TCS study: 80% of companies gained revenues through investments to Internet of Things

Average increase in revenue as a result of IoT initiatives is 15.6%, while market leaders in IoT see revenue increase of 64%

The most frequent use of IoT technologies by companies is tracking customers through mobile apps, used by almost half of all businesses (47%).

LONDON |MUMBAI, August 24, 2015: Tata Consultancy Services (TCS) has launched a major new global study looking at the impact of IoT technologies across a wide range of industry sectors around the world. The TCS Global Trend study on IoT, which surveyed 795 executives from global multi-nationals, identifies the huge potential for revenue increases from IoT, while also highlighting the significant challenges that lie ahead for businesses transitioning to the new model.

Million-dollar investments in customer insights

Customer and product insights are in high demand, and this is mirrored by the investments from some of the world’s largest companies. According to the study, each respondent company spends a full 86 million dollars on average on IoT in 2015 – projecting it to be 103 million dollars per company in 2018. Mobile apps are currently the most active area of IoT engagement. However, there is great variance between industries. In industrial manufacturing, for instance, sensor monitoring is making strong inroads.

“In the Nordics, it is still early days. In terms of strategy, what we learn from our clients is that most leading companies in the region are in the midst of drafting their IoT strategies. But in a fast changing environment, some ask whether a technology strategy ever should be set in stone. Competitive advantage gained today may be gone in a matter of months,” says Tommi Mäkinen Digital Transformation Lead, TCS Nordic,and continues, “Leading Nordic organizations have expressed their determination to optimize offering portfolios with the help of the IoT. In many cases, this will also mean revamping business models and value networks. As a result, baby step IoT initiatives will be transforming into major business development programs. The successful ones will be defining the winners of the IoT era.”

Many Nordic IoT initiatives have thus far focused on leveraging automation further, or on improving operational efficiency. In addition, a number of leading players are working on intelligent products and services, projecting significant revenue potential as well as pricing premium opportunities. However, with the pace of innovation and the emergence of low-cost alternatives, there are many uncertainties.

At the same time, opting out of the IoT is not an alternative. In an increasing number of industries IoT has gone global. Leading Nordic companies understand this, and agree that the flow of best practices from around the world to the Nordic business community needs to be faster than ever.

Culture is the number one issue holding companies back

Despite the encouraging data on IoT investment and its impact on revenue growth, the TCS report also revealed that major challenges remain in realizing the promise of IoT for businesses across all sectors.

The report found that the three biggest factors holding companies back were:

Corporate culture: Respondents identified the ability to get employees to change the way they think about customers, products and processes was a major barrier;

Leadership: Having top executives who believe in IoT and are willing to invest time and resources is critical;

Technology: Questions around technology continue to loom large including handling Big Data; internal vs. external development; integrating IoT data with enterprise systems; and ensuring security and reliability.

A significant opportunity for revenue growth through IoT

Across the board, those companies investing in IoT are reporting significant revenue increases as a result of IoT initiatives with an average increase of 15.6% in 2014. Almost one in ten (9%) saw a rise of at least 30% in revenue.

Companies at the very forefront of this drive for innovation through IoT have seen the biggest benefits from their investments. The top eight percent of respondents, based on ROI from IoT, report a staggering 64% average revenue gain in 2014 as a direct result of these investments. Currently the biggest business impact is that companies can offer their customers more bespoke products and services, yet by 2020 this will convert from marketing functions to increased sales, through adding considerable value to the customer.

North America and Europe lead IoT adoption globally

Revenue increases are also being enjoyed globally with all regions reporting double-digit growth in 2014, but US firms are reporting the largest gains of 18.8 percent, up from the previous year. In revenue terms, Europe as a whole is seeing a 12.9 percent increase, while Asia-Pacific reports a 14.1 percent increase and Latin America an impressive 18.3 percent growth. In 2015, European firms plan to spend $93.9 million on average, with French firms leading the charge ($138 million on average), ahead of Germany ($86.2 million) and the UK ($80.9 million).

North American companies will spend 0.45% of revenue this year on IoT initiatives, while European companies will spend 4.0%. Asia-Pacific companies will invest 0.34% of revenue in the IoT, and Latin American firms will spend 0.23% of revenue. This has led to North American and European companies more frequently selling smart, connected products than are Asia-Pacific and Latin American companies.