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February 1, 2015
The Industrial Internet of Things Part III: Short & Long-Term
Written by: Wayne Smith
Article Series #1 of the Industrial Internet of Things (IIoT) addressed some basic definitions, groups promoting the IIoT, and related economic forecasts. Article Series #2 addressed some of its opportunities, risks and challenges. This article will briefly address the short-term and long-term stages that pundits predict the industrial Internet will experience. In addition, it will outline some of the current social/economic/legal relations that it may disrupt.
We are currently in the near-term stage of the development of the IIoT. These activities, which are reasonably concrete and easily understood, will dominate business changes over the next three to ten years. Although these activities are not revolutionary, they will be the precursors to future disruptions.
Cost reduction activities and new revenue opportunities will be the focus in the early stages of development. Cost savings will focus on activities such as improved productivity, reduced production, better delivery methods, and increased worker productivity and workplace safety. The push to achieve these goals will require some convergence of IT and OT technologies. This convergence will disrupt the autonomous information silos found in the current OT environments.
New revenue opportunities will be sought such as increased per-use fees, software use services, and the increased collection and selling of market information. All of these are present in today’s Internet, but companies will attempt to leverage and extend these models to ever more applications.
Short-term public sector activities may include increased surveillance, improved traffic and parking management, better deployment of emergency services, improved pollution and effluents monitoring, and the improved management of energy and water resources. In addition, new functions that can increase government transparency and accountability will be demanded.
In contrast to the concrete and easily understood nature of the near-term, the long-term is more nebulous and ill-defined in both time and activities. Let us simply say the long-term is beyond five to ten years in the future. Long-term activities can be characterized as what some refer to as the “outcome economy.”
The “outcome economy” will be increasingly based on the collection and analysis of data originating somewhere in the cycle of production, delivery and use. Competitive pressures will force the manufacturer of the product or service to be more closely engaged with the customers’ predicted outcomes. Manufacturers may increasingly compete on “measureable results” rather than on equipment prices and delivery. Some risks will shift from the user of the product or service to the manufacturer and seller. With this shift, the profit model will also be altered since no one takes more risk without additional return. Perhaps equipment will be valued and priced based on lifetime productivity and uptime of the machine. Equipment may be increasingly sold on a “pay for use” basis. This would disrupt how equipment is currently purchased, financed, used, repaired and disposed. New partnerships between manufacturers and users to share productive resources will emerge. Seamless and extensive network connections will blur the lines between the ownership of production data that currently exist between the manufacturer and the user.
The convergence of IT and OT technologies will have dramatic effects on the skilled and unskilled labor forces that currently work on the OT side. New skills will be demanded, workers will be displaced and new opportunities will arise. In general, minimum skill levels will rise and so will the demand for new education and training to meet new skill requirements. The age old question is whether new work opportunities created will exceed the job losses caused by new efficiencies.
The “outcome economy” will blur the lines between seller and buyer business models. The ownership of liabilities and assets will become less clear and the ownership of data may be called into question. Production will become more interconnected and global. How will revenues and costs be parsed, assigned and taxed in this increasingly global world? Such shifts in business and legal relationships will demand considerable innovation from all levels of government and the legal system, neither of which is known for its agility and quick responsiveness. As you can see, the rise of the IIoT will be a catalyst for extensive change.
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