Four our of five multi-nationals see revenue boost from IoT investment, says Tata
August 13, 2015
More than 80 per cent of multi-nationals have increased revenue by investing in the IoT, according to a report by Indian consultancy Tata Consultancy Services (TCS). The average increase in revenue as a result of IoT initiatives is 15.6 per cent, while market leaders in IoT see revenue increases of 64 per cent.
Some companies are set to make huge IoT investments, with seven per cent of companies planning to spend more than $500m in 2015 alone. But major roadblocks stand in the way for organisations seeking to capitalise on the IoT.
TCS surveyed 795 executives from large multi-nationals to identify the potential for revenue increases from the IoT, while also highlighting the significant challenges that lie ahead for businesses transitioning to the new model.
“The age of IoT is well underway,” said Natarajan Chandrasekaran, CEO and MD at TCS. “The question is, whether businesses are ready to realise the full potential of this technology. Our latest global trend study found that leaders in using IoT technologies are using it to completely re-imagine their businesses by changing every aspect of them from business models and products to business processes and workplaces. Now is the time for every leader in every industry to reimagine the possibilities for their businesses in a world of smart, connected things.”
Across the board, those companies investing in the IoT are reporting significant revenue increases as a result of IoT initiatives with an average increase of 15.6 per cent in 2014. Almost one in ten (nine per cent) saw a rise of at least 30 per cent in revenue.
Company executives still see the IoT as a growing area for businesses, with 12 per cent identifying a planned spend of $100m in 2015 and three per cent looking to invest a minimum of $1bn among the 795 companies surveyed. The report also shows that companies predict their IoT budgets to continue increasing year-on-year, with spending expected to grow by 20 per cent by 2018 to $103m.
Companies at the forefront of this drive for innovation through the IoT have seen the biggest benefits from their investments. The top eight per cent of respondents, based on RoI from IoT report a staggering 64 per cent average revenue gain in 2014 as a direct result of these investments. Currently, the biggest business impact is that companies can offer their customers more bespoke products and services, yet by 2020 this will convert from marketing functions to increased sales, through adding considerable value to the customer.
This is reflected in the finding that the most frequent use of IoT technologies by companies is tracking customers through mobile apps, used by almost half of all businesses (47 per cent). More than half (50.8 per cent) of IoT leaders admit to investing in IoT to track their products and how these were performing, whereas this is only the case with 16.1 per cent of the respondents with the lowest RoI from IoT.
Culture is the number one issue holding companies back. Despite the encouraging data on IoT investment and its impact on revenue growth, the report also revealed that major challenges remain in realising the promise of IoT for businesses across all sectors. The report found that the three biggest factors holding companies back were corporate culture, leadership and technology:
· Corporate culture: Respondents identified the ability to get employees to change the way they think about customers, products and processes was a major barrier;
· Leadership: Having top executives who believe in the IoT and are willing to invest time and resources is critical;
· Technology: Questions around technology continue to loom large including handling big data; internal versus external development; integrating IoT data with enterprise systems; and ensuring security and reliability.
The healthcare sector has been hailed as having the greatest potential to benefit from the IoT, but remains one of the most underdeveloped industries due to regulatory restrictions and data security concerns that currently hinder innovation. The sector plans to spend just 0.3 per cent of revenue in 2015, but will be increasing this investment by at least 30 per cent by 2018. The healthcare market driven by the IoT is predicted to be worth $117bn by 2020.
In contrast, executives in the industrial manufacturing sector are reporting the largest increase in revenue from the IoT, with an average 28.5 per cent, followed by financial services (17.7 per cent) and media and entertainment (17.4 per cent). The automotive industry has the lowest revenue gain with just a 9.9 per cent increase.
The report, which looks at trends across 13 key industries, found that large-scale investment in IoT infrastructure and monitoring is not confined to those in manufacturing, however, with the travel, transportation and hospitality sectors planning to spend 0.6 per cent of revenue this year. Media and entertainment companies will spend 0.57 per cent of their revenue on IoT this year – significantly more than the 0.4 per cent average and the 0.44 per cent spend in banking and financial services.
North America and Europe lead IoT adoption. Revenue increases are also being enjoyed globally with all regions reporting double-digit growth in 2014, but US firms are reporting the largest gains of 18.8 per cent, up from the previous year. In revenue terms, Europe as a whole is seeing a 12.9 per cent increase, while Asia-Pacific reports a 14.1 per cent increase and Latin America an impressive 18.3 per cent growth. In 2015, European firms plan to spend $93.9m on average, with French firms leading the charge ($138m on average), ahead of Germany ($86.2m) and the UK ($80.9m).
North American companies will spend 0.45 per cent of revenue this year on IoT initiatives, while European companies will spend 0.40 per cent. Asia-Pacific companies will invest 0.34 per cent of revenue in the IoT, and Latin American firms will spend 0.23 per cent of revenue. This has led to North American and European companies more frequently selling smart, connected products than Asia-Pacific and Latin American companies.