December 31, 2015 | by Wayne Smith

Industrial Internet of Things Part II: Opportunities & Risks

Internet of Things (IoT) and the Industrial Internet of Things (IIoT)

In our last article about the IIoT, we addressed some of the basic concepts including definitions, organizations promoting it, and some statistics that forecast its economic impact on world economic output over the next 20 years. This article will address some of the IIoT’s larger opportunities, risks and challenges.

Opportunities

The IIoT promises to improve productivity across all of the major industrial sectors in the world economy. Short term opportunities will primarily come from improved efficiencies from better asset utilization, lower capital and operating costs, improved uptime, lower maintenance, shortened production life cycles, shortened supply chains, and the like.

The major long term impact is what some refer to as the development of an “outcome economy.” This will be a fundamental shift from the current economic focus on selling “products and services” to focusing on “predicted outcomes” of those products and services. The seller of these goods and services will compete on their ability to meet specific results or outcomes on behalf of the buyer and not just on the selling of the products and services. Activities such as these could transfer much of the risk from the buyer to the seller, and so doing, fundamentally change the business relationship between the parties. The legal implications of these developments could be very disruptive to current business models.

One thing is clear, the future winners will be those companies that can alter and adapt their business models to create new kinds of value propositions.

Risks and Challenges

Four big risks that must be overcome are software interoperability, network speed and reliability, security and the investment risk that is due to the inherent uncertainty of changing of business models. There is currently a major gap between the interoperability of current information technologies (IT) and current operating technologies (OT). IT platforms have been moving toward complete interoperability for several decades. However, OT software platforms are still predominantly proprietary and operate in independent silos with little or no connections to the systems outside those manufacturers. OT is sort of like IT in the 1980s. To develop an open, interconnected and seamless system of sharing data across OT manufacturers will require considerable changes to the business mindsets as well as the technology. This is not a small task.

Speed and reliability become increasingly important to enable M2M environments to operate in real-time. Industrial production and transportation may be very dependent upon instantaneous communications. This could make the historical Internet “best efforts model” with relatively long delays unacceptable for certain applications. In short, this will require considerable increases to bandwidth and capacities for wired and wireless networks throughout the world. Such increases will have to be on a scale of 100X to 1000X current network capabilities.