Accelerate the internet of things in manufacturing lns research

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© 2014 LNS Research. All Rights Reserved
November 2014
www.lnsresearch.com
One of the most potentially far-
reaching technological trends on
the horizon today is the Internet of
Things (IoT). A nascent and ever-
evolving concept, IoT is loosely
defined as a scenario in which all
potential objects are equipped
with unique identifiers that enable
the ability to transfer data over a
network without human-to-human
or human-to-computer interaction.
The possibilities are vast and challenge the mind: sensors, equipment, production
lines, machines, containers, transportation, buildings, homes, computers, software,
private and public clouds, mobile devices, departments, companies, processes—all
interconnected and communicating with one another to achieve the previously
unachievable.
Estimates on the number of connected devices range anywhere from 25 to 100
billion by the year 2020, and indeed, many in the commercial and industrial spaces
are expressing their excitement and optimism through large R&D capital
investments, acquisitions, and other market activity.
But while the promise of IoT capabilities could have a transformative effect on the
manufacturing sector, IoT has been approached with notably more trepidation and
skepticism among manufacturers. Why?
In this research spotlight, LNS Research will explore some of the main reasons
that manufacturers have carried a more cautious attitude and been slower to
embrace the initial steps to pursuing IoT.
Specifically, LNS Research will cover:
 The challenge of communications and interoperability standards, as well as
the current market response and direction
 The new challenges at hand with IoT network management and security
 The roadblocks to ROI and how these will be overcome as time passes
 Data on current and future IoT investment
 Actionable recommendations for positioning your organization for future
success
Research Spotlight
Accelerating the Internet of Things in
Manufacturing
While the promise of
IoT capabilities could
have a transformative
effect on the
manufacturing sector,
IoT has been
approached with
notably more
trepidation and
skepticism among
many industry leaders.
Why?

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Research Spotlight
Accelerating the Internet of Things in Manufacturing
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November 2014
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The Internet of Things’ Scope of Opportunity
The manufacturing industries are becoming increasingly excited about the future
possibilities of these aforementioned devices and objects being simply and
inexpensively interconnected and collaborating together via Internet technologies
to achieve innovative and amazing results.
IoT technologies create the potential for billions of everyday devices to become
more self-aware and intelligent, and to be able to negotiate communications with
each other via public and private Internets in order to create new ways of
collaborating, working, and living together.
Each of the physical, human, and computing elements involved will have the ability
to directly negotiate communication – streamlining supply and demand chains
along with the operation within the four consumer and supply chain areas depicted
above. These opportunities are exciting and far reaching, but there are many
hurdles to overcome to accelerate IoT’s potential in the manufacturing industries.

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A Lack of Established Interoperability Standards
Over the past several decades in the industrial space, interoperability standards
have been developed to enable different individual vendors’ sensors, actuators,
controllers, supervisory systems, operations management software, and business
systems to be combined into more cohesive solutions and provide freedom of
choice. At the time, the ideas of IoT connectivity were not a consideration in the
standards design or development.
As a long-term consequence, there exists a diverse and vendor-specific landscape
of device and component functionality, and there are currently very few analogous
standard communications protocols and information models that exist for the IoT
world today.
Among modern systems and applications, the industry is accustomed to using
fieldbus standards with interoperable device information profiles, information
standards for application-to-application use like OPC/OPC UA, and higher level
manufacturing to business integration models such as:
 OAGIS
 MIMOSA
 ISA 88
 ISA 95
Even having these integration models broadly deployed, manufacturers are still
potentially left with remaining integration and interoperability gaps that may need to
be filled with vendor-specific IoT solutions.
As of now, among machine-to-machine (M2M) devices, IBM’s MQ Telemetry
Transport (MQTT) protocol is the default, openly published protocol for use in small
computing footprint devices. Requiring limited overall bandwidth, this protocol
communicates in a fashion that is directly supported by IBM’s enterprise
Websphere MQ (Messaging Queue) software.
While some of the vendors focused on building out IoT application platform toolkits,
like PTC/ThingWorx, Xively, and others, support this open specification protocol,
the initial message/information delivery to and from devices is really only the
starting point in what is going to be required to make complete industrial IoT
applications fully functional.
Information profiles identifying and differentiating the many classes of devices will
be required. So too will interoperability with the pre-existing information integration
standards and models. In addition, new ones will be required, in large part to
Even having
integration models
broadly deployed,
manufacturers are
still potentially left
with remaining
integration and
interoperability gaps
that may need to be
filled with vendor-
specific IoT
solutions.

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handle the massive influx of new and unstructured Big Data. And all of this Big
Data needs to be processed and analyzed in an efficient and timely fashion. New
technologies such as SAP’s HANA, IBM’s Watson, and open source Hadoop are
already being applied to address this aspect of IoT applications.
LNS Research sees the landscape of these application frameworks and
architectures evolving very rapidly right now, so the scope and positioning of these
technologies are likely to expand in the near future.
Advancing the IoT Framework and Architecture
On the part of technology and solution providers, there has been plenty of activity
and messaging around the claim of manufacturing IoT as a key area of future
growth. In the past year or two, there have been alliances formed, such as the
Industrial IP Advantage and the Industrial Internet Consortium (IIC), which involve
large players like Cisco, Panduit, Rockwell Automation, AT&T, Cisco, GE, IBM,
and Intel.
New technologies
such as SAP's
HANA, IBM's
Watson, and open
source Hadoop are
already being
applied to process
and analyze the
massive influx of Big
Data generated by
the Internet of
Things.

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In particular, the Industrial IP Advantage coalition is addressing the secure use of
standard Ethernet and Internet Protocols for industrial purposes; however, in order
to create a complete automation system solution, this pre-supposes the use of
open EtherNetIP and CIP protocols with additional information profile and
systems/network management features that are contained in hardware and
software originating from the consortium member companies.
While this can be considered a great start and a helpful industry initiative for the
automation portion of IoT, LNS Research believes that an enterprise-level
participation in interoperability standards will be needed to approach the many
billions of connected devices, and their potential for associated manufacturing
business value, which could approach and surpass trillions of dollars.
From a public investment perspective, the governments of the United States and
Germany are already investing over $1B to help accelerate commercial success in
IoT to advance manufacturing.
IoT Network Management
While cellular networks blanket a much larger area than even five years ago and
4G is undoubtedly on the rise, outside of major cities, cellular is still not something
that many companies can consider reliable. Particularly when a company operates
in a large (and remote) geographical area where pipelines, rail lines, or other
vessels and structures are dispersed across wide swaths of physical space for
production/transportation/communication purposes, the logistics of building this
network, or bolstering what currently exists, and implementing the sensors and
devices in a standard way to create a functional and optimized network is certainly
formidable. And as newer techniques and sensor capabilities advance, existing
network infrastructure may find itself struggling to keep up.
As the amount of potential data transmitted over this network is growing
exponentially with increased connectivity and device intelligence generating larger
volumes and velocities of data, there will reach a point where real-time network
capabilities will be overwhelmed.
As previously mentioned, the spearheading of defining and framing new and
adapted standards is one of the most important roles of the IoT affiliations
mentioned above in advancing the cause. While not as exciting to expound upon
as the potential use cases and benefits of IoT, network bandwidth, availability, and
standards are where the most immediate and in-depth conversation is needed.
As Richard Soley, executive director of the IIC, has said, “Standards are the most
important enabler for innovation in the world today.”
LNS Research
believes that an
enterprise-level
participation in
interoperability
standards is needed
to approach the
many billions of
connected devices
and their associated
manufacturing
business value.
While not as exciting
to expound upon as
the potential use
cases and benefits
of IoT, network
bandwidth,
availability, and
standards are where
the most immediate
and in-depth
conversation is
needed.

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New Security Challenges
Issues and concerns around cyber security are nothing new, of course, and the
manufacturing industries have gone through several instances of technological
advancements opening new Pandora’s Boxes in the world of security. For
instance, from the Ethernet based automation systems starting in the 1980s,
standards evolved into multiple implementations of industrial network protocols that
fit standard Internet Protocol (IP) and UDP communications stacks including but
not limited to:
 Modbus
 TCP/IP
 PROFINET
 EnterNet/IP CIP
 FOUNDATION HSE
Additionally, communications between controllers/PLCs and workstation
applications have moved from slow serial ports to using high-speed Ethernet
networks that commonly run the aforementioned protocols as well as OPC/OPC
UA.
All this Ethernet/IP networking and interconnection has resulted in an array of best
practices established for different security aspects such as network and virtual LAN
segmentation, firewalls and selective port openings, user and application
authentication, intrusion detection, anti-virus, malware, security patching, and
application software roles and privileges.
Herein lays part of the issue. This same, previously mentioned legacy of differing
and disparate standards is causing major problems in the migration toward IoT
capabilities.
IoT smart devices run much smaller footprints of computing power and operating
systems. It is possible that their initial installation is permanent and that the
software within may never be updated or replaced. This permanence creates a
very high premium on the design security and impermeability of these devices to
viruses or denial of service attacks.
Since IoT devices may or may not participate in larger/centralized security domains
(e.g. Active Directory) in order to operate, the concept of multiple distributed
security domains will likely emerge from groupings of IoT devices, and be another
new security management consideration. Additionally, IoT devices need to
intercommunicate with existing controllers, automation, and manufacturing
information networks, and applications—which will require adaption of existing
While few forward-
looking business
leaders would
question the
eventual adoption
and future
applications of IoT,
for many the
investment
opportunity has yet
to appear ripe.

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security policies and approaches to meet these new IoT security challenges.
Addressing the New Security Frontier
While the challenges outline above present no easy task, and great stakes, the
market is responding to them in different ways. One great example is Cisco’s
Security Grand Challenge, which is an open solicitation for technical solutions
incentivized by prizes, matching investments, and potential intellectual property
protection. Cisco has also formed a partnership with software automation giant
Rockwell Automation, which consists of several measures focused on building a
common technology view, collaboration on reference architectures, people and
process optimization, and joint product development—all of which aim to advance
and standardize the way people, networks, and connected devices interact with
each other.
Another example of a partnership between large industry players is Siemens
Industry Sector and McAfee. These two companies have formed a partnership to
enhance security collaborating between the two companies’ portfolios and building
upon a joint effort started in 2011. Among the advancements will include a next-
generation firewall, security information and event management (SIEM), endpoint
security, and global threat intelligence. These offerings are expected to improve
visibility and control at the factory level while reducing the risk of intellectual
property theft.
Achieving ROI
The final macro-challenge to the acceleration of IoT in manufacturing is one that is
less concerned with IT and logistics, but nonetheless crucial to the business as a
whole: the financial impact.
While few forward-looking business leaders would question the eventual adoption
and future applications of IoT—not just in manufacturing, but in every conceivable
commercial arena—for many the investment opportunity has yet to appear ripe.

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A Perception of Redundancy
Though media hype may lead the casual observer to believe otherwise, intelligent
sensors and devices are not new. Truth be told, there are millions in current use,
deployed over the last decade or so in plants and manufacturing facilities around
the globe.
An important distinction is needed: These devices and sensors currently deliver
some of the functionalities often discussed when the phrase “Internet of Things”
enters the conversation. Indeed, it is not uncommon to hear manufacturing
executives comment with air of varying dismissal, “We’ve been doing machine-to-
machine (M2M) and intelligent device integration for years.”
This is true. Many of these sensors and devices work reliably with higher-level
controllers and other computing devices; however, the great majority are not
communicating via Internet protocols or directly over Ethernet networks.
In consequence, many manufacturing leaders feel that they are already executing
on IoT capabilities—at least those that they foresee as useful to operations—today,
and a move toward upgrading to fully connected devices and sensors, is very
difficult to justify from an ROI standpoint.
An important point to make in this area is around cost effectiveness. As new
generations of IoT sensors and devices are released into the market, their cost as
compared to the currently implemented versions will need to decrease
considerably for many manufacturers to consider upgrading.
Defining Early Success
While the IoT market has a long way to go in regard to functional, out-of-the-box
applications to add weight to its case in manufacturing, there are manufacturing
businesses that have shown early success and ROI gain. Many of these
successes have been in the area of Asset Performance Management (APM),
whereby industrial machinery and equipment is being monitored remotely, and
large data flows are being analyzed to present an increasingly predictive picture of
when these assets will fail based on specifications and historical data.
In most cases, these success scenarios involve intensive, custom-made solutions
built upon IoT platforms. And while the market may have a ways to go in
presenting these types of solutions out of the box, this type of success story is a
harbinger for what tomorrow’s IoT landscape may look like.
While the IoT market
has a long way to
go, there are
examples of
manufacturing
businesses that
have shown early
success and ROI
gain.

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The State of Investment and Attitudes
Looking at data from one of LNS Research’s recent surveys, we can see how
attitudes around IoT are shifting forward as more companies begin to see the
potential for business value. Asked how IoT is currently affecting their businesses,
approximately 20% of respondents (n=367) have made some form of investment
into IoT technologies, either for operations, customers, or some combination
thereof. Fifteen percent of respondents are conscious of IoT capabilities, but are
currently not seeing any impact in their businesses, and 21% have interest in IoT
but have yet to fully investigate the impact they could see from IoT. A full 44% of
respondents had yet to fully understand or know about IoT capabilities, so more
marketplace awareness and education clearly needs to occur.
Moving from present actions to future attitudes, respondents were also asked
about the nature of their IoT investments moving forward. While 19% did not
expect to invest in IoT technologies within the next 12-month period, 14% were in
the process of establishing a budget and expected begin investment in the next 12
months, and 19% had either fully established a budget, or had begun investing in
earnest in IoT solutions. Nearly half of respondents did not expect to invest in IoT
technologies in the foreseeable future.
4%
6%
10%
15%
21%
44%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Investment started due to customer demands
See value in operations and have begun
investment
Rapidly pursuing IoT, for operations, customers
or both
Understand/aware of IoT but see no impact yet
Interested but still investigating the impact
Don't understand/know about IoT
According to survey
data, 21% of
respondents had
made some form of
investment into IoT
technologies, either
for operations,
customer demands,
or some combination
thereof.

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While awareness and interest in IoT have shown signs of growth, the number of
manufacturers for whom IoT has yet to cause any real ripples in this data echoes
the need to address concerns, standardize networks, and communicate benefits
highlighted above.
Recommendations
While there are still many questions to be asked and answered, such as:
 What role will pervasive sensing and intelligent devices have on Big Data
and the Cloud through new fog computing models and the enablement of
distributed, rather than centralized, orchestration systems?
 Will manufacturers adopt truly consumer grade user interface and
personalized user experiences on the shop floor? How will collaboration,
video, and the mobile operator change plant operations?
 How will manufacturers adapt to new IoT enabled business models? Can
new financial models support what will be technically feasible in moving
from a product to services based company?
 How long will it actually take for sensor prices to drop far enough and
open/standard Ethernet protocols to be adopted broadly enough for rapid
roll-out?
There have also been some early successes in IoT in the manufacturing sphere,
the development of IoT functionalities and standards has quite a ways to go before
even the full breadth of possibility is understood by the manufacturing industries.
Even so, forward-looking companies that have been early adopters of IoT solutions
1%
2%
7%
9%
14%
19%
47%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Have made significant investment already and
expect it to decrease
expect it to stay the same
Have established a budget for IoT in the next 12
months
expect it to increase
Expect to start investing in IOT within 12 months
but still establishing budget
Do not expect IoT investment in the next 12
months
Do not expect IoT investment in foreseeable
future

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are experiencing benefits today. LNS Research recommends that manufacturers
perform an analysis of where specific applications of IoT can enable quick returns
on efforts in the short-term, while at the same time developing a long-term vision of
how IoT capabilities can affect their organizations in a more transformative and far-
reaching way as the space matures, and as IoT develops common standards and
platforms as well as enhanced security measures and capabilities.
As the space emerges and risk becomes less of a concern, it will be these
manufacturers that have done due diligence around IoT research and capabilities
that will be best positioned to build-off of short-term successes and reap the
rewards that an increasingly connected enterprise, and its compounding spaces for
revenue growth and cost reduction, will offer.
LNS Research provides advisory and benchmarking services to help Line-of-Business, IT, and Industrial Automation
executives make critical business and operational decisions. LNS research focuses on providing insights into the key
business processes, metrics, and technologies adopted in industrial operations.
Authors:
Mark Davidson Principal Advisor, mark.davidson@lnsresearch.com
Greg Goodwin, Research Associate, greg.goodwin@lnsresearch.com

Accelerate the internet of things in manufacturing lns research

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