July 22, 2015

Companies increase revenue by investing in ‘Internet of Things’

Toronto, ON-- Tata Consultancy Services, a global IT services, consulting, and business solutions organization, has launched a major new global study looking at the impact of IoT technologies across a wide range of industry sectors around the world.

The TCS Global Trend study on IoT, which surveyed 795 executives from large multi-nationals, identifies the huge potential for revenue increases from IoT, while also highlighting the significant challenges that lie ahead for businesses transitioning to the new model.

Commenting on the study,   Natarajan Chandrasekaran, CEO and MD of TCS, said:   "The age of IoT is well underway. The question is, whether businesses are ready to realize 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."

He added:   "Now is the time for every leader in every industry to reimagine the possibilities for their businesses in a world of smart, connected 'things'."

A significant opportunity for revenue growth through IoT
Across the board, companies investing in 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 (9 per cent) saw a rise of at least 30 per cent in revenue.

Company executives still see IoT as a growing area for businesses, with 12 per cent of the 795 companies surveyed identifying a planned spend of   $100m  in 2015 and 3 per cent looking to invest a minimum of   $1bn. The report also shows that companies predict their IoT budgets twill increase year-on-year, with spending expected to grow by 20 per cent by 2018 to   $103m.

Companies at the very forefront of this drive for innovation through 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 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 realizing the promise of IoT for businesses across all sectors. The report found that the three biggest factors holding companies back were:


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 IoT and are willing to invest time and resources is critical;


Technology: questions around technology continue to loom large, including handling Big Data; internal vs. external development; integrating IoT data with enterprise systems; and ensuring security and reliability.

Healthcare lags Industrial Manufacturing, which stands out for IoT success
The Healthcare sector has been hailed as having the greatest potential to benefit from 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 IoT is predicted to be worth   $117bn  by 2020 [1].

In contrast, executives in the Industrial Manufacturing sector are reporting the largest increase in revenue from IoT, with an average of 28.5 per cent, followed by Financial Services (17.7 per cent) and Media & 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. For example, the Travel, Transportation and Hospitality sectors are planning to spend 0.6 per cent of revenue this year on IoT, while Media and Entertainment companies will devote 0.57 per cent of their revenue. This is 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 globally
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   $93.9 million  on average, with French firms leading the charge ( $138 million  on average), ahead of   Germany  ( $86.2 million) and the UK ( $80.9 million).

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, compared to   Asia-Pacific  and Latin American companies.







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