Study shows over 80% of companies increased revenue by investing in IoT

Tata Consultancy Services (TCS) has launched a major 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 multinationals, 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 realise the full potential of this technology. Our latest global trend study found that leaders in using IoT technologies are using it to completely reimagine 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’,” he added.

Across the board, those companies investing in IoT are reporting significant revenue increases as a result of IoT initiatives, with an average increase of 15.6% in 2014. Almost one in 10 saw a rise of at least 30% in revenue.

Company executives still see the IoT as a growing area for businesses, with 12% identifying a planned spend of $100m in 2015 and 3% 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% 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 8% of respondents, based on ROI from IoT, report a staggering 64% 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%). More than half (50.8%) 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% of the respondents with the lowest ROI from IoT.

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:

1. Corporate culture: Respondents identified that the ability to get employees to change the way they think about customers, products and processes was a major barrier.
2. Leadership: Having top executives who believe in IoT and are willing to invest time and resources is critical.
3. 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.

The healthcare sector has been hailed as having the greatest potential to benefit from the IoT, but it 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% of revenue in 2015 but will be increasing this investment by at least 30% by 2018. The healthcare market driven by the IoT is predicted to be worth $117bn by 2020¹.

In contrast, executives in the industrial manufacturing sector are reporting the largest increase in revenue from IoT, with an average 28.5%, followed by financial services (17.7%) and media/entertainment (17.4%). The automotive industry has the lowest revenue gain with just a 9.9% 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% of revenue this year. Media and entertainment companies will spend 0.57% of their revenue on IoT in this year — significantly more than the 0.4% average and the 0.44% spend in banking and financial services.

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%, up from the previous year. In revenue terms, the Asia-Pacific region is seeing a 14.1% increase, while Europe as a whole reports a 12.9% increase and Latin America an impressive 18.3% growth. In 2015, firms in the Asia-Pacific plan to spend $63.1 million on average, with Australian firms leading the charge ($80.6 million on average), ahead of Japan ($70.9 million) and India ($24.6 million).

North American companies will spend 0.45% of revenue this year on IoT initiatives, while European companies will spend 0.4%. Asia-Pacific companies will invest 0.34% of revenue in the IoT, and Latin American firms will spend 0.23%. This has led to North American and European companies more frequently selling smart, connected products than Asia-Pacific and Latin American companies.

To know more about the TCS Global Trend Study, visit www.TCS.com/InternetofThings.

Reference:

1. http://www.forbes.com/sites/tjmccue/2015/04/22/117-billion-market-for-internet-of-things-in-healthcare-by-2020/