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OT professionals welcome vendor help with IoT business case, ROI metrics

April 15 2019
by Rich Karpinski


Introduction


Vendors and service provider partners have found themselves forced to play a very active role in helping their enterprise customers get IoT projects off the ground and into full-scale production. We've heard the horror stories – or at least middling complaints – again and again. And we've also seen it reflected in our 451 Research IoT survey results.

Enterprises are challenged to decisively move their IoT projects from proof of concept (PoC) and trial stage to full deployment. According to our 451 Alliance survey, somewhere around half of all initiated IoT projects make it from PoC all the way to production (53%, according to our IT survey; and, according to our OT survey, even fewer at 44%). And even for those projects that do succeed, the journey is long and arduous: the average enterprise IoT 'project' takes about 18 months from conception to production. And things are only getting worse: 51% of IT survey respondents say the time they spend in IoT project pre-production is increasing, with just 8% saying it is going down.

What can IoT technology vendors and other partners do to help improve this situation? We asked this question of respondents to our OT survey – the group of IoT executives most responsible for IoT business outcomes, and thus ultimate project success. Their answers point to a more aggressive up-front business-definition role for IoT deployment partners. But notably, they do not report a huge call for free or discounted PoC projects – an increasingly painful thorn in the side of many IoT vendors.

The data points in this report are taken from 451 Research's quarterly survey of IT professionals, and our twice-annual survey of OT executives involved in IoT projects. The latest OT survey report, IoT, The OT Perspective, 2H 2018, from which the bulk of this report's data and insights are taken, includes:

  • Updated OT-centric, asset-heavy IoT use case priorities by industry (including manufacturing, transportation, utility, oil and gas, smart city and healthcare systems/facilities)

  • New data on OT attitudes toward advanced IoT technologies (including 5G, AR/VR, artificial intelligence, video analytics and digital twins)

  • OT preferences for IoT infrastructure, including OT vs. IT views on cloud vs. edge storage, compute and analytics

  • Insights into OT views on IoT project ideation; budgets, spending and ROI; team creation and more

  • The 451 Take

    IoT projects are complex and time-consuming. In the early days of enterprise-wide deployments, vendors often played an outsized role, both to get projects off the ground (key to landing an opportunity) and to move them from PoC to production (necessary to realize revenue). Those days aren't going away, but vendors have reported to us they feel the need to be smarter – and especially more pennywise – in how and where they extend resources before IoT deals go to contract. Free up-front trial work in exchange for promised revenue down the line has become a losing proposition for many IoT vendors. The good news is that OT executives – those most responsible for outcomes and ultimately project go-aheads – are open to help, especially in the building of business cases to launch IoT projects, and the definition and measuring of project ROI metrics to track and fine-tune successful business outcomes. That's good news for vendors, especially ones early and smart enough to turn pioneering IoT project work – often time-consuming and costly – into business cases and usage patterns that can be stamped out to be marketed and sold again and again (and full-scale co-creation workshops might actually be overkill for many enterprises). That said, even better news is that the OT pros we surveyed are also realistic about seeking discounted or free PoC and trial work. While they would certainly welcome this (who wouldn't?), it's less important than business case and ROI aid. And that's even better news for IoT vendors and service providers.

    Context


    IoT vendors have been sharing stories and asking advice on how best to work with enterprises to move IoT projects – too often stalled in pre-production purgatory – into production and then start delivering revenue. The technical complexity and business challenges of IoT projects too often leave vendors in the lurch.

    So we asked our IT and OT survey respondents the same question: In which of the following ways is your organization in need of outside help to successfully deploy new IoT initiatives? You can see the picklist options and responses below, from both IT (generally responsible for IoT technology deployment and support) and OT (on the hook for business outcomes and integrating typically longstanding OT systems into IT/IoT infrastructure).

    Figure 1
    Figure 1
    Source: Internet of Things, The Operational Technologies Perspective, 2H 2018, and Internet of Things, Budgets & Outlook 2019

    Key takeaways include:

  • The top vendor help requested isn't surprising: professional deployment services. Both OT and IT respondents seek deployment help above all from their IoT vendors. It's a typical request, and one that large vendors – both IT and OT – are hiring for in their services arms to provide. The challenge comes when customers require major deployment help in the PoC/pre-revenue stage, and things stall there. Providing vendors help (free or discounted) during PoC is a good trick to avoid hiring internal help, or outsourcing to systems integrators that will likely demand payment from day one. Vendor services arms are headed in much the same direction, they tell us, as free-look/free-support trials become less the norm.

  • Help with up-front business case and trial-to-production ROI metric definition is in demand, by OT even more than IT. Enterprises are looking for help making IoT projects pay off: 44% of OT respondents (and 42% of IT) want help to properly instrument and measure IoT project metrics – ROI, total cost of ownership (TCO) and corresponding business outcomes – to ensure that IoT delivers value and transformation impact in ways that the C-suite can fully comprehend, and continue to fund. Up-front help is also needed: 40% of OT respondents (again, those responsible for IoT business outcomes) want help developing business cases to justify IoT investment. Notably, IT respondents (at 31%) ranked business case assistance much lower, indicative of their focus on technical issues and costs versus the business-value impact of IoT.

  • Free, while tempting, is not in high demand. One of the easiest – and most tempting – ways for vendor salespeople to land a new customer is to promise free or discounted PoC work, in exchange for the promise of a whale of a deal down the line. Vendors tell us this approach has caused problems because the PoC-to-production journey (as we've seen) too often gets aborted or stretched out beyond practical time frames. The good news is that for both OT and IT respondents, the choice of 'discounts or free services during the proof-of-concept/trial period' scored lowest in the vendor-assistance picklist. No one turns down free work, but in IoT, neither OT nor IT is demanding a handout and walking away if they don't get it.

  • Co-creation workshops score surprisingly low. Just 34% of OT and 33% of IT respondents said they are looking to vendors for project definition co-creation work. In some ways, this is just a definitional blurring of the lines, since such up-front co-creation would typically include business-case development and TCO/ROI work. So what isn't resonating in this area? One take could be that co-creation implies more collaboration than enterprises are looking for from their vendors in the project definition phase – that is, they know where they're headed and want input, not someone to take the steering wheel. The time demands of a full-on co-creation workshop could also scare away some enterprises. The final takeaway here: enterprises want vendor assistance, but not too much help – and likely not a project approach that may overly rely on a partner that's unlikely to understand the business as well as the enterprise does.