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Providers we’re speaking to during the ongoing COVID-19 crisis are united in the view that their clients will press pause on their Industry 4.0 roadmaps—with only the bare minimum adoption of emerging technologies like the internet of things (IoT), augmented and virtual reality (AR/VR), or blockchain. Instead, industrial firms will seek technology that can produce immediate cost savings like automation or cloud (see Exhibit 1). With many Industry 4.0 journeys on hold, providers must now organize their Industry 4.0 narratives and be primed for a post-COVID spending spree:
With the majority of the world’s population on lockdown, manufacturing is being walloped. Governments’ measures are forcing factories to close, and many of their employees, especially those on the production line, are unable to work remotely. Most providers we’ve spoken to present their vision of Industry 4.0 as a journey, or a roadmap, underpinned by strategy consulting that kicks off a lengthy implementation of a variety of emerging technologies, which we have summarized in our Industry 4.0 Services Top 10 report. Mercifully, none of the participants in that report tried talking us through what Industry 3.1 or 3.65 means for their clients (better leave that to the academics).
Exhibit 1: Many of Industry 4.0’s core technologies such as IoT and AR are poised for spending to stall during COVID-19; some, like automation, analytics, and cloud, will attract more spending because of their potential in offering quicker cost savings.
Keep talking to your clients: Providers must anticipate when and how quickly spending on Industry 4.0 technologies will ramp back up after COVID-19
Many Industry 4.0 clients have contracts in place that follow roadmaps, designed by multiple rounds of strategy consulting, toward whatever that client’s version of Industry 4.0 might be. With many aspects of these contracts likely to be placed on hold, providers will wonder just how many will follow through, and when. When will there be a desire to spend? When will there be an opportunity to spend? When will spending be at all possible?
We cannot overstate the importance of not only maintaining a dialogue with your Industry 4.0 clients during this pandemic but also refining and reiterating existing roadmaps and contacts as conditions change. The plight of many world leaders has proven how crucial it is to accept that circumstances are constantly changing instead of pretending that we can all stay our course. Providers and their clients must show the same humility in how they’ll adapt to COVID-19 through a flexible roadmap, and even flexible goals, for Industry 4.0.
This flexibility must also include pricing. It feels obvious to point out the need for adjustment in the many outcome-based contracts out there, especially those built off the back of consulting engagements that put in place timelines to implement various parts of the Industry 4.0 toolbox.
Cloud vendors and their go-to-market partners are acting now to save their Industry 4.0 clients money, but they’re also eagerly anticipating the post-COVID splurge
Manufacturing cloud solutions are always presented alongside a suite of Industry 4.0-enabling technologies, integrated into a common platform—IoT, AI, AR/VR, and so on. Manufacturing cloud vendors and their go-to-market provider partners will want to sink their teeth into manufacturers looking to save costs now in response to COVID-19, creating the platform for when these clients will be bringing in the full technology toolbox.
Salesforce is a recent standout, launching its Manufacturing Cloud offering in October 2019 while embedding itself as a partner to service providers to the industrial sector. Accenture, Deloitte, and Persistent are among the early partners hoping to get a first-mover advantage. In the words of one of its main partners, Salesforce saw manufacturing as a massive cloud adopter before COVID, and it is maintaining that view during the crisis. It’s easy to see why with manufacturing and other industrial sectors like energy and utilities lagging in cloud adoption (see Exhibit 2). Cloud giants, including Microsoft, AWS, and SAP, are all prominent partners for the leading providers in our Industry 4.0 Top 10; it’s going to be a competitive field soon as manufacturers all pivot their focus on cost.
Exhibit 2: Cloud maturity varies dramatically by sector; manufacturing and other Industry 4.0 adopters like the energy and utilities sectors languish near the bottom (maturity shown on relative scales).
Source: HFS Research, 2019
The Bottom Line: Industry 4.0 service providers need to prepare their clients, partners, and narratives for the rush to spend after COVID-19—while focusing on the key technologies for the here and now.
COVID-19 will cause Industry 4.0 roadmaps to diverge; some technologies will see increased adoption, while some will see spending grind to a halt. Providers must act to both solve what problems they can now, and prepare for the post-COVID splurge: