We’ve gotten past the hype around the Internet of Things — now the focus is on creating business value.
The impacts of IoT can range from incremental to transformative — and determining which of these it is can set the context for your project, according to Nathan Nutall, research director with Gartner’s IoT Group, in a recent Gartner webinar.
“According to our latest IoT survey, 80 per cent of organizations reported that IoT has delivered more value than they originally planned,” he said.
Regardless of your company size or vertical, it’s imperative to start by clearly defining your goals. This should go without saying, but the Project Management Institute’s 2017 Pulse of the Profession found that — of the more than 3,000 project management professionals surveyed — one in four (28 per cent) of strategic initiatives fail, and the primary cause of failure is lack of clearly defined objectives and milestones to measure progress (37 per cent).
In 2018, we’ve seen an “unprecedented focus” on what kind of value can be delivered from IoT, said Nutall. “CIOs and other IoT leaders really are past the hype around IoT. They’re zeroing in on quantifying benefits and predicting financial payback before starting an IoT project,” he said.
Internally oriented projects target processes and systems, according to Gartner, and are typically aimed at cutting costs or improving operational efficiencies. Externally oriented projects, on the other hand, tend to involve customer experience or engagement, and may have different goals altogether, such as generating revenue or monetizing a product as a service.
But how exactly do you figure out the ROI on IoT? Financial payback, as Gartner defines it, is the amount of time it takes to get your investment back, taking into account internal costs and vendor costs, as well as the value of cost savings or incremental revenue.
“The likelihood of achieving financial payback declines precipitously after the first year or two,” said Nutall, adding the strongest IoT use cases deliver payback in less than one year. As this time frame extends, maintenance and upgrades start negatively affecting financial payback (maintenance costs can add up to 10 to 20 per cent, per year, according to Gartner, and should be factored into your strategy).
That’s why a cloud or serverless model is recommended, as it allows for flexibility, particularly in an era of disruptive technologies — such as AI and intelligent digital mesh — that could affect IoT projects.
There’s a reason why many organizations struggle to achieve desired ROI from IoT projects, according to an article in IoT World Today: “Those projects begin as engineering experiments that could never escape that designation. And even the organizations that have emerged as IoT trailblazers are failing to capitalize on the technology’s potential to drive outcomes …”
Gartner’s latest IoT survey asked early adopters to identify their biggest barriers to success. Not surprisingly, security tops the list of technical barriers, and continues to be the No. 1 afterthought for IoT projects.
“This is where organizations acknowledge security is a critical element of their IoT project, but they have not explicitly outlined the risks or taken the time to identify specific security plans upfront and they start the IoT project implementation anyway,” said Nutall.
The top non-technical barrier — cited by 37 per cent of respondents — was insufficient time or resources to develop ideas to benefit from IoT (which goes back to the importance of clearly defining your goals).
Interestingly, Gartner found that the most successful IoT adopters set their own goals and objectives, but extensively used outside providers for technology, design, implementation and ongoing operations.
But Nutall warns against outsourcing strategy. “At the end of the day,” he said, “your organization has to own that strategy, has to deliver against that strategy, and ensure that results are ultimately committed and delivered.”