Bain & Company Says Europeans Extend Lead in Industrial Internet of Things

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Bain & Company Says Europeans Extend Lead in Industrial Internet of Things

When management consulting firm Bain & Company surveyed executives in Europe and the US two years ago about their IoT-plans, they found European companies ahead in the deployment of Industrial Internet of Things (industrial IoT) solutions. While 27% of European executives planned to deploy IoT solutions, the number in the US was only 18%. They also found companies in some European industries devoted more of their IT budgets to the Internet of Things, particularly automotive, buildings and industrial.

The results of a new survey in 2018 show Europeans pressing their IoT advantage. While the long-term ambitions of executives in both regions appear closely matched, European companies are further along in implementation than their US counterparts, particularly in the industrial sector. Europeans also appear further along in cracking the code to unlock value from IoT solutions.
Europe’s stronger engagement in proofs of concept (POC)s and higher investment levels in 2016 helped them move to scale faster, with three times more extensive implementations in 2018. US companies are ramping up investing in POCs and plan to invest primarily in these through 2022. Europeans also remain more concerned about security. Looking ahead, the greatest challenge for Europe’s IoT providers is to become leaders in cybersecurity, to meet the needs of their commercial and industrial customers that remain wary due to their security concerns. European companies must also continue to address the complex privacy and regulatory environment of the EU.
Industrial customers in the US say they are more concerned with issues that would bring IoT solutions into the mainstream of their businesses—namely, integration with other operating technology, interoperability, technical expertise and transition risk. US executives were much more likely to cite these concerns in the 2018 survey than in 2016. These challenges limit the degree to which companies scale their POCs into daily, operational implementations of IoT technology.
Europeans’ experience with implementing Industrial Internet of Things solutions contributes to their increased awareness of cybersecurity risks. Bain research found that executives at companies with greater cybersecurity sophistication see more risks than those at companies with less sophisticated cybersecurity capabilities.

Europe’s lead in implementation is a direct result of commercial and industrial customers allotting a higher percentage of their technology spending to IoT deployments compared with their US counterparts. Funding levels have remained roughly constant in Europe over the past two years, reflecting the reality that it can take longer than originally expected to overcome implementation barriers, especially security. Discrete manufacturing represents the greatest percentage of allocation in Europe and the US, with process industries following closely behind.
Europeans are planning to invest in more than twice as many extensive implementations in 2020 as their US counterparts. Looking almost 10 years ahead the investment plans of executives in both regions could result in a more competitive position, with the US expecting to see similar levels of POCs and implementations as the Europeans.
The key challenge for both regions remains addressing cybersecurity concerns, not only by the vendors but also for customers, who will need to ramp up their security investments significantly to benefit fully from IoT technologies. Bain research finds that customers would buy more IoT devices, and pay more for them, if their security concerns were addressed. Becoming a leader in security remains a powerful opportunity for European IoT champions.

Author: Tim Cole
Image Credit: Bain & Company

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