SOFTWARE AND PHYSICAL EQUIPMENT ARE NOW NEARLY SYNONYMS

While OEMs have been developing software for a long time, their expertise has historically been focused on purpose-built software embedded in their machines. Today, the line between software and physical equipment has nearly ceased to exist. Any machine, device or piece of equipment that can be networked and made more intelligent will be. As new software tools and hardware technologies continue to evolve, connected solutions based on deeper, peer-to-peer interactions between systems, machines, sensors and people will drive more dynamic value.

The continued evolution of Smart System and IoT technologies will impact virtually all OEMs, and will likely make most OEM businesses look and feel very different in the coming years. The divide between the technology-fluent “haves” and the technology-hampered “have-nots” will widen considerably as some OEMs figure this out early, while the rest become digital widows and orphans.

The core technologies that inform Smart Systems and Services are driving many new growth opportunities and efficiencies for OEMs based on new data collection, management, and analytics tools that provide a deeper understanding of a connected product or machine’s performance and usage. Because of immediate returns on efficiencies and the new applied values these systems can generate, OEMs have the opportunity to become the primary “translators and interpreters” of new Smart Systems and Services technologies. Like “Typhoid Mary,” they can carry these innovations to end customers where their presence and impacts will expand like a disease spread pattern.

As users and customers become familiar with digital and IoT capabilities, they realize that these technology innovations push the boundaries of how products, systems and equipment are used and managed within their operations. This, in turn, increases pressure on machine builders and equipment manufacturers to embrace these capabilities. End customers in factories, hospitals, buildings and elsewhere are coming to see how these technologies work together in new and novel ways to solve operational and business problems. As a result, specification and adoption of digital and IoT enabled equipment and systems is beginning to shift towards a “shared” set of roles between end customers and their OEMs.

How will this shift effect OEMs? And how should leadership in these companies think about the impacts of evolving Smart Systems technologies on their strategy, operating models and customer value creation?

COLLABORATION TECHNOLOGIES WILL BE CRITICAL TO ADDRESSING END CUSTOMERS

We believe the shift in product and systems specification is driven by end customers wanting to integrate data from diverse suppliers of devices, machines and equipment systems in their operations. Consider the diversity of equipment in any complex operating environment like a factory or a hospital.

Today, the average 200+ bed hospital has over 250 brands of equipment and devices. The typical hospital patient comes into contact or interacts in some way with over 75 devices per day. If every device and machine has its own embedded intelligence and monitoring scheme, that would leave a health delivery company CIO needing to respond to 250 equipment OEMs showing up on her doorstep proclaiming that they have the most superior digital and IoT capabilities!

The speed and scale at which OEMs are integrating digital automation and data analytics into equipment systems is expanding exponentially. The rate of end-customer adoption of these systems is growing almost as fast. Connectivity alone may help the manufacturer of the machine provide more efficient service and support, but it does not allow the end user and customer to leverage very much intelligence across myriad brands, suppliers and diverse systems.

This is due to several factors, including technical integration complexities, networking and data standards, and differing approaches to automating machines. The challenges of gathering machine data and integrating diverse data types have been significant end-customer adoption hurdles, particularly for industries where the range of brands and equipment types number in the hundreds.

ALLIANCES ALONE WON’T INTEGRATE DATA

Given all of the aspects that must be addressed from the end-customer’s standpoint, alliances between OEMs are one approach to addressing the challenges of leveraging data across differing brands of equipment and creating maximum value for all parties involved. However, alliances alone will not provide the end-customer with the ability to integrate data from multiple brands and equipment, and ultimately to utilize the data to optimize their operations.

At the end of the day, all of this adds up to a huge collection of information-islands. Assuming the islands remain in existence reliably, they are still fundamentally incapable of truly inter- operating with other information-islands. We can create bridges between them, but islands they will remain. That’s what they were designed to be.

What’s required is a true shift in thinking about how data from devices, machines, people and physical systems will be integrated and how they will interact. We need an approach that does not focus on leveraging aging IT, telecom or automation technology into a new context. Rather, we must look forward to a single, unified approach for integrating the many interactions that these systems will foster.

WHAT THE FUTURE REQUIRES

What are the core enabling technologies required to overcome these hurdles?

• Higher performance, higher quality and more reliable mission critical wireless networks that enable new smarter sensors and sensor data fusion tools;
• More “democratized” distributed data and information architecture standards to inform data sharing and data fusion for analytics and machine learning;
• Easier and less costly data management, transformation and analytics application development tools; and finally,
• A new generation of integration and equipment management platforms that enable free flowing data discovery, data aggregation, integration and fusion and collaborative application development.

While all of the factors listed above will contribute to OEM and end customer adoption of new Smart Systems and IoT technologies, our analysis also points to several broader market development challenges to realize the full value of new enabling technology:

• Challenges in OEMs around adopting new business, revenue, and operating models;
• Complex services delivery ecosystems that require new and different relationships;
• Anticipation of smart services and systems innovation, as well as new growth venture modes not widely adopted today;
• Fragmented digital and IoT vendor landscape, in particular the lack of understanding of how these new more “distributed” and “participatory” systems will work on the part of the IT and telecom technology development community; and,
• Requirements for more vertically-focused solutions developed from “horizontal” enablers.

The potential scale of the Smart Systems and IoT opportunities for OEMs is utterly dependent on new technology innovations.

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