IDC study: IIoT adaptation in Germany is stagnating

The adaptation of the Industrial Internet of Things (IIoT), once highly hyped in connection with Industry 4.0 and Smart Factory, is stagnating at a low level in Germany. Just 29 percent of German industrial companies have the IDC study “IIoT in Germany 2022” According to IIoT projects actively implemented. For this study, IDC surveyed 250 industrial and industry-related companies in January and February of this year.

Overall, the market researchers from IDC draw a rather sobering conclusion in their study: The IIoT adaptation has slowed down in recent years and is standing still. Many companies might have simply missed the best opportunity to react better to risks and problems in supply and value chains. Too many companies would stand on the sidelines and research (20 percent), evaluate (30 percent) and plan (20 percent), but not act. According to IDC, these companies are in danger of being left behind.

The explanation for this behavior seems obvious. The changed overall economic situation of the past two years due to the Corona crisis and the increased energy costs have changed the priorities of companies. And the war in Ukraine is finally putting companies on the alert. Instead of medium and long-term measures, activities to secure the key business figures are now at the top of the agenda.

Just 29 percent have actively implemented IIoT projects.
Just 29 percent have actively implemented IIoT projects.

For 40 percent of companies, “increasing profits/reducing operating costs” is one of the top five business priorities. A total of 38 percent also put the aspect of “improving productivity/efficiency” on their to-do list. For almost a third of the companies, points such as “improving customer loyalty” or “managing the effects of COVID-19 are on the priority list. Classic IIoT topics such as “reducing downtime”, “reducing resource and energy costs”, “reducing scrap rates “, which are relevant to production, are currently not even prioritized by a third of the companies.

However, simply trying to explain the hesitant IIoT adaptation of companies with the crisis environment does not go far enough. Numerous obstacles for an IIoT introduction are homemade. For example, only about every tenth company has so far defined a holistic data and analytics strategy, which the IDC analysts believe is a critical prerequisite for a holistic IIoT strategy and the entire industrial digitization.

Companies are currently focusing on economic stability.
Companies are currently focusing on economic stability.
Photo: IDC

It looks even bleaker when it comes to the use of AI/ML in IIoT projects. Only 12 percent of companies are already using this. In addition, modern applications such as Digital Twins or AR/VR are rarely used. The strategic deficits are also reflected in the biggest challenges related to analytics, AI and ML such as high costs and lack of budgets (30 percent), security and compliance (24 percent) as well as a lack of integration capability of data sources and data growth (20 percent each). .

What further hampers widespread IIoT adoption is the lack of oversight over IIoT implementation. Of the companies that have already implemented IIoT projects or are running IIoT pilot projects, only a third regularly record suitable metrics to measure success. 22 percent check initial metrics for suitability. Only a fraction can currently determine whether the IIoT projects achieve the desired goals – provided that corresponding goals have been defined at all.

In view of these conditions, it is hardly surprising that in 2022 IT/OT integration will still be an issue. Only ten percent of the companies have already successfully managed the integration of OT and IT – 16 percent, on the other hand, have failed. Corresponding projects are currently running at 42 percent of the companies surveyed. Challenges and barriers to integration include a lack of expertise and resources to execute the initiatives for 29 percent, technology issues and security concerns for 28 percent each, and organizational complexity for 27 percent.

AI/ML is hardly used in IIoT projects.
AI/ML is hardly used in IIoT projects.
Photo: IDC

On the other hand, the positive mood of those surveyed is pleasing Industry ecosystems, i.e. a platform-oriented cooperation. Three quarters of those surveyed stated that they were already part of such mergers from industrial companies and increasingly also between companies from different sectors, for example from industrial companies and the health or insurance sector. The goals of participation in industry ecosystems are faster innovations for 31 percent, new sales potential for 29 percent and to promote the safety and quality of their own products for 26 percent.

Overall, the IDC analysts see ups and downs in terms of IIoT use. Thus, according to IDC, the field is divided into a few strong leaders with advanced and strategic adaptation, organization and integration, and many laggards who continue to run very isolated initiatives or only monitor and evaluate without properly addressing the issue. This lack of optimism is also reflected in the IIoT application scenarios used. They are too focused on optimizing the status quo instead of transforming and, if necessary, disrupting traditional processes and business models.

Market researchers are therefore warning that global competition is not sleeping. If nothing changes in the attitude of German industrial companies, they are in danger of being left behind not only in mass production, but also in products and services that are characterized by innovative strength and engineering skills.

IDC study: IIoT adaptation in Germany is stagnating

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