A couple of hours remain till we welcome the New Year here in the United States, but elsewhere 2014 has arrived and resolutions are being made, enacted on, and already broken. In the service space, automation provider PTC has made a splash to begin the new year with a much awaited move into the Machine 2 Machine (M2M) or more popularly known as the Internet of Things (IoT) space with the acquisition of ThingWorx. With the aid of ThingWorx’s connectivity and application development platform, PTC looks to offer manufacturers the opportunity to improve the way they design, deliver and support products leveraging remotely captured data. To achieve this vision, PTC is paying a hefty sum north of $100m dollars (Note: the Servigistics acquisition cost $220m) and believes that the ThingWorx platform will further strengthen PTC’s offerings, particularly in the Service Lifecycle Management space.
Remote service, as enabled with connected machines and equipment, is not a new concept in the realm of service and asset management. In industries such as oil and gas, utilities, medical devices and more, organizations have long connected with their serviceable equipment to aid in service processes. Improved diagnostic information captured directly from serviceable equipment has enabled:
- Better self-service
- More efficient reactive service with accurate knowledge of the service issue and necessary part
- Improved preventive and predictive service as machine parameters approach performance thresholds
Outside of improving service processes, remotely captured performance data has also opened the door to the creation and delivery of net new services that enable new revenue streams for the servicing organization. These services range from reporting and analytics packages, to improved training and consulting services. In essence, remotely captured machine performance and usage data has changed and is continuing to change the relationship paradigm between servicing organizations and their customers. With the support of usage and performance data, servicing organizations can transform the way that products are delivered, serviced and managed in order to maximize the value seen by customers. Access to this data impacts the way products are priced and sold (lump sum capital equipment purchase vs. pay per use or pay for output), the way service contracts are structured (standard repair vs. performance-based), the way service is delivered, and much more (think consumables, end-of-life services and more). As a result, the servicing organization becomes much more of a solution partner thereby enabling a level of differentiation that cannot necessarily be matched by other OEMs or third-party service providers. Our research shows that increasing competition in both the product and service realms is seen as the top challenge facing organizations in 2014, as seen by 40% of respondents in a recent 2014 Trends research survey.
TSC’s research also shows that 41% of organizations (and 56% of industrial manufacturers) strongly believe that remotely captured machine data will significantly impact their service transformations in the coming 3 years. For these organizations, connected products are a viable opportunity given the reduced cost of connectivity and the ease with which we can connect with products. More so there is much more familiarity with connected products, particularly in the consumer space. However, challenges do remain in broader adoption of a full-scale connected infrastructure, and these issues will impact the success of PTC’s recent acquisition.
- Access Fears and Security of Data Challenges – Early adopters of remote service faced significant challenges in convincing their customers that the data being tapped into was secure and only being used for service purposes. Customers were afraid that OEMs were tapping into their IP and therefore processes and audit trails needed to be established around the type of data being accessed, where the data was being stored, and what was being done with the data. These challenges still remain. More so, with greater connectivity across the consumer and industrial worlds comes greater fear of security breaches, unauthorized access to networks, data theft and more.
- Building a Clear ROI for Customers – While remote connectivity is a great value to manufacturing and servicing entities, organizations have often struggled in selling its value to customers. A large percentage of customers are still struggling with an uncertain global economy and facing tight cost constraints. Therefore, these organizations are reluctant to pay more for remote service if they don’t see a direct ROI or cost benefit to themselves. As a result, servicing organizations often struggle with the pricing and bundling of remote service with new equipment of service contract sales.
- The Internal Sell – Organizations continue to struggle with incentivizing and motivating their sales teams to actually sell service and not give it away for free. The added sale of remote connectivity and the value relationship that needs to be established add another layer to this challenge.
- Data Everywhere – Remote monitoring and connectivity tools greatly increase the amount of product performance data available to service organizations. This isn’t always a good thing if organizations aren’t afforded the analytical and data management tools to make use of the data. The ThingWorx platform currently offers some analytical capabilities to react and respond to real-time data feeds, but deeper data analysis tools are lacking. For strategic decision making around service direction, product engineering and more, PTC will need to look at providing enhanced analytical capabilities via a partnership or subsequent acquisition.
2014 will be a vital year in the growth of the Industrial Internet of Things. Major software providers are clamoring to get a seat at the table and the PTC acquisition is the first of many to occur in the space in 2014. We can expect other enterprise software providers to make inroads in the space (applications, platforms, devices and services) along with further investments in analytics and big data tools to enable organizations to manage and sift through the increasing amount and burden of performance data available.