Bernd Gross is senior vice president of IoT and Cloud at Software AG. He was previously responsible for the IoT Business at Nokia Siemens Networks and chief executive of Cumulocity and has seen IoT develop from an exciting concept for the future into a market reality. Here, he tells George Malim, the managing editor of IoT Now, how organisations can establish sound foundations for the future stages of their IoT implementations by identifying their goals, selecting their partners and ensuring they have flexibility and security.
IoT Now: What do you see as the main motivations for companies to deploy IoT technologies and what is accelerating uptake of IoT in general?
Bernd Gross: Typically, we categorise demand for IoT platform technology in three areas. Deployments either focus on lowering cost, increasing efficiency or supply side optimisation, and growing revenues. Lowering cost is an easy way to show the business case internally for organisations and it’s often a first way in for IoT. Having an initial service that generates cost savings or efficiencies to the extent that return on investment in IoT can be established is an easy to understand way to gain organisations’ commitment to investing in IoT.
The second way in is if a company wants to reach a new level of engagement with its customers. This might be if they are motivated to provide a better customer experience by improving a product’s functionality or its interface. In this scenario, knowing how a product is used enables improvements to be made. This is very similar to how a web company does analysis on a browser to continuously improve usability. In IoT, this is the same concept but being applied by smart device makers.
In a traditional business, it’s not easy to access data about how products are used but once the products are connected you get the data points that enable you to engage with customers in new ways and that’s a compelling attraction of IoT for many organisations.
The third category is increased sales. It’s obvious that having the ability to introduce a new business model such as providing an asset as a service or shifting from a capex to an opex model offers significant opportunities to organisations. This capability helps them to differentiate from their competition and extend the value they can deliver to their customers.
Such an offer might involve predictive maintenance capability to ensure machine uptime. This was not previously possible because the machines weren’t connected but now it’s possible to monitor the machine to ensure it is running well. This can be monetised, either by manufacturers or their distributor partners.
IoT Now: That seems a complex approach for organisations that are new to IoT capabilities. Which approach is motivating the market place the most today?
BG: Recently we have seen a lot of cost optimisation-driven initiatives, especially in industrial IoT (IIoT). For example, discrete machine manufacturers such as DMG Mori, the largest equipment makers in the metal working industry, or Homark, which makes machines for the furniture industry, are using our IoT platform technology. They’ve focused first on cost optimisation but now want to use IoT to grow their businesses with new revenue models.
These might, for example, involve introducing recurring revenue models instead of a simple onetime machine sale. In addition, companies might be able to use IoT to enable them to offer services to improve machine productivity or predictive maintenance packages. They can build new revenue streams while differentiating themselves from being purely makers of machines. As a machine maker your capability to differentiate has certain limitations imposed by the nature of the machine in questions. However, IoT can enable the performance of the machine to be maximised and its maintenance and support to be done in new and efficient ways. We see IIoT as the leading vertical in which companies are engaging with IoT to move from pure cost saving to new revenue generation and creating differentiation.
IoT Now: How is the ability to connect and analyse the physical world enabling new opportunities to be identified?
BG: As I said earlier, the capability IoT brings enables companies to act similarly to web companies that analyse how users interact with their products and services. These insights can then be applied to enable product enhancements. Once devices get online it’s quite surprising that people out there are managing their businesses in the same way that they did 50 years ago. Of course, they’ve introduced IT in that time but they’ve only really digitised their back offices. We now see IT and business applications converging so companies can have a full understanding of their business that encompasses inputs from spare parts inventory to predictive maintenance. I believe we’ve only seen the tip of the iceberg in terms of innovation and the possibilities enabled by IoT. The fundamental thing is to have end-toend transport in real-time available so you can gather data to predict and optimise and create a better experience.
IoT Now: What are the main challenges organisations face in order to implement IoT successfully?
BG: We think there are three key attributes to successful IoT deployments. These are the ability to deploy rapidly, the utilisation of open technologies and ensuring security.
The biggest challenge I’ve seen with companies entering into the IoT implementation challenge is that they try to do too much at once. They embrace the idea of introducing predictive analytics and maintenance before they’ve done the basics, which are to connect the machines and make sure that’s working well. Having said that, a significant part of the challenge is to get services up and running and demonstrating their value. This is vital to maintain internal support for IoT investment.
IoT Now: Is there are need for organisations to move quickly but in a more focused way?
BG: A rapid start is very important to generate momentum but then apply an agile methodology. For example, taking a minimum viable product (MVP) approach could enable a company to start with a discrete IoT product. They could start with an app that is separate from IT and other processes such as remote alarm management for a fleet of machines. This would demonstrate value but remain self-contained. We recommend rolling out a separate app, learning to manage the new environment and ensuring it is up and running and works well for six to nine months before slowly improving capabilities with an agile methodology.
A second step would be to increase efficiency by integrating the new data insights you are now collecting with your existing process, such as supply chain management. Finally, the third step is to innovate around the new service offering and use artificial intelligence (AI), predictive intelligence and other technologies to enable new revenue generating services.
IoT Now: Why is it so important to use technologies that have open architectures?
BG: Without doubt, openness will play a key role. Today, it’s extremely difficult to foresee what will happen in two or three years so you have to ensure you have a partner that gives you complete freedom of choice in the future. You only get that with an open platform.
Maintaining flexibility is so important because although an early customer might require you to offer services based on Microsoft Azure, a future Chinese customer might want it based on Alibaba. Increasingly we are seeing organisations being required to comply with national regulations regarding data sovereignty so you need a platform that is completely independent in terms of the hyperscale cloud environment it uses. However, this is just one aspect, the openness of the platform is also important.
All the application programme interfaces (APIs) must be open to enable you to do what you need to in future. If only a few are open you may later find yourself limited in terms of what you can do. I would only select a provider with fully open APIs because you can’t predict what will happen. A principle of the Cumulocity platform is we believe in fully open capabilities so all functionality is available through open APIs.
IoT Now: Everyone’s aware of the security challenges facing IoT, how can organisations ensure they address this in the best way?
BG: Security and data privacy are massive topics for IoT platforms. Using the latest technologies to achieve end-to-end encryption from endpoint to cloud is very important. If you use the http layer, you can use high or low security encryption and there are specialist companies that will advise you on which is most appropriate to get your data safely into the data centre.
If you’re using cloud, you have to make sure that the provider’s multi-tenant concept separates the database. Do not trust a database that services multiple customers. However, if you truly separate and provision the database environment for each customer, there can’t be leakage of data.
Another consideration is access to data. You need to consider who will be able to access the data and, because IoT is an ecosystem play, you need to be able to provide access to third parties. To do this, you need a governance model that provides access at specified level to the different types of partners and organisations you decide to allow access to you data.
IoT Now: You mentioned that IoT relies on an ecosystem to enable services and applications. How should organisations approach the ecosystem and their role within it?
BG: This is a highly strategic question for each organisation to answer before seriously considering an IoT deployment. For example a manufacturer of compressors that wants to make the most of IoT will have the immediate reflex of using IoT to improve efficiency. They will focus on cost optimisation even though the greatest value will come from revenue and differentiation via the enablement of the partner ecosystem.
For a compressor company this comes in the form of condition monitoring, alarm management and, in the future, predictive analytics to help the end customers and ensure the machine is always up and running. However, when you start thinking about what is specific to a compressor company you quickly realise that there is no generic ecosystem for a compressor company. It’s a micro-ecosystem, it’s not like iTunes, it’s specifically around the machines and the ways in which machine information can be made available to partners and distributors. Many of these rely on aftersales as part of their business model so having the opportunity to make money out of service contracts or verifying the condition or age of a compressor enhances their business and grows loyalty to the compressor company. This is just one example but it shows the complexity. Requirements are often very specific and very closely related to the business case so you need to develop your environment into an ecosystem. With IoT, it’s the things that make the difference and define the ecosystem, not the internet.
IoT Now: Even with the right micro-ecosystem in place to support highly specific services, organisations still have strategic partners. What are the differences between strategic partnerships and being part of an ecosystem?
BG: From the smart equipment maker’s perspective there’s no real difference. The service company they use is a strategic partner but one level above that for us, as a platform player, it’s different. We have hundreds of ecosystem partners all of which can add value to our platform offering. For instance, we have about 20 telecoms operator partners worldwide including Deutsche Telekom, Telstra, NTT Communications, KPN and Telia. They have our platform whitelabelled so that when you deploy and app on our platform you can actually deploy it across various open cloud environments.
A strategic partner should therefore be selected based on if they are already present in a specific vertical and can add value. Strategic partnerships should be defined for a particular value proposition with the partners jointly participating in that area.
IoT Now: We’re not talking so much about IoT in theoretical terms today because organisations are already making moves beyond introductory deployments. What has the market learned so far to make development of IoT happen more successfully?
BG: To move through the maturity steps from initial IoT deployments that generate cost savings, into the introduction of new services that generate differentiation and revenue, before engaging in innovation to go even further, organisations need to carefully assess their priorities. As I said before, it’s not possible to know what will be needed in three years time but it is possible to ensure you engage with the right ecosystem to support you with the open technological platforms for the future. At the same, it’s possible to put in place security to protect your IoT implementations and your customers. Finally, the right strategic partners can enable you to turn a concept into reality to the benefit of all involved.
