IoT key enabler of manufacturers’ move towards services

It wasn’t so long ago that servitization and the internet of things (IoT) – the ability to remotely monitor and control products in real-time, while collecting and analysing substantial volumes of data – were considered two separate conversations.

However, these two streams have now merged, with IoT now a key enabler of servitization, particularly in regards to accessing the higher levels. According to the Advanced Service Group’s Dr Andreas Schroder, IoT and associated technologies are having a profound impact on forward-thinking manufacturers’ service offerings as they move further up the value chain from ‘base’ (product provision) services, through ‘intermediate’ services (product condition) to ‘advanced (customer-centric) services, i.e. those built around outcomes focused on capabilities.

Schroder explains that, by embracing IoT, manufacturers can achieve greater service efficiency, further their service reach and create stronger business risk assessments for the future. Contrary to some perceptions, he adds that IoT actually extends, rather than replaces a manufacturer’s base services, “Supporting both product and service offerings, as opposed to creating a trade-off.”

IoT is a fundamental building block of Industry 4.0, leveraging the increased mobility and connectivity of technology, the compute power offered by the cloud to gather and analyse large volumes of data in real-time, and autonomous systems making swift decisions based on that data.

All of these elements are readily available today, have reached a sufficient price-point to drive widespread adoption, and are crucial if a manufacturer wishes to monitor and appraise assets out in the field, whether a commercial aero engine cruising at 39,000 feet, an office photocopier or anything in-between.

As Schroder phrases it, servitization is a journey, representing a business evolution rather than an overnight revolution. As that journey progress and a business looks to offer more advanced services, the need to invest in an adequate technological infrastructure becomes a prerequisite.

Yet, that in itself raises certain challenges – particularly for SMEs (small to medium-sized enterprises), around financing.

Global OEMs, for example, often have easier access to the investment capital to fund the necessary initial expenditure; however, for an SME that can be a daunting prospect, deterring them from progressing further along their servitization journey.

One manufacturer observes that better educating financial institutions, such as banks and investment platforms, could pay dividends in that regard. In his experience, many such institutions had an excellent knowledge of make-sell business models, but still struggled to fully appreciate the advantages of a service-based alternative. Were that to change, more appropriate finance packages could be delivered to support SMEs on their transformation journey.

According to recent research, for the first time, businesses consider security in the cloud to be as good, if not better, than on-premise platforms. This represents a sea-change in sentiment, with UK manufacturers in particular, historically hesitant towards fully embracing cloud applications, and this positive momentum needs to be maintained.

IoT is intrinsically linked to the gathering and analysing of data, the speed and volumes required can only be accommodated via the cloud. With IoT a key enabler of servitization, in turn the cloud is a core element of IoT. The more manufacturers become familiar with using cloud applications for daily processes, the less of a risk represented by moving towards ‘advanced services in the future.