The roadmap for successful IoT solution development

The hype is over. Let's get down to business.

You've seen the hype. Forecasts that there would be tens of billions of connected devices in just a few years—up to 30 billion by 2020—turned out to be wildly optimistic. At the end of 2022, Transforma Insights put the actual number at less than half of that, 14.4 billion.

And it's easy to understand why everybody was so excited. The ability to gather real-time insights into your customers, products and equipment is a crucial differentiator. The Internet of Things (IoT) opens up incredible opportunities to connect and change how businesses operate, market and serve their customers. It can provide far greater insight, require fewer resources and do it all at less cost and with less environmental impact. It’s core to most of the innovations we see transforming industries, from consumer goods to industrial equipment.

But then our 2020 report 'Why IoT projects fail and how to beat the odds', based on a study by Beecham Research (Beecham), found that despite the hype, many IoT projects were not considered successful.

In 2023, three years later, Beecham did another survey of hundreds of professionals responsible for the design, deployment and management of IoT projects. This report is based on that survey’s findings and looks at what's changed in the past couple of years, why more projects are seen as successful, and how you can still beat the odds. We will also look at the importance of seeing IoT as more than a quick fix, or standalone project. It's when companies see it as an enabler of enterprise-wide transformation and fully embed IoT in their business, integrating data from across the organization, that the full potential of IoT is realized. That too may sound like hype, but in this report we'll give you the chance to see for yourself. We’ll share some examples of the business outcomes companies we’ve worked with have experienced.

Back in 2020, Beecham Research (Beecham), a leading technology research and analysis firm that specializes in IoT, carried out an extensive study into the design and delivery of IoT projects. This research, supported by Software AG and several other partners, included a large-scale survey of professionals involved in designing, deploying and managing these initiatives.

It found that just 12% of those surveyed thought their projects had been fully successful. And nearly three-fifths (58%) said their projects had been fully or mostly unsuccessful.¹

At the time, we called these numbers "sobering." And we said that we believed that the lack of success had nothing to do with IoT technology itself, but instead that the high rate of failure reflected the fact that implementing IoT isn’t straightforward, making it difficult to fully realize the promised benefits.

Fast forward three years and Beecham approached us again to revisit this topic and look at how things had changed. Always keen to learn more about the field and share it with the community, we were happy to support this further research.

Now that we can review the latest data to learn how the market has evolved, here are three significant findings from the research.

1.1 The likelihood of project success has grown significantly

And how things have changed. When Beecham asked the above question in 2023, 70% of respondents said that their project had been successful. The share of those saying that their projects had been unsuccessful fell from 58% to just 24%. So what has changed over the past three years to cause this improvement?

1 Beecham Research, Why IoT projects fail, 2020
2 Beecham Research, Why IoT projects fail, 2020
3 Beecham Research, How to Measure IoT Success?, 2023

1.2 Objectives haven't changed much

The sizeable increase in the likelihood of project success did make us wonder whether companies had relaxed their expectations for IoT projects. But the data gives no indication of this.

Between 2020 and 2023, companies continued to rank a wide range of objectives as important.

Improving productivity remained a common objective but was knocked from the top spot by a new option, "Ability to scale." This is an interesting development as it shows that companies are planning beyond the initial deployment and recognize that a customized solution that works for one asset in one plant is not valuable if it cannot scale across the plant, across sites and across the globe.

The importance of improving productivity and scalability may also be an indicator of the growing importance placed on improving sustainability. IoT can drive many green objectives, including helping to reduce waste, cut energy consumption and identify process improvements. Despite the desirability, only 7% of companies are on track to meet their own sustainability goals.⁶

⁴ Beecham Research, Why IoT projects fail, 2020
⁵ Beecham, How to Measure IoT Success?, 2023
⁶ Accenture, Accelerating global companies toward net zero by 2050, 2022
⁷ Gartner, Gartner Sustainability Opportunities, Risks and Technologies Survey, 2022

1.3 Customer-facing objectives are harder to achieve than those focused on internal operations

Six out of seven (83%) of adopters that said the objective "Improving productivity" had been mostly or fully realized. Conversely, just 58% of those said the same about "Enabling new business models," and only 4% described it as fully realized.

The explanation for this is likely to do with the scope of change. Enabling new business models is, by its nature, a more ambitious and far-reaching objective.

Creating new business models is complex and the potential benefits likely to be much more substantial and wide-ranging—for example, increased customer loyalty and greater share of wallet. Such benefits may take several years to become fully apparent.

Also, given the ambitious nature of such projects, the number of things that could go wrong are also likely to be much higher. Success is dependent not just on the technology working, but many other factors too:

• Did the anticipated market gap exist?
• Were forecasts of potential revenue accurate?
• How did competitors react to the change?
• How did external factors (such as economic changes and geo-political instability) affect results?

⁸ Beecham, How to Measure IoT Success?, 2023

1.4 Use of third-party expertise/resource grew slightly

In the past three years, the maturity of IoT has grown significantly. As IoT has become more commonplace, the availability of skills has grown. Despite this, there has been a modest growth in the number of respondents saying that their projects were primarily or largely dependent on external expertise and/or resources.

This reflects the fact that while there are more people with relevant skills, demand has also grown. Attracting and retaining the skills needed remains a challenge.

Many IoT projects require a wide variety of skills. For example, a project to track assets in a manufacturing plant may require skills in/knowledge of:

• Radio network design
• Module integration
• Data security
• Systems integration
• Privacy/data sovereignty regulation
• Data analytics/artificial intelligence (AI)

So it's little wonder that nearly three-fifths (59%) of respondents—up from 50% in 2020—said that their projects were developed and implemented with "primarily external" or a mix of internal and external resources^.11,12

⁹ Beecham Research, Why IoT projects fail, 2020
¹⁰ Beecham, How to Measure IoT Success?, 2023
¹¹ Beecham Research, Why IoT projects fail, 2020
¹² Beecham, How to Measure IoT Success?, 2023

Why has the percentage of companies reporting that their IoT projects are mostly or fully successful risen so much in just two years? Our work with our customers suggests several key shifts that will continue to accelerate success moving forward.

2.1 Organizations are setting clear business objectives

The era of technology pilots and proof of concepts is over. Companies are no longer content for IoT development to occur in a sequestered section of the R&D or IT departments. Before making any IoT investment, there has to be a clear understanding of how and why it is going to generate a return.

Measurement is essential for evaluating the impact of projects and ensuring that they align with organizational goals. Businesses achieving success with IoT initiatives have seen the following benefits:

Greater output

Flexco is a leading industrial conveyor belt products and services company focused on one thing: maximizing belt conveyor uptime, productivity, and safety in industrial applications around the globe. Flexco has developed Elevate, an IoT solution that lets mining customers monitor their conveyor belt cleaning systems in harsh environments, predict when interventions are needed without deploying expensive field inspection teams onsite, and save money by optimizing production. Flexco boosted production output at an aggregate site by implementing Elevate on 20 of the most problematic cleaners, allowing the maintenance team to identify deficiencies and proactively provide service. Using weigh scale measurements from before and after, they noticed an increase in production output because of decreased carryback that equaled more than $1.1M in production per year.

Higher efficiency

SMC specializes in the manufacturing of pneumatic equipment. The solution’s sophisticated analytics and preventive maintenance save the company and its end-users costs associated with leakage-caused air loss. Under its Smart Field Analytics offering, SMC now delivers the granular data that its customers demand and help them achieve their sustainability, money saving, and efficiency goals, plus much more. As part of the benefits the solution provides, factory managers can now deploy predictive maintenance across the floor and eliminate the risk of unplanned downtime and disruption to productivity, improving OEE by as much as 20%.

Healthier, safer workplaces

AiFlux Limited is an AI industrial tech company in the United Arab Emirates (UAE) that specializes in using IoT technologies, advanced analytics and artificial intelligence to provide real-time insights, alerts and predictions about the health, integrity and productivity of industrial resources. They recently rolled out 44 different Health & Safety use cases related to the health and safety of workers and equipment used in the construction of offshore oil & gas structures.

Improved product quality

Dürr is one of the world’s leading mechanical and plant engineering firms. Its turnkey paint shops, final assembly systems, and machine and robot technology harness digitalization and Industry 4.0 concepts to power manufacturing across the automotive industry, allowing them to reduce painting faults caused by material or equipment degradation.  

Take time to consider second-order effects

Indirect benefits are less tangible and harder to quantify, yet can still add value to the organization. They can include improvements in employee morale, enhanced collaboration, strengthened brand reputation and accelerated innovation. While these benefits may not have immediate financial value, they are crucial for long-term success.

Focusing solely on easily measurable metrics may lead to overlooking crucial aspects of project success. It is necessary to align measurement criteria with the project's goals and objectives. This requires identifying the key drivers of success and establishing relevant metrics that accurately capture progress towards those goals. Measuring indirect benefits requires a more nuanced approach, involving surveys, feedback mechanisms, and qualitative assessments to capture the qualitative aspects of the project's impact.

A global industrial equipment manufacturer with a focus on earthmoving, mining, and crane technology, invested in IoT to develop a digital solution to simplify construction site documentation, automate reporting via digital machine communication and provide real-time insight into machine utilization. The project was successful, and the company’s customers were able to improve efficiency by 30%.

But that wasn’t the end of the story. The customer quickly realized that integrating data about local weather conditions and wind speeds could provide early warnings about dangerous conditions. By incorporating this data into its digital tools, it was able to help customers improve the safety of workers while on-site. And, of course, fewer incidents also means less paperwork, less spent on regulatory fines and penalties and increased uptime.

We continue to recommend prioritizing use cases that can produce tangible business outcomes quickly, building momentum and internal support. This will give a solid footing for future investment and growth. In fact, as a result of working with so many equipment manufacturers – many of which had previously failed with IoT—we recently developed our IoT Maturity Model, below. This shows that you don’t have to leap all the way to Equipment-as-a-Service model to benefit from IoT and connected devices. There are compelling benefits associated with each phase of IoT maturity and those benefits are cumulative. This means that there are strong reasons to get started and to continue along the journey.

The Software AG IoT Maturity Model

2.2 Organizations are taking a company-wide approach

One of the critical decisions when implementing an IoT project is “build or buy”:

• Building a solution yourself means that you have total control, and you can build something completely bespoke. It also requires a larger upfront investment to secure the necessary talent, a larger time to market with the potential for project delays, and having to learn through trial and error.
• Buying a solution allows you to take advantage of prebuilt applications to launch services around common use cases and reduce time to market. It also comes with the risk of vendor lock-in and limited opportunity to expand your use cases. But why choose? It doesn’t have to be an either-or decision. A “buy and build” approach to IoT can give you the best of both.

Focus on addressing how you can generate value for your organization with IoT. The faster you produce tangible business outcomes, the more support you will gain for your project and the sooner it will become part of standard operations. Employ a “buy and build” strategy and leave the technology for building IoT to those who have made it their business.

Faster to build:

• Avoid skill shortages
• Work smarter
• Accelerate solution development by leveraging proven solution components

Faster to value:

• Avoid costly mistakes and vendor lock-in
• Accelerate value by learning from the experiences of others

Faster to grow:

• Build scalability in from the outset
• Leverage open-source to avoid limiting proprietary technology and keep your options open
• Upskill your people
• Scale and make changes faster with a self-service platform
• Extend the reach of your IoT solution, faster

2.3. Organizations are being forced to review their technology strategies

Three years may not sound like long, but a lot has changed technology wise. Key aspects of IoT solutions have got better, faster and cheaper. levels of connectivity, the deployment of sensors and digital intelligence have advanced more quickly than almost everyone expected.

Consider connectivity. Back in 2020, 5G was still embryonic and networks rare. In 2023, public 5G is widely available. 5G was developed with the needs of connected devices in mind. This includes being able to support far more devices in the same space as 4G or Wi-Fi—theoretically, 5G can support up to a million devices over one square kilometer.

There's also growing interest in private 5G. Unlike Wi-Fi, this uses licensed spectrum, reducing the likelihood of interference. These networks give companies the ability to control characteristics such as performance and security. Combined with edge computing, they can enable real-time responsiveness, opening up a whole new set of IoT applications.

The number of 5G-enabled devices is growing rapidly. According to GSA, there are now more than 1,700 5G-ready devices available, including over 200 modules.¹³

At the same time, sensors have gotten smaller, more robust and cheaper, making many more use cases economically viable. Durability and battery life have also increased. Perhaps the most interesting development is the rapid growth in edge computing and artificial intelligence (AI) tools. The buzz around AI has been growing over the last few years with the emergence of generative adversarial networks (GANs). That buzz reached fever pitch in 2023 as ChatGPT entered the public consciousness. IT behemoths like Microsoft and Google were forced to share their plans for AI or see their share price take a knock.

The press has been full of stories about industries being shaken up over the next couple of years. Applications like digital twins, which may have seemed somewhat fanciful, sudde impending disruption—some have compared the scale of change to the advent of the internet—many companies are urgently reassessing their strategy.

Many have realized that they have a lot of catching up to do.

¹³ GSA, 5G Device Ecosystem Member Report, December 2022

Understand the technical challenges  

Security is a common concern for all new technologies. And IoT is no exception. Typically, the problems that arise aren't indicative of any particular weakness of the IoT but rather poor product development and management processes.

Basic security hygiene remains a problem. For example, there have been many studies putting the proportion of people and organizations that fail to change default/vendor-supplied passwords at between about 40% and 80%. And among those that do change passwords, many reuse the same ones time and again.

This problem is so serious that several governments, including the UK and some US states, have passed or are in the process of passing legislation to help address it.

Since January 2020, the California Consumer Privacy Act of 2018 has required those selling IoT devices in the state to equip the device with reasonable security features that are:

• Appropriate to the nature and function of the device
• Appropriate to the information it may collect, contain, or transmit
• Designed to protect the device and any information contained therein from unauthorized access, destruction, use, modification, or disclosure

The UK bill includes similar provisions but would also force device manufacturers to publish the date until which they will provide security updates and patches.

While the vast majority (92%) of respondents said that security was important to their IoT project—and over half (54%) ranked it as very important—just less than one in eight (12%) said that this objective had been fully achieved.

IoT project security: perceived importance versus achievement  

As a business, it’s not just your own data you need to worry about, but also the data you gather from customers and partners. And loss of data isn’t the only concern. A security incident could lead to the compromise of other systems and downtime.

An IoT platform, like Cumulocity IoT, can make managing the security of IoT devices much easier. It can help you simplify the addition of new devices—critical if you’re going to have thousands of them—and enforce minimum security standards. It can also help you protect data by implementing segmentation and encryption. These help to keep IoT data away from prying eyes, whether they be hackers or other users.

Our advice about avoiding limitations due to vendor lock-in or propriety technologies is still valid. But we'd now also warn about setting unrealistic timelines for project delivery and return on investment. Our recommendation would be to start with an easy win to help build internal approval in your IoT plan. As our maturity model shows, IoT programs can deliver benefits from early on. Gradually building your maturity is a good way to help reduce risk and increase the chances of project success. If you want to move faster, the argument for bringing external expertise is extremely strong. An experienced partner can help you build more aggressive timelines that are achievable and deliver the results promised.

2.4 Organizations realize they can’t do IoT alone

Although IoT is a relatively new field, there is a vast community of developers, ranging from small independents to large companies and systems integrators, working on IoT solutions. It is wise to leverage the existing knowledge and tools available. Many IoT platforms provide their own software development kits (SDKs) and run developer communities. When selecting a platform, ensure that it supports the use of consistent APIs across different environments such as edge, cloud, and on-premises. Additionally, check that it facilitates the sharing of data and analytics models across various computing platforms.

14 Beecham, How to Measure IoT Success?, 2023

By using an IoT platform, you can significantly reduce development time and mitigate risks associated with your IoT investments. IoT platforms can reduce the need for your team to focus on the technical complexities of connecting devices, allowing them to dedicate their efforts to building superior applications and discovering innovative ways to leverage the data. Pre-integrated platforms offer ready-to-use functionalities for connectivity, device management, application enablement, systems integration and analytics.

To ensure successful implementation of IoT, a diverse set of skills is required, many of which are in high demand. Studies have shown that involving a solution provider can significantly decrease the risk of project failure. The combination of internal knowledge and external expertise is most likely to lead to project success.  

Where external expertise can help the most

One area where external expertise can be invaluable is in developing your IoT strategy. It is important to select a provider with a proven track record of assisting companies in identifying use cases, building business cases, developing proofs of concept, and deploying and scaling solutions.

Another crucial aspect where third-party assistance is beneficial is in specifying the technical aspects of your IoT project. IoT encompasses various disciplines, including device management, networking, security and systems integration. Therefore, it is advisable to choose an IoT platform provider that can help you develop a pilot project and seamlessly expand your solution to multiple territories and user types.

When selecting a partner, it is essential to consider future needs. Look for a provider that can not only support full-scale deployment but also assist with future integration and project expansion. A great provider will not only ensure the success of your current project, but they will also help position you for success in subsequent efforts.

The effective use of gathered data is a key indicator of IoT maturity. Choose a provider with professional services that has the necessary tools and expertise to help you derive maximum value from your data.

Lastly, it is crucial to prioritize security throughout every aspect of your IoT decision-making process. Whether you opt to recruit in-house expertise or seek external assistance, ensure that security is ingrained in every IoT-related decision you make. Don't leave it to someone who is learning on the job.

Make the switch before your customers do

IoT is now a well-established technology with a strong ecosystem of vendors and service providers. It has been successfully adopted by thousands of companies and is delivering a wide range of benefits, from improving safety to cutting costs, enabling new business models to increasing transparency.

There are a few key factors that separate the organizations that succeed from those that fail in their IoT transformation:

1. Set clear business objectives and be prepared to measure outcomes
2. Take an organization-wide approach
3. Continually review your technology strategy to make sure it is up to date
4. Don’t feel like you have to strategize and execute on your IoT transformation alone

The diversity of possibilities IoT offers means that companies will typically have multiple IoT projects, and often a mix of small and large, some internally focused and others externally. There's no "one size fits all" roadmap for IoT.

To achieve success, our customers tell us they need to start fast, scale easily and evolve with the market. And that's the philosophy behind our Cumulocity IoT platform and the advisory services that we provide to clients.

Customer requirements for IoT success

At Software AG, we see more and more customers coming to us after experiencing IoT project failures when building IoT solutions. They come to us because, together, we help them create a different story – a success story. And to prove that, we conducted an independent study to show the benefits and ROI that our customers can experience by using our Cumulocity IoT platform.

Prior to implementing Cumulocity IoT, the respondents to the study used a range of IoT Platforms including home-grown and vendor-provided solutions which they said were technically complex and required outsized investments of time and resources to stand up and maintain.

The study showed a wide range of benefits in terms of business outcomes, including:

• 50% improvement in win rate
• 125% increase in incremental revenue
• 35% reduction in unplanned maintenance
• 30% reduction in licensing costs
• 75% reduction in operations costs