High interest rates and cautious consumer sentiment are having a deep impact across the manufacturing and logistics sectors in North America. The Internet of Things (IoT) has been touted as a potential solution for challenges that cash-strapped businesses face in increasing efficiency and productivity. But research indicates that 58% of all IoT projects are unsuccessful. There is even a belief that 58% is a low-ball estimate and the real number is closer to 70%. The high failure rate is a matter for concern for enterprise users who are not only investing funds, but also professional credibility into IoT initiatives.
Why do IoT projects fail?
Beacham research conducted interviews with solution providers as well as enterprise users. They identified unclear business objectives or outcomes and lack of senior management involvement as key factors in project failure.
This is the nub of the problem and IoT projects are more prone to this kind of a disconnect than typical IT projects. For context, consider a firm’s value system, as defined by Porter in the chart below. This value system defines the business’ primary activities as those that add value and create a competitive advantage for the business. The benefits of the IoT solution are directly realized by the layer comprising the primary activities.
Common use cases are in using IoT to track inventory and get answers to questions like – Where is the cargo now? What are the conditions under which the cargo is moving? Are there any anomalous conditions that compromise the integrity of the cargo? etc. Or a firm could use IoT to monitor the processes involved in creating the finished product from raw materials. Users would get answers to questions like – Are there any changes to operating conditions that affect product quality or impact the warranty periods? What, if any, are the points of inefficiency in the production environment? etc.
Despite the apparent value to the specific primary activity, referencing Porter’s value chain, some of these initiatives do not gain visibility outside the narrow primary function where they originate. They lack a champion with a pan-company mandate. Our contention is that the reason for the high failure rate for IoT projects is the way projects originate inside the organization.
.. IoT needs integration with ERP systems because these are the foundation on which the primary activities function.
Why IoT must integrate with ERP systems
IT is the champion of IoT projects needs to build organizational momentum and succeed. As a broad analogy, if IoT establishes the sensory framework, IT is the nervous system infrastructure that ensures that the stimuli are received and consumed across the organization. IT is also more than infrastructure. IT directly benefits from IoT integration as the subsequent initiatives help it achieve faster payback on their infrastructure investments. This makes IT a champion with a vested interest in IoT initiatives’ successes. Ergo, the CFO, CTO and CIO are aligned and give support to IoT plays.
To be more specific, IoT needs integration with ERP systems because these are the foundation on which the primary activities function. The integration ensures there is no duplication or manual transcription of data, and there are automated updates. Thus the primary business activities like supply chain operations, inventory management, order processing, customer relationship management etc. benefit from real-time data that are consistent across organization functions.
Innovapte has developed Innovtrack technology to help with IoT integration into ERP systems. This could be a native implementation with SAP or 3rd party systems.