Plenty of organizations have yet to take a formal account of their connected devices.
Key takeaways
Collecting and analyzing IoT device data will be critical for improving decision making.
Organizations will need a data management program built on a modern data architecture.
Tech infrastructure, data strategy are key in future of industrial automation
Rising production costs and supply chain challenges have put pressure on industrial organizations to increase margin through efficiency and productivity gains. Technology—especially operational technology (OT) and industrial Internet of Things (IIoT) capabilities—enables companies to meet these goals, but also poses new risks for companies to manage. Looking to the rest of 2023 and beyond, enhanced access to and use of data will play a crucial role for organizational success.
Companies increasingly need to assess how to properly manage their technology-related risks—including cybersecurity, infrastructure and data—as they increase their use of these new technologies. While IIoT adoption among manufacturing and energy companies has increased, plenty of organizations have yet to take a formal account of their connected devices and develop a plan to protect operations in the future—especially important with more growth on the horizon.
Global revenue for IoT endpoint technology in the manufacturing and natural resources market is projected to grow from approximately $66 million in 2023 to over $167 million by 2032, according to Gartner® research. In the energy industry (oil and gas, power and utilities), such revenue is expected to increase from $32 billion in 2023 to nearly $48 billion in 2032, with over 70% coming from smart meters for electricity, gas and water.
When considering the sources of this growth, the following top use cases emerge within the manufacturing and energy sectors. While some large companies have already begun adopting IoT/IIoT for some of these use cases, we expect adoption to spread to the middle market in the coming years.
Top manufacturing use cases for IIoT
Process automation
This category includes connected field devices, manufacturing machinery, 3D printers, robotics and head-mounted displays. As organizations upgrade equipment on the manufacturing floor, an increasing amount will come embedded with IoT technology that supports remote monitoring, augmenting existing industrial automation technologies already in use (e.g., OT and industrial control systems). Additionally, many organizations will consider incorporating IoT into their finished products to enable remote service and support. Collecting and analyzing the data generated by these IoT devices will be critical for improving decision making.
Facilities management
This category includes sensors for environmental factors such as temperature, humidity, vibration or general condition monitoring. While some of these sensors come built into manufacturing equipment, the biggest growth we anticipate will be in the install base for additional sensors that companies tie into their overall processes to get a more complete data set. Maintaining controlled environments is essential for ensuring system and product quality, and supplementing existing data sets will be a crucial strategy for optimizing manufacturing processes and achieving strong key performance indicators. Additionally, this supplemental data will enable better predictive maintenance.
Commercial utility monitoring
As the demand for environmentally responsible manufacturing grows and environmental, social and governance reporting becomes more mainstream, organizations will focus on monitoring water, electricity and gas usage across operations as well as on specific equipment. IoT will not only help companies reduce their use of valuable resources, but also benefit the bottom line.
Top energy use cases for IIoT
Process monitoring and maintenance
Actuators and IIoT sensors for vibration, temperature, pressure, flow, air quality, noise level and other factors will enable energy companies to monitor and/or control the performance of critical equipment, ranging from electric turbines and drilling rigs to remote pipelines and compressor stations. By adopting IIoT devices, companies will be able to collect more and better data on performance, environmental conditions and operational parameters. Besides providing visibility and/or control similar to what OT already provides energy companies, IIoT data facilitates improved operational decision-making, predictive maintenance, optimization of equipment performance and reduced downtime.
Environmental monitoring and compliance
Energy companies will face increasing pressure to manage their environmental impact. Utilizing some of the same types of IIoT sensors described above, companies will be able to monitor emissions, air quality, water usage and other environmental parameters more precisely, especially across remote locations in the field. This data will help identify potential issues (e.g., leaks, spills, outages) faster and more accurately, and will support monitoring and reporting needed for compliance with environmental regulations.
TAX TREND: Operational technology and IIoT
For manufacturers and energy companies adopting or advancing capabilities involving operational technology or industrial Internet of Things, integrating new systems with modern tax applications can help effectively manage complex tax and financial data. For example, remote servicing of equipment may have state and local tax implications. Involve the tax function at the outset of any project to promote an effective integration.
Risk implications in 3 key areas
As organizations consider deploying more IoT, IIoT and industrial automation, they must consider the associated risks and plan ahead to ensure underlying technical requirements are well integrated in the design process. Key areas of consideration include:
Cybersecurity
IoT/IIoT systems pose new security risks, as they often are designed to connect operational environments to less secure networks (e.g., corporate, cloud, internet), challenging traditional security models. Engineering and operations will need to collaborate with security and technology teams during system selection and planning to integrate security and technology principles by design. Proper architecture and security controls not only are crucial for fending off attacks but may also be necessary to meet regulatory requirements.
Technology infrastructure
Unlike some legacy OT systems, IoT/IIoT devices are designed to connect to other systems, including cloud solutions. During selection, organizations must balance connectivity requirements against available connectivity, possible integration points and the organization’s risk tolerance.
Data governance
IoT and OT systems will generate substantial volumes of data, which companies can leverage for benefits like cost reduction and additional revenue sources. To benefit from this data, however, organizations will need a data management program built on a modern data architecture. The architecture should be supported by consistent data governance practices so that data is secure, of high quality and properly defined. Data literacy can be a common adoption barrier, so organizations will need personnel who understand the data and have a vision to drive its use.
CONSULTING INSIGHT: Data analytics
Companies now have access to more data than ever before, along with inexpensive computing power. By asking the right questions, powerful insights emerge that can lead to strategic decision making. With the right data, companies can create critical connections among their business lines, increases progress on business goals and add value to the organization. Learn how RSM’s data analytics services can give you more timely and accurate information.
Industrial technologies are typically not upgraded frequently, often remaining in use for 10 to 20 years or more, limiting companies’ ability to make meaningful change. Manufacturing and energy companies building new facilities or upgrading existing ones today have a unique opportunity to consider the elements described above as a critical part of the design process. Doing so will help them to better manage risks, reduce costs and maximize the value that these emerging technologies can bring to companies in the industrial ecosystem.
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.
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