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A Legacy of Connected Equipment

The IoT is a new world of connected equipment and data flows, which means that good ideas will come from unexpected sources.
Monica Schnitger Monica Schnitger

News articles about the internet of things (IoT) often cover personal or home devices, such as fitness trackers and refrigerators that tell us when to buy more milk. But those are just a tiny fraction of the real use cases for the IoT—the industrial sector has millions or billions of machines ready, today, to be digitally active in their own performance. What does the industrial IoT mean for these manufacturers who manage a fleet of installed equipment?

Let’s first understand the opportunity. The IoT combines sensors, a way to transmit the sensor data and an analysis engine that uses this data to suggest actions. Imagine a climate control system that monitors itself. It has sensors that transmit data to both a building management system and to its manufacturer’s maintenance engine. Locally, a building manager can optimize operations to meet comfort and cost targets. The centralized analytics enable the manufacturer to gather data across its installed fleet that highlight opportunities for maintenance services while also informing the next product design iteration. In addition, this connectedness creates the opportunity to sell heating or cooling degrees, charging customers for the effect of the system rather than the system itself.

Data Collection Affects Design

All of this requires a rethink of the manufacturer’s design and go-to-market capabilities. The designer needs to understand what data matters and where to place sensors. He must know about power requirements and the data transmission options available for this type of equipment. (Wi-Fi doesn’t exist everywhere!) Designing a product to include sensors, power and comms creates new objectives. In the past, goals may have included attributes like ease of maintenance, flawless operation for 10 years or the ability to survive an earthquake. In an IoT world we might add the ability to transmit uninterrupted and accurate data every 10 seconds, or display part numbers or other data to match up with an augmented reality platform. Someone also needs to build the apps that gather the sensor data, transmit it to the analysis engine and serve out results to the equipment operator.

From a go-to-market perspective, the IoT changes the relationship between maker and user. Some users may prefer to own their assets and are uncomfortable with a rental or performance-based scheme. They may also want to know all costs up front, which usage-based models can’t readily predict at the outset. In the HVAC example I mentioned, a colder-than-average winter will lead to higher costs when heat-degree-based pricing is in effect. A cooler-than-average summer means less air conditioning, which means less revenue to the HVAC manufacturer. This scheme requires both sides to share in operating risks.

Building on a Legacy

Industrial equipment makers with a legacy fleet face many of the same problems, but they also have another market challenge: How can they compete against an IoT-ready product that may offer these new business and technical models? And do their customers even want this? The sense I’m getting is that, yes, many buyers want clearer insights into their equipment’s operation, even those embarrassed by past lapses in maintenance. And the odds are that most operators already have access to a lot of data they aren’t using from sensors placed years ago, feeding data historians for regulatory or after-the-fact analysis. Why not repurpose that data with software and analytics? This creates an IoT offering without requiring significant expenditure by the buyer.

Equipment manufacturers with a base of older products should start by investigating the IoT platforms on the market today and see which of them support the sensor types already installed. Do a pilot project to track data and create analyses. Let the platform build user apps, manage communication and uptime. Many buyers want to work with installed vendors but that doesn’t mean they’re not interested in the process and data potential of the IoT. Don’t let someone take this business away from you! And be open to new ideas and business models. Expect some of them to fail. The IoT is a new world of connected equipment and data flows, which means that good ideas will come from unexpected sources.

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About the Author

Monica Schnitger's avatar
Monica Schnitger

Monica Schnitger is the founder, president and principal analyst of Schnitger Corporation. She has developed industry forecasts, market models and market statistics for the CAD/CAM,CAE, PLM, GIS, infrastructure and architectural / engineering / construction and plant design software markets since 1999.

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