IoT Readiness: Is Europe up to it?

The race is on but how does Europe measure up? We look for the winners and losers to see if the Old World can take a lead in the new world of IoT. Smart Industry looks at the IoT Readiness.

The Internet of Things is inexor­ably reshaping the world – and Europe. From the western shores of Ireland to the Russian border, connective technology, smart devices, and analytics are coming together, offering new options to consumers and potentially revolutionary developments in agriculture, commerce, and industry. While beginnings can be detected almost everywhere, only a few countries have yet advanced far on the IoT journey.

IoT Readiness:Prospects, Challenges

The Internet of Things, that potent combination of mind and matter that is threatening to upend industries and even patterns of consumption, has received a lot of attention and hype. Pundits like Gartner routinely issue pronouncements about the billions of connected devices that will soon be joining humans on the Internet. Of course, not all the predictions will come true but it seems likely that many will – and soon. Quite simply, IoT has the potential to be as consequential as the whole age of information up to this point.

For Europe, IoT is both an opportunity and a threat. It is an opportunity for leading sectors of the European economy to stay ahead, and for others it’s a fresh chance to lead. How big is the rapidly evolving world of IoT? According to Marta Muñoz Méndez­Villamil, research director and IoT practice lead at IDC EMEA in Madrid, her firm expects market spending on IoT in Western Europe to grow from approximately $147bn in 2017 to over $274bn in 2021. IoT activities in the manufacturing sector, one of the largest sectors for IoT investments, will reach almost $26bn in 2017 across Western Europe. That spending will be primarily driven by IoT investments to improve two main areas: manufacturing operations and production asset management. “The main objective here is to use IoT sensors to improve factory performance in the plant, as well as improving supply chain orchestration,” explains Méndez­Villamil.

“According to our research, Germany undoubtedly leads the way, due to the large presence of manufacturing companies in the country and the large contribution of manufacturing to the country´s GDP,” she adds. For Germans, the focus is around cost control and efficiency gains, which are the two primary drivers of IoT investments in this sector. This not only includes large German manufacturers, but also smaller ones with innovative approaches to circumvent budgetary limitations and scalability restrictions, and the creation of multiple industry alliances to test IoT use cases, like the ADAMOS (Adaptive Manufacturing Open Solutions) alliance, she says.

According to Software AG, an ADAMOS member along with DMG Mori, Dürr, Zeiss, and ASM PT, the organizations have established the strategic alliance for the advancement of Industry 4.0 and the Industrial Internet of Things (IIoT). ADAMOS is customized to meet the speciffic needs of machine and plant builders and their customers. It is a non­proprietary platform that brings together up­ to ­date IT technology and industry knowledge. The alliance hopes to attract other machine builders to become partners and establish ADAMOS as a global standard for the industry. Other markets where IDC expects to see rapid growth in IIoT­ related activity are Italy, France, and the UK. The opportunity in this sector is sufficiently important to have attracted players like Apple, with its recent partnership announcement with GE, says Méndez­Villamil.

In general, the infrastructures and political willingness of Europeans will dictate how the Internet of Things develops in the near future, notes Peter Wilmar Christensen, co­founder and general manager, EMEA, at Greenwave Systems, a software and managed services company based in California and Birkeroed, Denmark.

The main objective is to use IoT sensors to improve factory performance, as well as improving supply chain orchestration.
_{Marta Muñoz Méndez-Villamil, Research director and IoT practice lead at IDC EMEA in Madrid}

Citing a report from the CXP Group, Christensen says it shows there is a strong appetite for IoT technology across the continent. He believes the majority of European companies are already involved in IoT initiatives, with cost reduction being the major driver. “The same report revealed most companies will also increase their spending on IoT over the next three years, and between 10% and 30% will increase it by more than 30%,” he says.

Iot Readiness: Selected markets in Europe

The UK has a track record for inventing IoT-related technologies, such as the MQTT protocol which came out of the IBM Hursley Labs in Hampshire and is now an open source standard. The UK also has a significant startup scene and many maker spaces dotted around the country. Furthermore, there were several UK companies speaking and exhibiting at Augmented World Expo (AWE) 2017 in Munich.

Although major concerns around privacy and data security remain, and the General Data Protection Regulation (GDPR) is slowing down implementation, IoT is advancing quickly in certain markets. According to IDC, manufacturing is among the leading industries in terms of market share, followed by utilities and transportation. “The industries that will see the fastest spending growth are consumer, insurance, and retail,” Christensen adds.

Regional divergences

There are also variations between different countries. In Germany and the UK there is a great focus on IoT and a willingness to invest. There are technology hubs in Berlin, Dresden, and Munich, while the UK also has several projects dedicated to decentralizing its IoT development. Mobile phone provider O2 recently became the first British telco to announce it will trial 3GPP­compliant IoT connectivity tech in the UK later this year.

Meanwhile, companies across Italy see the improvement of supply chain management as the biggest driver for implementing IoT. But, when it comes to the most advanced region for IoT adoption, the Nordics lead the way with cost reduction and the development of connected products being the main motivators, Christensen says.

This landscape is creating a positive investment climate, with low interest rates and recent economic growth meaning that companies are generally willing to invest in optimization – and that is where Christensen reckons the IIoT comes into play. “IIoT is not only big in transportation and logistics, but also in production and machinery,” he explains.

For example, car and truck tracking, where mobile connections link to GPS devices in fleets, has been used for many years and is now very much the norm, but going forward mobile asset tracking will be the new standard in supply chain use cases. Christensen explains: “Starting with assets with most value, they will have low­cost Long­Term Evolution (LTE) high­speed wireless communication devices – with long battery lifetime – attached to them, with assets of lower value also getting connected as the cost of the devices and services goes down.”

Analytics at the edge

He adds that this trend will continue “until mobile asset tracking becomes as normal as barcodes are today.” The simplest of these devices will solely report location and build on current GPS and Wi­Fi solutions but more advanced solutions will include connected sensors to relay light levels, temperature, smoke, and the like. “Some will even have edge analytics, so they can react to data input without needing to send it back to a data center for analysis,” he notes. “While these sorts of solutions may seem a long way off, the willingness of companies to invest in such systems is high and the infrastructure is ready.”

Germany and Industry 4.0

How to count the ways

The Industrial Internet of Things is a cumbersome term at best, so why not come up with something better? That may not have been the intent but it gave rise to “Industry 4.0.”The name was first proposed by the German Federal Government’s High Tech Strategy team in 2011 at the Hannover Fair. Within a couple more years, a formal planning effort emerged and the term was officially adopted by the government. But why 4.0? The thinking is as follows:

• The first phase of industry was mechanization (1.0)
• The second phase was electrification (2.0)
• The third phase was digitization (3.0)
• The fourth phase adds intelligence, connectivity, and ubiquitous computing (4.0)

All of this was embodied in Recommendations for Implementing the Strategic Initiative Industrie 4.0 from the Ministry of Education and Research in 2013. The report predicts: “In the future, businesses will establish global networks that incorporate their machinery, warehousing systems and production facilities in the shape of Cyber-Physical Systems (CPS). In the manufacturing environment, these cyber-physical systems comprise smart machines, storage systems and production facilities capable of autonomously exchanging information, triggering actions and controlling each other independently. This facilitates fundamental improvements to the industrial processes involved in manufacturing, engineering, material usage and supply chain and life cycle management.”

LTE can provide the connectivity these products need until NarrowBand IoT (NB­IoT), a low­power, wide­area network (LPWAN) wireless standard, become widely implemented, which is expected to be by 2020. “When it comes to consumer IoT, we don’t expect these solutions to be adopted quite as rapidly due to the price point being a major influencer on end­user trends,” Christiansen says. However, this could happen as soon as 2018, with things like bikes, handbags, suitcases, children, and dogs being among the “assets” consumers might want to connect to keep secure.

UK business consultancy Logicalis is a provider of global IT solutions and managed services. Its European chief technologist for IoT, Richard Simmons, comments: “I think it is fair to say that IoT is one of the key options and strategic goals that most customers are looking at across all verticals.” He adds that they want to know how to use different IoT devices to get better connections to what they do. While there is a lot of interest, it’s still a technology looking for a use case that would actually drive value, he believes.

Manufacturing has been one area of success, especially with things like predictive maintenance. IoT helps ensure better maintenance and, from an adoption standpoint, it represents a fairly controlled and well understood environment – namely the internal workings of a production machine or an appliance. “In that world, you already have people familiar with operational tech and they know how that can be better controlled,” Simmons explains.

Rocky Foundations – IoT Readiness

The biggest challenge to further IoT adoption is that most customers don’t have the foundation to adopt it. Simmons says that’s because largescale IoT implementations include not only devices and sensors but also connectivity, management platforms, analytics, machine learning, and user interfaces – all of which must be wrapped in comprehensive security. It is a frustrating reality.

Simmons has talked to construction firms about the potential to automate air conditioner maintenance through IoT, a potential that generates excitement and interest. When he then asks about the details, things come to pieces. “Do you have AC units with sensors?” No. “Connectivity?” No. “Network management?” No. “Do you have the data platform for storing data?” No. “Do you have analytics?” No.

While these sorts of solutions may seem a long way off, the willingness of companies to invest in such systems is high and the infrastructure is ready.
_{Peter Wilmar Christensen, Co-founder and general manager for EMEA at Greenwave System}

“For most companies, it would be a huge investment to provide that foundation and in the case of that construction company the actual ROI wasn’t supported – the investment was simply too big,” he explains. On the other hand, some customers may have more compelling use cases. “We work with a car manufacturer that handles 30 chassis per hour. If that line went down for 30 minutes, the costs would be tremendous, so an IoT investment is worthwhile,” he says. If the network or some other part of an IT infrastructure is coming to the end of its life, a refresh means nominal additional investments can be made to build a foundation for IoT. Then everything is ready for these use cases further down the road.

Missing links

Another impediment to adoption is that in much of Europe there are huge challenges with connectivity. That gap between connectivity need and connectivity capability represents a major barrier, according to Simmons. Where connectivity is available, creative IoT solutions emerge readily. As an example, he outlines a smart city project his company recently completed that incorporated the monitoring of trash bins. The bins can signal when they are full enough to warrant pickup but this information is combined with weather monitoring in accordance with what analytics revealed about consumer habits. In Spain, where rain is relatively infrequent, people neglect to put their bins out for pickup when it’s wet. In the UK, on the other hand, where it rains more often, people don’t change their routines and bins are put out for collection at the same rate as under dry conditions.

Logicalis was also involved in a flood prevention project that used smart manholes. Service companies would typically charge about €10 for each manhole they cleaned out, regardless of whether there was actually any debris to be removed. “We can detect which ones need cleaning, which has led to a reduction in flooding as well as operational savings from not sending people out to needlessly clean out manholes,” says Simmons. While pundits focus on the amazing things that can be accomplished by IoT, especially with the coming of 5G, there remain huge areas of Europe without 4G, or even 3G – and access is often expensive. “In many cases we have to put in Wi­Fi to allow devices to talk,” he says. The situation is no better with other potential communications protocols. Sigfox, a French company founded in 2009, builds wireless networks that connect “things” such as electricity meters but the problem is that there isn’t the coverage for Sigfox networks yet in Europe, Simmons says.

The evolution of IoT

There are several things that will determine the evolution of IoT in Europe and the most important are competitiveness, innovation, standardization, and security, comments Christensen from Greenwave: “Innovation, a willingness to invest, and competitiveness are crucial for European companies if they are to keep pace with Asia. Innovation in particular makes it possible to move up in the value chain to offer more advanced products and services.” This has to be balanced with the main concerns about IoT for most companies: data security and privacy. “These elements should not be an afterthought that is sprinkled on top of new solutions, but should be baked­ in from the beginning,” says Christensen.

When innovating, developers should also be aware of regulations and the level of digital culture in specific companies, because these two factors can potentially slow down implementations. Likewise, the value of data analytics shouldn’t be underestimated because being able to understand and react to what is happening instantly is incredibly important for companies, especially those with mission­ critical operations. Here, “implementing edge analytics can yield great results,” he says.

What we are not finding is repeatability. Instead, we find that every organization and situation is different and must be engineered differently.
_{Richard Simmons, European chief technologist for IoT at Logicalis UK}

In industry, the number of connected devices is likely to multiply five times. Today, automobiles are the big driver and holder of “most connections” but in five years, assets will also be connected, as well as all critical production equipment. “Taking all of this into account, we expect to see a pretty massive build­up of services and devices both in industrial and consumer IoT applications,” Christensen says. “We are seeing more adoptions of IoT in some areas but it is very task specific,” says Simmons at Logicalis. “What we are not finding is repeatability. Instead, we find that every organization and situation is different and must be engineered differently.” Adoption and innovation also have a geographic component. According to Bonnell from Coresystems, the question should really be which cities are best positioned to benefit from IoT.

World of opportunities

Across Europe, important innovation hubs are emerging in cities such as London, Barcelona, Berlin, Munich, Copenhagen, Amsterdam and Zurich. “What is happening in these innovation hubs is not always mirrored across the entire country – especially those with large rural populations,” explains Bonnell. For startups focused on IIoT, cities like Berlin and Amsterdam should be high on their list. “Both these cities are highly desirable for tech talent, with strong and increasingly well­ funded tech ecosystems and close access to real­ world testing and incubation opportunities, partners, and customers that will improve chances for commercial success,” he says.

Europe offers a wealth of opportunity for companies expanding their footprint in the IIoT market and they would be wise to determine which cities make the most sense as their base, rather than deciding at the country level. Of course, it’s not possible to talk about the state of IoT in Europe without putting things into a global context – but it can be uncomfortable to do so. “Asia is ahead of Europe and moving forward fast,” warns Hughes. “China is prioritizing advanced automation [robotics] and wants to be world leader in precision manufacturing in 2050.” He considers the US to trail Europe, with Boston Consulting Group placing Germany ahead of the US when it comes to implementing or planning digital solutions in their factories.

“We expect the new wave of IIoT to offer cloud­based services which are cheap and easy to implement in existing infrastructures – and can, therefore, spread with very low financial and technology barriers,” says Christensen. “For this reason, we don’t expect those countries that are currently behind on IoT to stay that way for long, with all three regions poised for high speed IoT growth in the near future.”

Avoiding Babel

Plenty of initiative

While Germany has carved out a prominent vision that incorporates the concepts of IIoT in its Industry 4.0, this isn’t the only alternative initiative on the continent. Indeed, the European Commission has identified numerous strategies and has proposed taking steps to align them.
In 2016, the European Commission proposed building upon and complementing the many national digitization initiatives beyond Industry 4.0, such as Smart Industry in the Netherlands and in Slovakia, Fabbrica Intelligente in Italy, and Nouvelle France Industrielle (Industrie du Futur) in France. Currently there are more than 30 national and regional initiatives.

The Commission says it plans to use its policy instruments, financial support, coordination, and legislative powers to trigger further investments in all industrial sectors, including working with member states to focus investment in public–private partnerships. The Commission hopes to encourage pooling of resources for further developments in digital technologies and platforms, including high-performance cloud infrastructure for science and innovation as well as large-scale test-beds to accelerate standards setting.

Significantly, the Commission says it will monitor the commitment by the private sector to invest on average three to four times as much as the EU investments in the public–private partnerships. In particular, the Commission says it strongly encourages the use of the opportunities offered under the Investment Plan’s European Fund for Strategic Investments (EFSI) and through the European Structural and Investment Funds. The Commission predicts further digitization of industry could create an additional €110bn of revenue for industry per year in Europe over the next five years, citing studies by consultancies PwC and the Boston Consulting Group.

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