ISG Provider Lens™ Internet of Things - Services and Solutions - IT/OT Tech Data Convergence - Global 2021

What stands out the most from the research conducted for this study is that there is a clear resurgence of interest from enterprises around the world in the Internet of Things (IoT) and its manufacturing counterpart, the Industrial IoT (IIoT). While the pandemic slowed IoT development in industries reliant on travel, service providers shared use cases across sectors from cold chain supply improvement in pharmaceuticals to shopfloor equipment ef­fectiveness in food manufacturing. Manufacturers need smart connected factories to keep up with the competition and demand. Vehicles from scooters to mass transit are becoming powerful mobile computers, connected to improve safety and customer experience.

While the pandemic influenced the IoT market in 2020, cybersecurity is also equally influential. Continuing data theft and ransomware attacks take advantage of poorly managed and maintained connected systems. Enterprises connecting previously offline operations technolo­gy (OT) are discovering the various risks involved. As a result, service providers are integrating end-to-end security assessments, monitoring and tools into their IoT service offerings.

According to ISG research (Source: ISG Momentum Sourcing Digest 2021), outsourcing con­tract volumes and spending levels decreased for most service lines, geographies and regions in 2020. However, the size of the declines, their persistence and prospects for recovery were extremely inconsistent across market segments and regions. Manufacturing was one of the few industry segments to achieve total contract value (TCV) growth in 2020, based on the results from Europe. Europe, the Middle East and Africa was the largest regional market for TCV in 2020 due to strong contract signings in Germany and the U.K. Smart manufacturing initiatives were seeing strong growth prior to the pandemic. However, as the virus took hold, manufacturing divisions shut down and investments declined significantly worldwide, leading to a tepid 1.5 percent growth for the overall industry in 2020.

This may be starting to change. Broader market managed services annual contract value (ACV) bounced back in significantly in the fourth quarter of last year, growing 163 percent sequentially over the third quarter (see figure below). This growth illustrates that there might be a stronger post-COVID recovery in manufacturing than anticipated.

Another big influence on the interest in IoT is the changing networks on which it runs. 5G hype is rampant and much of that is warranted for enterprises hoping to benefit from the IoT and IIoT. However, according to a recent investigation by ISG Research, not all spectrum types are available in a particular country or with a particular mobile network operator, and deployment of 5G is spotty across the globe.. An unpopular discussion, although relevant, regarding the IoT in this area, is that to maintain the quality of wireless networks while managing costs, operators will often choose to shut down older mobile networks and re-farm the spectrum for 5G.

Enterprise clients, especially those with deployed IoT fleets and devices, need to manage the selection of replacement technologies, which needs to be coordinated in advance of shuttering events, preferably in conjunction with 5G deployment. 5G and shuttering events happen on a by-country, per-operator basis, which makes it difficult to both plan and manage. Enterprises are likely to seek assistance on both 5G and spectrum shuttering from their network and IoT service provider partners.

In Europe, companies are seeking IoT providers that are able to cover multiple geographic areas and also a number of languages. Companies are looking for providers not only for managed IoT services, where it is crucial for providers to offer dedicated services locally even in very remote areas, but also in IoT consulting services. Europe is a conglomerate of more then 25 countries with different languages and cultures, and it also has many differ­ent rules and regulations related to data collection, data security and data privacy. Not all European countries in this study are part of the EU, with its standardized regulations. This lack of standarized regulations especially affects connected mobility solutions. Road traffic regulations, railroad management and control systems, mobile connectivity all systems that are necessary within a successful pan-European mobile connectivity project -- differ between countries, in part without any existing interfaces or common standards.

5G may not always be the best technology for an enterprise and its IoT deployments and plans. ISG MobileMap also tracks what operators were deploying in other IoT technologies such as narrow band IoT (NB-IoT), long range Wi-Fi (LoRa) and Sigfox. To help enterprises take advantage of the changes, service providers in this study offer network expertise, telecom partnerships and labs to test 5G solutions.

Beyond the security and network requirements, enterprise IoT requires proper implemen­tation, integration, and innovations in AI, the cloud, automation, analytics, computer vision and product engineering. Successful IoT service providers need to offer expertise and solutions in these technology areas.

This year’s study quadrants differ from 2020 because ISG assessed the changing market to determine the highest value topics to cover. While this study continues the research about consulting, managed services and connected mobility, ISG added AI on the edge, endpoint security and IT/OT convergence as service areas due to demand from enterprises needing IoT services. However, smart buildings remain important, and many use cases shared with ISG reflect that. IoT platforms are also a part of scaled implementations. While future studies might add it, ISG believes an IoT platform comparison is the responsibility of the service provider hired to solve the business challenges.

IoT Consulting and Services

The trend toward business-centric thinking in IoT consulting projects continues to change clients’ requirements for IoT projects. Customers understand the direct influence of IoT on business processes and request strategic approaches in the early planning stages as well as proof of concept (PoC). The focus of IoT consulting continues to move away from the mainly technological solutions, focusing more toward other essentials such as business models, business development, and process optimization. Providers have started to offer outcome-based pricing models but are reporting that clients are yet reluctant to accept this offering.

Security and the integration of AI have become other focus areas. With the increase in cyberattacks on networks and IoT environments, on pipeline operators, on utilities and power plants, as well as on industries considered secure such as food manufacturing, the demand for security of IoT networks is rising. Providers offer dedicated security solutions, teams of ethical hackers, and AI-driven security controls, both as sensors and for fault analytics. Other new technologies such as blockchain are still in an experimental phase. First blockchain projects assure the origin of spare parts within supply chains or provide higher levels of trust between multiple networks of things.

Managed IoT Services

Many large clients, even those with multinational presence and a strong workforce, are overwhelmed by the amount of work and expertise needed to build, deploy and manage a large IoT environment, covering multiple scenarios and in different parts of the world.

They are seeking partners that can help them with large global deployment nightmares, integrating myriad of different products, platforms, software solutions and services, and making them work continuously and smoothly. With the IoT encompassing an increasing number of products, generating both extremely large volumes of data to analyse and new possibilities for services and support, managed IoT services have become a highly complex global service offering. We are witnessing an increasing number, including large and global, partnerships that cover multiple technologies, multicloud environments, network­ing and AI technologies.

Connected Mobility

All forms of transport and mobility devices, including automotive and rail, are going to become IoT devices on wheels, with new functions implemented primarily through software to enable all major functionalities, with autonomous driving at the top end. Connected vehicles represent several extremely complex challenges for IoT providers. As an example, updates of software and firmware over –the air (OTA) is common, but very difficult to deliver because of challenges especially in the areas of connectivity and networking, security and AI on the edge. Connected mobility is an area in which cross-in­dustry projects are a standard. The collected data is of value for many applications, be it for supply chain management, insurance, finance, new mobility concepts or predictive maintenance. Providers in connected mobility have to offer deep knowledge in a variety of industries and planning projects, from the perspective of both business operations and technology availability.

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