A survey looking at the Internet of Things (IoT) technologies finds that more than 80 percent of companies increased their revenues by investing in the IoT. In 2014, the average increase in revenue was 15.6 percent, while market leaders reported a 64 percent revenue increase, according to a survey conducted by Tata Consultancy Services (TCS). Nine percent saw an increase in revenue by at least 30 percent.
The TCS Global Trend study on IoT surveyed 795 executives from large multi-nationals (who responded to all questions) across a variety of industry sectors, looking at both the potential for revenue increases from IoT and the challenges for companies transitioning to the IoT.
However, in total, 3,764 executives responded to some parts of the survey. Of this group, 79 percent said their companies had IoT initiatives in place. Of the 21 percent that don’t have initiatives, 64 percent plan to launch one by 2020. This translates into 92 percent of the 3,764 survey participants having an IoT initiative by the end of the decade.
In 2015, companies with IoT initiatives (who completed all of the survey questions) will invest $86 million – or 0.4 percent of revenue – in their IoT projects. IoT budgets are expected to increase 20 percent by 2018, reaching $103 million.
"The age of IoT is well underway. The question is, whether businesses are ready to realize the full potential of this technology. Our latest global trend study found that leaders in using IoT technologies are using it to completely reimagine their businesses by changing every aspect of them from business models and products to business processes and workplaces,” said Natarajan Chandrasekaran, CEO and MD of TCS, in a statement. "Now is the time for every leader in every industry to reimagine the possibilities for their businesses in a world of smart, connected 'things.'"
The remainder of the research findings are based on the responses from the 795 executives who completed the entire survey. In this group, 90 percent have IoT initiatives in place and the remainder plan to have them by 2020.
A key finding indicates that businesses are making big dollar investments in the IoT. Twelve percent of the 795 companies surveyed plan to spend $100 million in 2015 and three percent expect to invest a minimum of $1 billion. Companies also expect their IoT budgets to increase year-on-year, with spending expected to grow by 20 percent by 2018 to $103 million.
The top eight percent of respondents, based on ROI from IoT, report a 64 percent average revenue gain in 2014 as a result of these investments. The biggest business impact is that companies can offer their customers more tailored products and services, said TCS.
The survey reveals that the most frequent use of IoT technologies is tracking customers through mobile apps, used by 47 percent of all businesses. Nearly 51 percent of IoT leaders invest in IoT to track their products performance, compared to 16.1 percent of the respondents with the lowest ROI from IoT.
In terms of product tracking what companies track depends on the price of the product. TCS cited that companies are more likely to invest in an IoT initiative for an object like a multimillion-dollar power turbine. “While only 26 percent of all companies are using digital sensors for product monitoring, the number varies greatly by the price of the product,” said TCS.
The survey also finds that companies are comfortable using IoT technologies to track their own supply chains. Again, what they track appears to be based on product cost. Forty-five percent of all companies surveyed said they used sensors and other digital devices to monitor production lines and distribution operations. However, European companies are the leaders with 48 percent of them using IoT in production or distribution.
However, there are some big challenges, said TCS. The survey indicates three major challenges, led by corporate culture. Respondents said “the ability to get employees to change the way they think about customers, products and processes was a major barrier.”
Other challenges include having top executives who believe in IoT and are willing to invest resources and time, and questions around technology, including handling big data, internal vs. external development, integrating IoT data with enterprise systems, and ensuring security and reliability.
Who are the big adopters? Executives in the industrial manufacturing sector reported the largest increase in revenue from IoT, with an average 28.5 percent, followed by financial services (17.7 percent) and media & entertainment (17.4 percent). The automotive industry is a laggard with a 9.9 percent increase. Industrial manufacturers also lead in using sensors and other digital technologies to monitor the products they sold to customers with 40 percent of the companies using these technologies.
Geographically, North America and Europe are the leaders in IoT adoption. In 2014, U.S. companies reported the largest revenue gains of 18.8 percent compared to the previous year, followed by Latin America with a 18.3 percent growth, Asia-Pacific at 14.1 percent, and Europe with a 12.9 percent increase.
However, in 2015, North American companies are forecast to spend 0.45 percent of revenue this year on IoT initiatives, while European companies will spend 0.40 percent. This is followed by Asia-Pacific companies that will invest 0.34 percent of revenue and Latin American firms that will spend 0.23 percent of revenue. The upshot: North American and European companies are more frequently selling smart, connected products, compared to Asia-Pacific and Latin American companies, said TCS.
By 2018, spending by these companies is projected to reach an average of $102.8 million on IoT initiatives. Almost all of them forecast revenue gains between 2015 and 2018. Only two percent did not forecast any revenue increase.
Here are the projected gains:
- 42 percent said they expect to see revenue increases of between 1 percent and 10 percent (with 26 percent of respondents saying they expected gains between 6 percent and 10 percent)
- 29 percent project revenues increases between 11 percent and 20 percent
- 7 percent said the increase will be between 21 percent and 30 percent
- 22 percent said the increase will be more than 30 percent
The survey also provides several case studies in which GE, HP, Intel, and PTC share their IoT strategies and visions.