IoT is cost-cut led from the boardroom, says Ovum report

IoT is cost-cut led from the boardroom, says Ovum report

IoT leadership starts at the top, says analyst company Ovum. Any decision to deploy Internet of Things projects typically involves multiple stakeholders, but the analysts’ research shows that while the IT department remains “an important stakeholder” in these schemes, C-level leaders are the driving forces behind 52 percent of IoT deployments.

By contrast, just eight percent of IoT programmes are being led by line-of business departments, and 38 percent by the IT department. This has implications for IoT providers, as well as for buyers.

To understand what is driving the take-up of IoT technologies, it is critical to understand end-users’ attitudes, says Ovum. To this end, the company conducted a 14-country survey of organisations that are already deploying, or are in the process of rolling out, IoT solutions.

Talk to the business

Ovum’s findings show that IoT adoption is still in the early stages for most enterprises, with fragmentation and immaturity characterising the market. Given that, providers must consider who to approach within the organisation and be ready to explain the IoT’s benefits and use cases, rather than simply introduce new technologies to the IT department in a standard sales-led approach.

“IoT suppliers must ensure their pitch is understood by senior leaders, which may require more focus on business benefits and less on the IoT technology. To further boost chances of winning a deal, IoT suppliers must also secure buy-in from the head of IT,” says the report.

That said, providers should be ready to “start small and meet customers where they are”, says Ovum. “A quick deployment and targeted ‘just do it’ approach to IoT will work better than trying to promote broader strategic approaches, though these can be a useful framework for a longer-term vision.”

This creates an unhelpful tension, as we explore below, in ‘Internet of Business says’.

ROI of the rovers

The good news is that most respondents report seeing measurable benefits from IoT deployments in fewer than 12 months, says Ovum, so helping customers understand the best KPIs to measure and demonstrate IoT success can help drive further investment. “Entering into IoT project discussions armed with this information can maximise the chances of a successful outcome for all parties,” the analysts suggest.

Regional differences are significant in some cases, from technology choices to organisational goals and challenges. But many drivers for IoT are universal, says Ovum: organisations are looking for cost savings (44 percent), improved business processes (37 percent), and better productivity and competitiveness (33 percent) in the first instance.

“Building new revenue streams from IoT was important to a minority of enterprise deployers [25 percent], along with longer-term goals, such as sustainability,” says the report. “These goals are still further out for most enterprises, though they play a role in strategic decision-making on IoT deployment.”

Better use of environmental or energy resources was lowest on the list of priorities, according to the survey: cited by just 22 percent of respondents, half the number who said cost-reductions were the main impetus behind IoT programmes.

“The key drivers are reflected in the KPIs used by enterprises to measure successful IoT deployments,” continues Ovum. “Almost half of enterprises surveyed use productivity and cost-savings data as their top KPIs. Enterprises were likeliest to report measurable benefits linked to efficiency or productivity gains, greater asset/performance insights, cost savings, and improved customer satisfaction.”

The greatest challenges in IoT deployments centre on data and network security, the ongoing cost of sustaining IoT projects, and integration with legacy infrastructures and business processes, adds the report.

Fact and figures

As of the second half of 2017, 56 percent of enterprise IoT projects involved deployments of fewer than 500 connections/devices, says Ovum. At the other end of the scale, just seven percent of enterprises had IoT deployments with 10,000+ connections/device.

However, this year the size of enterprise IoT projects will “shift up”, according to the report, with 60 percent of organisations expecting their projects to support 500-9,999 connections/devices.

China will lead on larger IoT deployments, with 38 percent of Chinese enterprises planning 1,000-9,999 connections/devices, followed by 26 percent of enterprises in France and South Korea.

Despite this, IoT spending is still low overall. Again, the clear exception was China in 2017, where 53 percent of enterprises fell into the $250,000 to $500,000 investment band. Germany led in the $5 million+ category, with five percent of German enterprise respondents investing at this level.

Internet of Business says

The survey appears to have looked mainly at internal IoT projects, rather than at – for example – smart city deployments and environmental programmes. Nevertheless, it is no surprise to see so many organisations still laser-focused on cost reduction and productivity, if not to the exclusion of everything else.

Arguably, this primitive approach is a concern, not just in the private sector, but also in government, which itself has zeroed in on cost cuts and productivity gains from technology, rather than on being smarter and more innovative.

Survey after survey has found that tactical applications of technologies such as robotics, automation, and AI, are the wrong approach, especially when the core focus is on slashing costs. Strategic applications that focus on running a smarter, more agile, better informed business in line with C-level goals are what works – and should lead to lower costs overall.

In the past, the rush to slash costs has sometimes led to bad strategic decisions: such as the mass offshoring of call centres – in some cases leading to expensive repatriation programmes and damaged reputations. Technologies such as the IoT, robotics, automation, and AI demand smarter approach than that.

The picture that emerges from this survey of buyer attitudes and behaviour is a vendor saying to a CEO, “Here’s a quick demonstration of how you can save money”. That should ring alarm bells, not celebration bells. Particularly when set alongside the numerous surveys this year that reveal organisations rushing in to IoT deployments without considering the security implications.

That approach leads to hidden costs, not cut costs.