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The Internet of Things: New Business Models for Manufacturers?

The convergence of operational technology and information technology systems could help manufacturers embrace new service offerings using web-based business models.

Arun K. Sinha, Opto 22
Arun K. Sinha, Opto 22

Many years ago, one of my distributor partners took me to a very large industrial OEM for an automation demo. Afterward, we went into a stockroom, where she noted on a clipboard all the components she supplied to them that needed to be reordered. The form was dropped into the inbox of a purchasing agent on our way out.

This memory came to mind recently as I was thinking about new business models for manufacturers that could result from the Industrial Internet of Things (IIoT).

In addition to a purchase order being generated as a result of the form left for the purchasing agent at the OEM, I’m sure the information on that sheet made its way, probably manually, into an enterprise resource planning (ERP) system.

Of course, supplier-managed inventory (as my distributor partner was conducting with her manually completed form) is not a new concept. But imagine if a data source for an ERP system existed one level lower than supplier electronic data interchange (EDI) and was accessed directly from a machine?

Advances in automation technology today are helping make this kind of data exchange with IT software and cloud platforms simpler. Opto 22’s new groov EPIC(Edge Programmable Industrial Controller), for example, contains IIoT-enabling tools that eliminate the PCs, OPC servers, gateways and integration often required by traditional programmable logic controllers (PLCs).

With the operational technology (OT) data more easily available to IT systems, business leaders might start asking themselves, “What opportunities does the connected enterprise present for my organization?”

The answer is likely to be new services that use Internet-based business models.

IoT-based services

Much has been said about how the convergence of OT and IT can help industrial companies operate more efficiently, reduce downtime, increase profitability and do things like move from preventive maintenance to predictive.

Most of these outcomes are facilitated by making plant floor data available to software platforms that can combine it with other data to perform advanced analytics. With that in mind, what if manufacturers used this new business intelligence to better serve or add value to their customers? Many forward-thinking companies are already doing this by leveraging IIoT technologies to develop new business models based on delivering services, rather than just products.

Some companies are even looking to integrate customer relationship management (CRM) and marketing automation platforms with operational and enterprise data. With this approach, new services that could add value for their customers include product lifecycle management (PLM), faster product development, data warehousing and product customization.

A compelling case for the use of Internet technology to provide service to customers can be found with OEMs and machine builders. The idea of delivering a machine to a customer and providing remote support (commissioning, troubleshooting, maintenance) as a service might not be a new idea. The difference today is that IIoT-enabling technologies in automation have removed some of the IT barriers and made this idea much more feasible.

Some innovative OEMs are taking this idea to the next level and offering what is known as product as a service. A great example of this can be seen at Kaeser Compressors, which offers its compressors as a service through its Sigma Air Utility. Charging for cubic feet per minute used rather than for the equipment itself offers value toKaeser’scustomers by replacing an often difficult-to-obtain capital expenditure with an operational one.

Speaking about their compressed air as a service business model, Kaeser likes to say, “You probably don’t generate your own electricity, water or gas, so why generate your compressed air?” This “servitization” through IIoT technology is very likely to grow with the ever-increasing interactive web mentality.

For more information, visit Opto 22 at


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