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The CEO Perspective: The Internet of Things for

Industrial Machinery and Components
Top Priorities to Build a Successful Strategy

If the Internet of Things (IoT) is causing a wave of disruption, then the

industrial machinery and components (IM&C) industry is poised to ride
the crest. So much so that the term Industrial Internet of Things (IIoT) is
now commonplace. Unlike many other sectors, industrial manufacturing
has direct contact with millions of machines, equipment, and components
that are ready to fully embrace technology and innovation. Industrial
manufacturers need to stay current with the latest technology to capitalize
on emerging business opportunities and stay more than a few steps
ahead of the competition.

Worldwide revenue opportunity

presented by the IoT for discrete
manufacturing industries by
20181

18.8%

The IIoT is at the heart of this transformation connecting people, machines, products, and services to
streamline the flow of information, enable real-time decisions, and enhance customer satisfaction and
loyalty. Leading IM&C manufacturers are already investing billions in the IIoT, realizing returns driven by
previously unobtainable speed and accuracy from the latest technology available.

Estimate revenue compound

annual growth rate between
201320181

Industrial companies are beginning to transform their business practices and recognize that, in time,
the IIoT will touch nearly every aspect of their engineering, sales, supply chain, manufacturing, and
aftermarket service operations. How can you successfully navigate this transformation? Consider
these top priorities to build a successful IoT strategy.

1. Worldwide Internet of Things

Spending by Vertical Market
20142018 Forecast, IDC, June 2014.

Digital product
memory
Smart
products

R&D

Adaptive
logistics

Sales

Track and
trace
Energy
management

Supply chain

Smart data

2014 SAP SE or an SAP aliate company. All rights reserved.

US$746
billion

Remote service
management
Resilient
production

Manufacturing

Predictive
maintenance
Performance-based
contracting

Aftermarket
service

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The CEO Perspective: The Internet of Things for

Industrial Machinery and Components
Top Priorities to Build a Successful Strategy

Embrace Innovation
The IIoT is made up of a network of cyberphysical systems. Machinery and equipment are
fitted with a number of sensors that send data to a transactional system, analytics warehouse, or another machine. This tremendous volume of data is collected, analyzed, and
used to make decisions, execute various business processes, or communicate performance
status to stakeholders. The useful application of this technology is endless as the IIoT is
becoming more aordable and practical and the size and price of sensors continues to shrink.
When IM&C companies consider ways to create tangible business value from IIoT, they
should look at the following three key areas.

Tangible Business Value from the IIoT

Innovate and evolve your products and
services
Extend your product and service portfolio
Benefit from digital product memory
Support process monitoring and
prevention
Manage and optimize remote service
and maintenance activities
Integrate production line components

In 2013 Cisco Systems estimated that

supply chains and logistics based on the
IoT could realize a savings of

$2.7 trillion
through improved process eciencies and
less waste.2

2. The Internet of Things Is Now, Connecting the Real

Economy, Morgan Stanley, April 2014.

Optimize your value chain

Implement new business models

Enable smart processes

Create new performance-based
contracting models
Improve resource eciency, safety,
and return on assets
Track production machinery, material
handling equipment, and inventory
flows with sensors and actuators

Make logistics more adaptive

Help ensure resilient production
Manage energy consumption
Facilitate predictive maintenance and
service
Anticipate problems, proactively schedule
maintenance, and help customers
manage their fleets more eciently

Caterpillar says its dealer network

can capture

$9 billion to
$18 billion

in revenue annually when customers

move from fix when fail to predictive
maintenance.3
3. Driving Unconventional Growth Through the
Industrial Internet of Things, Accenture Technology,
July 2014.

The potential economic impact of the

IoT will range from

$900 billion to
$2.3 trillion
per year by 2025.4

4. James Manyika, Michael Chui, Jacques Bughin,

Richard Dobbs, Peter Bisson, and Alex Marrs,
Disruptive Technologies: Advances That Will
Transform Life, Business, and the Global Economy,
McKinsey Global Institute, www.mckinsey.com/mgi,
May 2013.

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The CEO Perspective: The Internet of Things for

Industrial Machinery and Components
Top Priorities to Build a Successful Strategy

Think Global
An increasingly connected world provides an eective springboard for growth
and optimization. For global manufacturers of complex engineer-to-order
and configure-to-order products, the IIoT helps drive better on-time delivery
performance, higher quality, lower costs, optimized assets, and increased
revenues.

Worldwide IoT Revenue

According to IDC, estimates for IoT revenue by region in 2020 will be:5

billion

$114.4
billion

$217.1
billion

$1.9
trillion

$2.1
trillion

Latin
America

Middle East and

Africa

Central and Eastern

Europe

North
America

Western
Europe

76.3

$2.6
trillion
Asia
Pacific

5. Worldwide and Regional Internet of Things (IoT) 20142020 Forecast: A Virtuous Circle of Proven Value and Demand, IDC,
#248451, May 2014

Global Reach
Farmers around the world can
operate CLAAS equipment on
autopilot, receive advice on
how to improve crop flow and
minimize grain losses, or automatically optimize equipment
performance. CLAAS is now
partnering with other organizations to provide information
services to growers through
a global marketplace called
365FarmNet.6
6. Driving Unconventional Growth
Through the Industrial Internet of
Things, Accenture Technology,
July 2014.

Think Design
As experience becomes increasingly more valued than material items, keep the
human experience in mind when you begin your plans for new products and services. Whether you are considering IoT services for a business-to-consumer
model, a business-to-business model, or both, explore what will simplify life for
your target audience and oer them an unparalleled user experience. This helps
ensure your equipment, machinery, and services are IoT-capable and your eorts
drive tremendous business value for your end customers.

Think Big Data and Analytics

The growing number of connected devices will result in huge data volumes.
Social networks will add to this massive data ocean of IoT information to
enrich pure machine data. By correlating all this data, you can gain invaluable
insight about operational performance, resource availability, equipment usage,
and machine health. But how will you make sense of it all?
Industrial manufacturers need to develop a strategy to store and secure large
volumes of data and enable advanced analytics at both the local and enterprisewide level. These capabilities can help you understand past actions and predict
future trends so you can deliver the right inventory mix at the right time. Even
more, your business can act in the moment and provide higher levels of service
to engage your growing installed base of connected customers. Cloud-based
data warehouses and real-time analytics are a must.

Beautiful Design
Our customers are delighted
when they call us. We provide a
consistent experience through
every interaction and touch
point. Having access to the
latest information on projects,
account status, orders, and
quotations, we have morerelevant conversations that
help build customer loyalty.7
Marco Gebhardt, CEO
GEBHARDT Frdertechnik
GmbH
7. GEBHARDT Frdertechnik customer
success profile

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The CEO Perspective: The Internet of Things for

Industrial Machinery and Components
Top Priorities to Build a Successful Strategy

Address Privacy and Security

Data privacy and security need to be part of every discussion when planning
an IoT strategy. Consider the breakdown in people, processes, and technology
that have led to a variety of security breaches in recent years and their impact
on financials, customer relationships, and military intelligence especially the
Stuxnet computer worm that was designed to attack industrial programmable
logic controllers. Your security practices need to be infallible. Furthermore, your
IoT connections that deliver data and enable the customer experiences need to
be tamperproof.
Beyond security, IM&C manufacturers need to clearly explain how they collect and
use personal data. Privacy policies must prevent the unwanted sharing of personal
information to third parties or in public forums. Opt-in programs that demonstrate
the benefits of sharing data such as incentives, exclusive oers, or loyalty
rewards need to be part of the equation, even in an industrialized setting.

Enable Your Infrastructure

$10$15
trillion
Growth in global GDP over
a 20-year time horizon.
GE believes that industrial
Internet-enabled condition
monitoring and improved
performance can drive
productivity improvements
of 1%1.5% per annum.8
8. The Internet of Things Is Now,
Connecting the Real Economy,
Morgan Stanley, April 2014.

The IIoT brings together a vast range of technology including hardware,

sensors, devices, mobile apps, telematics, data, and connectivity to the
cloud. Who you partner with to build your infrastructure will have a great
impact on its potential for success. Assess how software vendors, device
makers, and telematics platforms can reshape product design and enable
connected strategies. See them as strategic partners in your process.

Harmonize It All
The real value of the IIoT for machinery and equipment manufacturers is its
ability to connect your infrastructure to your broader business process software.
The use of in-memory technology is a necessity to successfully combine IoT data
with transactional data in one shared database in real time.
For example, running the IoT on an in-memory platform can help you become a
real-time industrial manufacturer, enabling unprecedented benefits in terms of
customer insight and just-in-time distribution and maintenance. It creates an
environment where you can monitor, analyze, and automate in ways that greatly
improve customer experiences, streamline key business processes, and create
new business models.

The SAP HANA platform

supports the IoT for the IM&C
industry and provides advanced
analytics and solutions that
optimize business processes.
The software bridges silos of
data across physical, digital, and
social channels to help create a
real-time enterprise. SAP for
IM&C solutions help enable responsive supply chains; real-time,
demand-based replenishment;
predictive maintenance; and
highly personalized customer
relationships.

Are You Ready for the Industrial IoT?

The IoT is not a distant concept for future consideration. The time to think about the IoT is now.
Learn more at www.sap.com/iot or http://global1.sap.com/campaigns/digitalhub-internet-of-things/index.html.

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