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Market Insight

Has the time finally arrived for IIoT—and other questions answered

October 22, 2019

Alex West Alex West Senior Principal Analyst, Industrial Technology, IHS Markit

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The industrial internet of things, or IIoT, is built upon four foundational, interconnected pillars: connect, collect, compute, and create.

This is because in IIoT, industrial devices and systems are connected, enabling gargantuan amounts of data to be collected and processed by advanced computing, which then transforms the amassed data through analytics into actionable insights, finally leading to the creation of new interactions, solutions, business models, and revenue streams.

As the initial building block that lays the groundwork for the entire IIoT, the “connect” component is integral to everything else that takes place in the IIoT cosmos. And with each industrial IoT device that comes online, the continually expanding IIoT universe gets just a little bigger.

Today, more than a billion IIoT devices can be found throughout the factory floors of the world, IHS Markit | Technology estimates.

But despite the proliferation of IIoT devices made possible by the rapid pace of technological advancement, the industrial automation market has been slow to shift to Fieldbus, a legacy network medium for connecting machines on the factory floor and a key factor that many—including IHS Markit | Technology—believe has slowed the deployment of IIoT solutions.

While offering various advantages including determinism and more physically robust connectors and components, Fieldbus technologies were originally developed without any consideration of how they might link up to a wider network setup or to the internet.

This year, however, could be a tipping point as worldwide shipments of industrial Ethernet devices overtake Fieldbus shipments for the first time. The transition is key to the deployment of technology that will future-proof facilities for them to benefit from IIoT solutions.

Unlike Fieldbus, industrial Ethernet is faster, has greater bandwidth, and—crucially—supports the IP addressability called for in IIoT.  


IIoT business models and new ways to monetize

Part of the excitement surrounding IIoT is the possibility of creating new business models and revenue streams. In aerospace, for instance, both General Electric (GE) and Rolls-Royce are known for their “power by the hour” approach in generating revenue for the jet engines they make for commercial airlines.

In this unconventional revenue model, GE or Rolls-Royce use the time and duration spent in the air—the hours flown—by a plane outfitted with the manufacturer’s engines as the basis for payment and compensation to the manufacturers. In return, General Electric or Rolls-Royce takes ownership of all aspects of engine maintenance, repair, and replacement, utilizing the analytics borne from the data collected in the company’s IIoT systems to perform the engine upkeep.

In this performance-based logistics approach, monetization is shifted away from the manufactured commodity—in this case, the jet engines—toward rendered services for the commodity instead.

Another business model finds manufacturers employing a subsidy-type approach: Equipment, often outfitted with the latest technology and expensive as a result, is offered to customers at a reduced rate, but additional revenue is generated through the services that are provided.

In these and other examples, companies are intrigued by the prospect of taking the service model to its furthest end—unknown for now—as they seek to determine just how far the service model can be utilized and monetized to create additional revenue streams.

For more information on IHS Markit | Technology research on the industrial IoT, visit our website and go to the Industrial IoT, Software & Communications research category, under the Manufacturing Technology research service.  IHS Markit | Technology is now a part of Informa Tech.

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