Point of View

Target segments and value chain activities to expand IoT services

June 2, 2021

The proliferation of connected devices and systems has driven demand for captured data. Enterprises are increasingly relying on smart sensors to capture data on parameters that play a crucial role in operational environments running with connected devices. Real-time access to operational data helps businesses expedite decision-making processes, enable predictive maintenance, and drive process efficiency. The internet of things (IoT) plays a key role as a change agent for businesses in this context.

In the wake of COVID-19, businesses are on the cusp of delivering more value for customers through enhanced customer experiences, thus creating a competitive advantage for themselves. IoT-based projects in enterprises have begun expediting projects from the pilot phase to achieve their digital transformation goals. HFS believes now is the right time to update the Top 10 report on IoT service providers published in 2019. Service providers in the IoT market and the enterprises that use IoT based solutions and services will get a detailed view of the strategies of key IoT service providers, their capabilities and their areas of focus in IoT business.

Industrial IoT, consumer IoT, and smart cities are the three major segments in the IoT market

HFS looks at the IoT engagements based on stakeholders that control the application and the users at the center stage of the applications. Some IoT use cases target the consumer segment, which includes smart retail, smart wearables, and smart home. Industrial use cases include smart manufacturing, connected supply chain, and factory-based operations that work with connected devices. The third segment, smart cities, is gaining more importance worldwide; it includes both consumer and industrial users. Typically, local governments work with a provider on smart city initiatives. Exhibit 1 provides a detailed view of the areas covered by industrial IoT, consumer IoT, and smart cities.

Exhibit 1: HFS categorizes IoT-based projects as industrial IoT, consumer IoT, and smart cities

Source: HFS Research, 2021

Based on the categories of IoT-based projects shown in Exhibit 1. Industrial IoT includes most use cases as businesses operating with connected devices look for real-time monitoring and seamless decision-making capabilities. We have observed varying degrees of complexity across the three categories. The challenges of multiple stakeholder management, integration, data privacy, and security are common to all three categories of IoT-based projects.

An HFS OneOffice mindset will create more opportunities for IoT services as businesses are keen to move toward digitally native operations

With the outbreak of COVID-19, enterprises realize the value of being digitally native, which they cannot achieve without breaking the siloed operations in front,- middle-, and back-office functions to allow a seamless flow of data and ensure smooth operations. This mindset, which HFS advocates as a key success factor, is known as the HFS OneOffice mindset. For example, IoT applications on the manufacturing shop floor enable real-time visibility of different operational parameters related to various aspects (e.g., asset management, workforce productivity, and systems monitoring). This visibility enables data-driven decision making, which can also be called “shop floor to top floor.” An interesting example is integrating preventive maintenance solutions with enterprise applications for procurement and ERP to understand better and plan maintenance schedules.

Service providers need to focus on IoT value chain components to prioritize both offerings and capability development

HFS Research published the IoT Top 10 service providers study in 2019, before the outbreak of COVID-19. The study highlighted the traction for IoT services among key service providers and provided a view of their strategy for growing IoT business use cases. HFS defines IoT service providers as offering solutions and services across the four IoT value chain elements outlined below. Exhibit 2 provides a view of the typical services covered across the IoT value chain.

  • Strategic consulting focuses on landscape assessment, strategic planning, technology roadmap, data governance and security, and business case development.
  • Productization includes change management, network engineering, implementation, security, custom application development, and regulatory compliance.
  • Deployment comprises end-to-end process integration, system integration, cloud management, and security.
  • Operations include governance, risk, and compliance services; data management; and device management.

Exhibit 2: HFS IoT services value chain

Source: HFS Research, 2021

IoT engagements often demand strategic consulting and advisory services related to landscape assessment, technology maturity, and future roadmaps. Though most service providers cater to the entire value chain, some service providers, such as the Big-4 consulting firms and Accenture, have solid consulting expertise. In addition, engineering service providers have demonstrated strong operational technology capability. From the industry focus perspective, most service providers provide IoT solutions for the manufacturing industry. However, we have also observed good traction for IoT use cases across energy and utilities, media and telecom, and high-tech industries. As a result, service providers can differentiate their IoT services portfolio across consumer IoT, industrial IoT, and smart cities. Moreover, focusing on an ecosystem-led approach and industry-specific innovative offerings will help develop better capability development, enhanced client experience, and business growth.

The Bottom Line: Effectively leverage domain expertise and geographic presence to identify the sweet spot for IoT services.

COVID-19 disrupted various industries worldwide. As businesses strive to maintain relevance, they have no option but to embrace the change agents that pivot their transformation initiatives. One aspect crucial in achieving this is enhancing the customer experience, which cannot happen without working seamlessly with connected systems. IoT will play an important role in helping businesses improve their customer experiences. Therefore, service providers are increasingly focusing on developing proprietary technologies for IoT services. For example, TCS has a dedicated number of IPs across digital technologies and IoT solutions, including TCUP, SDAF, Peacock, IP2, iSense, and industry-specific solutions, which cater to clients in different industries and geographic areas. As a result, we have observed more industrial IoT use cases (from auto and aero domain perspectives) in Europe.

In contrast, APAC and the Middle East have several smart city examples. Thus, service providers need to focus on a “two-in-a-box” strategy that includes their domain expertise and geographic presence to expand and grow in the IoT business. The increased focus and growth of IoT across segments have prompted HFS to update the 2019 Top 10 IoT Service Providers study in Q3 2021.


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