intended and designed? Companies can analyze, learn, and adjust. Intel, for example, is examining new business models based on data from sensors embedded in its processors that track computer hardware performance. One potential example: a manufacturing company could create a service that aggregates data from a plant's sensors and other devices to maximize productivity. Such a system requires customers to buy into the arrangement, to share data in return for the value they gain from it. As data provider and potential analyst, Intel would gain business while providing a new kind of service. In another example, aircraft engine maker Rolls-Royce Holdings PLC rents its engines to airlines and charges for the hours they are used.

2. Deciding what data to capture from the Internet of Things. There is no shortage of data, but not all data is created equal. The data must be relevant to the IoT initiative and the desired outcome, such as improved customer service.

3. Getting managers and workers to change the way they think - about customers, products, and processes for serving those customers. The insights provided by IoT-based systems show the truth about product usage - and thus have the potential to upend long-held assumptions that have guided business decisions and customer service practices. Leaders at GE and Intel say support from the C-suite is mandatory for the culture change associated with IoT initiatives.

4. Determining what technologies to develop internally and externally. GE, for example, has made developing internal talent around IoT and Big Data a priority.

5. Integrating Internet of Things data (from sensors and other digital devices) with enterprise systems. Connecting the IoT initiative to enterprise systems that are supporting management decisions helps executives augment their understanding of the business.

0% 10% 20% 30% 40% 50% 60%

1.7%

14.0%

14.0%

24.0%

49.6%

Other

Bypassing entities in our distribution channeland resupplying our end customers directly

Much greater leasing of our products(not just selling them outright, that is,

shifting to product-as-a-service model)

Making money from customer productusage data (that is, selling it to third parties)

Increasing our service business(support and repair) because we can now

monitor product usage by customers

18.2%We have made no changes to date

in our business model

- Increasing our service business(support and repair) because we can now

monitor product usage by customers

- Making money from customer productusage data (that is, selling it to third parties)

- Bypassing entities in our distribution channeland resupplying our end customers directly

- Much greater leasing of our products(not just selling them outright, that is,

shifting to product-as-a-service model)

- Other

- We have made no changes to datein our business model

16

NotesFor Manufacturers, the IoT Is Here to StayThe relatively high state of maturity in the manufacturing industry, marked by moderate rates of growth, gives rise to intense competitive pressures. These pressures provide strong motivation for manufacturers to seize upon IoT initiatives to innovate and develop new business models.

While IoT-driven opportunities are exploding, TCS believes it is important for manufacturers not to get lost in the vast number of possibilities presented by the world of connected products. Instead, focus on two core application areas: business operations excellence and customer experience enhancement.

It is crucial to identify emerging business models that will have a lasting impact on a company's market performance, competitive advantage, and strategic differentiation. Mapping the available IoT technologies to a company's core competencies reveals a continuum of opportunities. Not every manufacturing firm will be able to master the complete set. Much will depend on a company's ecosystem, competitive levers, and cultural context. Firms that are able to take an early lead on one or more of these areas of opportunity, and continue to invest in widening the gap between themselves and competitors, will secure advantageous market positions.

The manufacturing industry has navigated significant changes during the last two decades. The core philosophy of manufacturing operations has changed, from the internal, operations-centric 'lowest cost of operations' model prevalent in the 1990s, to today's customer-centric model focused on developing new services. These services supplement traditional offerings.

In the manufacturing sector, the largest change driven by the IoT is the focus on providing 'servitized' products, and hence the name Internet of Things and Services or IoT/S is most appropriate, as well as shifting from selling a product to selling a service and retaining ownership of the product. Call it a 'services-centric' business model if you will. We have seen a visible leap from the traditional asset sale and break and fix-on-demand services to performance-based asset monetization models. The decisive progression of the industry from traditionally B2B to B2B2C is a large driver for digital transformation.

The opportunities are here. The sensors are available. The data is calling. And new customers await.

16

NotesFor Manufacturers, the IoT Is Here to StayThe relatively high state of maturity in the manufacturing industry, marked by moderate rates of growth, gives rise to intense competitive pressures. These pressures provide strong motivation for manufacturers to seize upon IoT initiatives to innovate and develop new business models.

While IoT-driven opportunities are exploding, TCS believes it is important for manufacturers not to get lost in the vast number of possibilities presented by the world of connected products. Instead, focus on two core application areas: business operations excellence and customer experience enhancement.

It is crucial to identify emerging business models that will have a lasting impact on a company's market performance, competitive advantage, and strategic differentiation. Mapping the available IoT technologies to a company's core competencies reveals a continuum of opportunities. Not every manufacturing firm will be able to master the complete set. Much will depend on a company's ecosystem, competitive levers, and cultural context. Firms that are able to take an early lead on one or more of these areas of opportunity, and continue to invest in widening the gap between themselves and competitors, will secure advantageous market positions.

The manufacturing industry has navigated significant changes during the last two decades. The core philosophy of manufacturing operations has changed, from the internal, operations-centric 'lowest cost of operations' model prevalent in the 1990s, to today's customer-centric model focused on developing new services. These services supplement traditional offerings.

In the manufacturing sector, the largest change driven by the IoT is the focus on providing 'servitized' products, and hence the name Internet of Things and Services or IoT/S is most appropriate, as well as shifting from selling a product to selling a service and retaining ownership of the product. Call it a 'services-centric' business model if you will. We have seen a visible leap from the traditional asset sale and break and fix-on-demand services to performance-based asset monetization models. The decisive progression of the industry from traditionally B2B to B2B2C is a large driver for digital transformation.

The opportunities are here. The sensors are available. The data is calling. And new customers await.

Notes

Notes

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Contact

For more information about TCS' Manufacturing Business Unit, visit: http://www.tcs.com/industries/manufacturing/Email: manufacturing.solutions@tcs.com

About Tata Consultancy Services Ltd (TCS)Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT and IT-enabled, infrastructure, engineering and

TMassurance services. This is delivered through its unique Global Network Delivery Model , recognized as the benchmark of excellence in software development. A part of the Tata Group, India’s largest industrial conglomerate, TCS has a global footprint and is listed on the National Stock Exchange and Bombay Stock Exchange in India.

For more information, visit us at www.tcs.com

About TCS' Manufacturing Business Unit

TCS helps global manufacturers reduce operational expenditure, utilize capacity optimally, and increase efficiencies while meeting safety and regulatory norms. We are the preferred partner for a third of the Fortune 500 manufacturers, and have a record of enabling business innovation that helps them meet the objectives of global operations.

The core strength of our solutions lies in our rich experience across discrete (automotive, industrial manufacturing, and aerospace) and process industries (chemicals, cement, glass, and paper). Our vertical focused Centers of Excellence (CoE) leverage this rich database to cross-reference learning and drive innovation in business solutions for standardized processes, assets and templates, ERP implementation, and continued support services.

Our solutions and services portfolio spans IT-led business transformation; design, development, and support for IT solutions; and value-added services such as outsourcing, infrastructure management, and consulting.