Big companies plan to double their annual spending on smart, Internet-connected devices like video surveillance gear and factory sensors over the next four years to an annual total of $520 billion, according to a new report from consulting firm Bain & Co.
The estimate, which includes purchases of devices, software, and related services, is up from a projected $450 billion for 2020 made by Bain in its previous survey about the topic in 2016. The higher forecast shows businesses are increasing their appetite for connected devices alongside growing consumer demand for everything from smart speakers to Wi-Fi connected lightbulbs.
Connected products used today usually send the information they collect, including big video files, to cloud data centers for analysis to monitor secure areas, measure crowds, or keep tabs on how quickly parts are wearing out. But newer products will have more of their own computing power and artificial intelligence apps built in, making them more independent and efficient, at least in theory, boosting sales.
But some expected uses of connected devices haven’t caught on as much as expected, according to Bain, providing a reality check for the hot field. For example, many companies hoped that collecting extensive data about their equipment would help predict when to service them, reducing costs.
In one example, Bain pointed to elevator manufacturer Schindler working with GE (GE) to collect sensor data from 60,000 elevators. But a lack of historical data and problems integrating different data formats made predicting maintenance needs difficult. “Insights have been harder to glean than first promised,” Bain noted.
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Overall, the biggest concerns business customers had about the Internet of Things remained the same now as in the 2016 survey, Bain said. Forth-two percent of companies cited the risk of security weaknesses that could allow hackers to infiltrate their computer systems, while another 29% cited difficulties integrating new and old systems, and another 28% feared poor returns on their investment.
Bain’s survey, based on checking in with an undisclosed number of companies, also found that big customers are looking for connected devices that that they can plug in and use right away, instead of systems that require substantial customization. Currently, 60% of those surveyed said they have to customize the products.
Bain praised IBM (IBM) for using insights it learned working with Samsung to help elevator and escalator maker Kone improve maintenance schedules and the French rail company SNCF track thousands of trains and improve safety. Using a different strategy, Verizon (VZ) built a real-time wireless service to monitor vehicle fleets by acquiring four firms, including the $2.4 billion purchase of trucking tracker Fleetmatics Group in 2016.