I’ve said it before, but it bears repeating: When it comes to the Internet of Things (IoT), the consumer market gets all the attention, but the real action may be in industrial applications, the so-called Industrial Internet of Things (IIoT).
The IIoT is a huge market, and it’s based more on clearly defined cost savings than the always-fickle consumer preferences that seem to rule the consumer market. It also requires highly available infrastructure to connect everything and avoid expensive downtime — one reason why investment in IIoT firms has been hot this summer, with investments in companies such asSeeq, Element Analytics, Trendminer, Falkonry, and Toumetis.
To find out more, I traded emails with Chris Nelson, vice president of engineering at OSIsoft. Funded by Softbank, the operational intelligence company analyzes and visualizes massive amounts of IIoT data for enterprise customers such as Chevron, Norvartis, PG&E and Kellogg, and also works with many IIoT startups.
Predictive maintenance is the ‘gateway drug’ for IIoT
According to Nelson, the drivers of IIoT growth vary by markets: “Oil companies and mining companies are looking at ways to reduce their costs and insulate themselves from commodity price fluctuations, utilities want to incorporate renewables, pharma and food manufacturers are building smarter supply chains and reduce the risk of recalls.”
As that growth continues, the IIoT market is entering a new stage, Nelson said.
“We’re moving out of an exploratory phase where companies have been testing data analytics or IoT into one where more of them will ‘operationalize’ these technologies across multiple facilities,” with predictive maintenance as the “gateway drug” for IIoT adoption, he said. That market expansion may not seem “explosive —this is business technology after all,” Nelson noted, but he predicted “strong, steady double-digit growth.“
IIoT architecture and other trends
Just as important, Nelson noted, is that the architecture to support IIoT is solidifying. Instead of looking for a “magical algorithm that will solve all of their problems,” customers are building complete solutions by “combining connectivity from one company, data management from another, and analytics from a third or fourth to develop a platform that works for them,” he said.
Concurrent with that, will be that as the technology stack solidifies, we’ll enter “a phase where less-tested technologies and companies will fade out,” Nelson predicted.
The IIoT challenge
The big challenge, Nelson said, is for IIoT users to get a handle on vast amounts of data — quickly. In the IIoT, he warns, “Machine and operational data far outstrips what you see on the IT side in terms of velocity, variety, and volume. We see people tracking 10 million to 20 million data streams at once,” and they need to figure out how to analyze and act on that data in real time.
Going back to the role of predictive maintenance as a gateway drug to the IIoT, Nelson pointed out: “If there’s a production problem or equipment meltdown starting to build, you can’t just send your data to the cloud or IT to a data scientist and wait five days for an answer.”
IIoT vs. consumer IoT
While it’s easy to get distracted by shiny new IoT devices, enterprises know that infrastructure is often more important — and that’s even more true in the IIoT. Nelson explained it this way: “A smart thermostat might cut your power by 2 percent, or $150 a year. In comparison, a paper manufacturer that cuts energy by 1 percent could save $15 million. Likewise, increasing production by 1 percent can mean $1 million at a mine or metal processing facility.” (Of course, there are a lot more consumers than giant enterprises, so those $150 a year savings can add up when multiplied by millions of households.)
Given the potential of the IIoT, I asked Nelson why the rise of IIoT remains overshadowed by consumer IoT? One reason, Nelson said, is the phenomenal success of consumer plays like Uber, Facebook, and the iPhone.
Another is that it’s simply “easier to imagine a smart fridge than a smart fluidized bed reactor.” And because “business buyers are more demanding,” B2B markets can often grow slower and create fewer high-profile “overnight 29-year-old billionaires.” But he contends that business markets like the IIoT can deliver steadier growth and profits over the long haul.