The Internet of Things _ IoT Special Report from Gartner

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The Internet of Things | IoT Special Report from Gartner

SPECIAL REPORT

IoT's Challenges and Opportunities in 2017 A Gartner Trend Insight Report

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Analyst(s): Mark Hung (https://www.gartner.com/analyst/38974)

Summary IoT is the technology foundation of digital business. Although it presents myriad opportunities for leading organizations to address their business issues, key technical and business challenges must be overcome in order for IoT to fulfill its promise.

Overview Opportunities and Challenges IoT is at a crossroads in the enterprise, where the evolution from early trials to production deployments has proved challenging due to business and technical concerns. Industries that can derive clear business benefits from IoT, such as improved operational efficiency, have gravitated toward the technology at this nascent stage. While there is some commonality between IoT projects across industries, differences in business goals and technology competence drive the need for more targeted solutions.

Recommendations New security attack mechanisms and project funding concerns have continued to present a challenge to IT leaders looking to implement IoT solutions in their organizations. In the midst of a highly fragmented market landscape, organizations in key industries such as manufacturing and automotive/transportation have emerged as the early adopters of IoT. Reference architectures and industry-specific best practices have started to emerge to address the top challenges of IoT and accelerate IoT adoption.

Insight from the Analyst IoT at a Crossroads: When Reality Sets In After years of growing interest in the applications and innovations in IoT, many business and IT leaders have been wondering if the technology can ever overcome the hype and fulfill its promises in organizational and societal disruption. As we have written in our published research and observed in our client interactions, organizational leaders have gradually changed their perception of IoT from "hope" to "possibilities" to, most recently, "reality." During the"hope" phase, leaders viewed IoT as a silver bullet, a technology that can solve the myriad IT and business problems that their organizations faced. Very quickly, though, they recognized that without the proper framing of the problems, IoT was essentially a solution looking for a problem. In the next phase,"possibilities," leaders started to explore the applications and use cases for which IoT is best-suited as the organization embarked on its journey toward digitalization. Finally, in 2017, we expect some of these"explorers" to move to the"reality" phase, when skunkworks projects and proofs of concept graduate to commercial or production deployment. In this latest IoT special report, we will be discussing the challenges faced by organizations that have started on their IoT journey, the opportunities in key vertical industries, and how organizations have taken advantage of some of these opportunities and overcome the ensuing challenges. Throughout this latest collection of IoT research, you will find that the connective tissue is the desire of organizations to reinvent themselves by identifying key business issues and matching them with the appropriate technology solution.

Executive Overview Definition IoT is the technology foundation of a digital business. As organizations inexorably move toward digitalization, IoT continues to gain traction in terms of mind share among IT leaders and market growth for technology and service providers. In our latest IoT Backbone Survey, which covered key global geographies (China, Germany, India, Japan, the United Kingdom and the United States), we found that the top internal IoT initiatives (that is, ones that are inward-facing) addressed operational optimizations, while the top external IoT initiatives (that is, ones that are customer-facing) focused on enabling customer data collection through the use of connected devices. IoT is a network of IP-enabled, dedicated physical objects (things) that contain embedded technology to sense or interact with their internal state or the external environment. This excludes general-purpose devices, such as smartphones, tablets and PCs.

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As the perception of IoT has changed among organizational leaders after their initial investigations, key business and technology challenges have surfaced (see Figure 1). For example, from a technology implementation perspective, the constant media reports about hacks and breaches have only served to increase the anxiety surrounding IoT and security. In fact, in our IoT Backbone Survey, security was cited as the top barrier to IoT success (35% of respondents). From a business perspective, while the value and benefits that IoT may bring to an organization are becoming increasingly clear, its ranking among other top IT priorities remains unclear — in the same survey, cost and funding concerns was second behind security (32% of respondents). In this special report, we have included relevant research that discusses some of the top challenges that organizations face when implementing IoT, where the opportunities lie in various industries, and how best to address those opportunities and overcome the respective challenges. Figure 1. IoT's Challenges and Opportunities in 2017

Source: Gartner (April 2017)

Research Highlights Business and Technical Challenges Impede IoT's Progress Related Research- For Clients "Vanguard Enterprise Architects Must Adopt Leading Indicators to Measure the Performance of IoT Initiatives" : Adopting IoT solutions and establishing business value have been difficult tasks for many organizations due to many factors, including unclear business benefits and insufficient expertise or staff. Enterprise architects must develop leading indicators to plan, track and manage their IoT investments. "Hardware Security and Its Impact on IoT Projects" : The emergence of IoT has created new security challenges that enterprises must address. Determining the level of security required and educating the organization should be primary goals of IoT project leaders. "Healthcare Provider CIOs Need to Address IoT's Security Risks Now" : For healthcare providers, IoT provides the benefit of significantly increased situational awareness surrounding patients and hospital operations; however, as a result, new and unfamiliar cybersecurity risks have also emerged. Healthcare provider CIOs must redefine their security strategies to address these new vulnerabilities. "Prepare to Monetize Data From the Internet of Things" : Data and analytics leaders increasingly understand that IoT has the potential to be transformational. However, determining how the data generated from the"things" can be monetized is the key challenge. One of the first steps to overcome this challenge is to create a focused information product manager role. "Reassess Storage Requirements for Successful IoT Implementations" : This note discusses how the demand for more scalable and cost-effective storage will be driven by IoT, along with the inadequacy of current solutions. There will be a need for I&O leaders to re-evaluate their storage requirements based on specific use cases as IoT evolves into more of a corporate asset. "Digital Business and IoT Will Drive Significant Changes to ERP Applications and Strategy" : IoT and digital business have created new opportunities; however, few CIOs understand the full potential of IoT business solutions and how they can be best-leveraged. Developing an ERP and IT strategy must be a top priority for CIOs interested in taking a more IoT- and digital-business-related approach. "Four Key Impact Areas of IoT on IT Disaster Recovery Teams" : Disaster recovery professionals will be faced with a new wave of challenges due to the rapid adoption and implementation of new IoT projects. DR strategies must be built into IoT architecture and deployment plans to avoid costly additions and high-impact failures. "IoT in Retail — Understand the Costs of the Challenges Below the Tip of the IoT Cost Iceberg" : IoT is a challenging IT environment to manage due to immature ecosystems, varying standards and the fact that IoT is not one single technology. This research, targeted at retail CIOs, details the need to cost out custom IoT projects that require consulting and professional services.

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"Ease the Challenge of Selecting the Right IoT Service Provider" : With the emergence of IoT, separating hype from reality is a challenge many CIOs are facing. Seeing through the service provider marketing hype requires CIOs conduct a SWOT analysis of vendors to assess their capabilities and how external providers might support their IoT initiatives. "Expedite Your Identification of IoT Providers With Agile Sourcing Methods" : The adoption of IoT among businesses is accelerating at an increasing pace. Sourcing and vendor management leaders must transform their IoT processes by quickly being able to assess the critical constraints of their IoT use case. Key Industries Embrace IoT As shown in Figure 2, Gartner estimates more than $440 billion will be spent on IoT in 2020 (see"Forecast: Internet of Things — Endpoints and Associated Services, Worldwide, 2016" ). In terms of the commercial opportunities, manufacturing, utilities, transportation and government stand out, while retail and healthcare are also significant market segments. Figure 2. IoT Spending in 2020

Source: Gartner (April 2017) Given the unique requirements of each industry, there is not a"one size fits all" IoT solution that can serve these heterogeneous markets. We explore these key industries and address IoT's impact in the following research. Related Research - For Clients "Jump-Start Your Industrie 4.0 Initiative by Leveraging Business Moments" : Many manufacturing companies are looking to launch their Industrie 4.0 initiatives; however, there is still a gap between strategy and the realization of these Industrie 4.0 initiatives. To bridge this gap, CIOs must exploit a business moment approach. "Measuring the Strategic Value of IoT for Utilities" : All of the IoT-related hype has made it challenging for utility CIOs to discern which IoT initiatives are actually capable of delivering the most strategic value. At the forefront of any strategic plan should be the formation of a cross-functional IoT team that includes business, operational and IT executives. "Trenitalia Drives Cost Savings Using IoT on Train Operations" : Although some companies deliver real IoT value today, many enterprises are struggling with the ability to launch successful IoT initiatives. This research highlights Trenitalia, the main Italian train service operator, and how it has leveraged IoT to increase cost savings and improve reliability. "Master the Four Stages of Connected-Vehicle Evolution to Lead the Renaissance of the Automobile" : The automobile is evolving into the ultimate mobile device. CIOs in the automotive and smart mobility industry must weigh partnership opportunities, build systems capable of using real-time data and prepare for the storage of massive amounts of new data.

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"Market Insight: Disruptive Macro Trends for 2025 — Smart Social Citizens Shape Digital Society" : This research provides a look into how citizen-led solutions powered by personal technologies are driving the development of smart cities. Strategic planners will succeed by providing solutions that make it easier for users to capture, develop and shape their environment. "IoT in Retail — Understand the Benefits of the IoT for Digital Business Success" : In retail, IoT has the potential to be able to keep costs down through operational efficiency and keep revenue up through effectiveness in customer engagement. To accomplish these goals, retail CIOs must focus on collaborating with the business to investigate the customer-facing use cases that will be best-suited for IoT implementations. "How to Use IoT to Extend Customer Experiences" : There are many new customer experience opportunities available to enterprises due to the real-time nature of IoT; however, these IoT initiatives are difficult to implement for a number of reasons. This research includes an exploration of use cases, strategies and best practices that IT leaders can leverage to deliver personalized customer experiences. "Thing Commerce: IoT-Enabled Digital Commerce" : New business opportunities have been created due to the emergence of smart things and their ability to make purchases on behalf of users based on rules, context and preferences. To support their digital commerce initiatives, IT leaders should identify the products and services that are suited for thing commerce and determine how they should be offered. "Market Trends: The Connected Home, 2017" : The three primary trends that will impact the connected home market in 2017 are voice integration, AI and personal assistant robots. To address these trends, technology product management leaders must deliver solutions that are seamless and contextual, while marketing these products based on their overall usability and ease of integration. "Prepare Your Multichannel Marketing for the Internet of Things" : This research examines the rapid rise of IoT and how it will create new business growth prospects in addition to new competitive threats. To address this, marketing leaders will need to develop a roadmap to pinpoint where the IoT intersects with marketing programs and processes.

How Organizations Can Address IoT's Opportunities and Overcome Its Challenges Although IoT presents many technical and business challenges, solutions are starting to emerge to address some of them. Leading organizations in key industries have started to adopt IoT, whether on a small scale to prove out business value or technology integration, or in production deployments that have started to generate new revenue streams or have improved operational efficiency. In the research that follows, we have included both foundational technology research on how to architect your IoT solution in light of the challenges, and specific examples on how IoT can be implemented for respective industries. Related Research - For Clients "Architect Your Internet of Things System by Using the Gartner IoT Reference Model" : This research highlights the importance of having a clearly defined architecture when designing any IoT system. Technical professionals should utilize Gartner's IoT Reference Model to create a suitable IoT architecture. "How to Address the Top Five IoT Challenges With Enterprise Architecture" : While the opportunities related to the use of IoT are most often highlighted, it's the associated challenges and threats that organizations should focus on. Innovation leaders will need to focus their attention on the digital mesh,"information of everything," digital twins and intelligent things. "Market Guide for IoT Security" : This research provides an assessment of the IoT security landscape, as well as the importance of an organization's ability to securely manage IoT devices to ensure IoT endpoint and data security, and asset discovery. Security and risk management leaders must be able to accurately evaluate the impact of improved visibility and control on the organization's risk exposure. "Market Guide for IoT Service Providers" : This research examines how scarce the skills and resources needed to build, deploy and run IoT solutions are among many businesses. This research is especially pertinent to IT leaders in manufacturing, healthcare delivery, transportation and retail organizations that need to select the right IoT service provider to support their IoT projects. "Learning From IoT/OT Implementation in Semiconductor Manufacturing" : The semiconductor industry has seen gains in productivity and quality through the implementation of IoT/OT-based factory automation. CIOs can leverage best practices from the semiconductor industry by implementing aggressive data and IP security protocols. "Pragmatic Strategies to Improve Industrial IoT Security" : The adoption of industrial IoT security solutions has been slowed due to the absence of security posture visibility and a lack of asset visibility. To overcome this challenge, security and risk management leaders must map out the IIoT architecture, and develop a comprehensive and well-documented inventory of all IIoT assets. "Toolkit: Strategic Technology Map for IoT for Utilities" : Tools capable of assessing the strategic value of IoT options are lacking across many IoT solutions. This research enables utility CIOs and their IT executives to compare the strategic impacts and business value of the IoT.

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"The Role of the Alarms and Notifications Platform in the Real-Time Health System" : A&N platforms play a critical role within real-time health systems. Healthcare provider CIOs must deploy an A&N platform with sophisticated alarm management capabilities to reduce alarm fatigue and improve patient safety, staff utilization and morale. "Envision the IoT-Enabled R&D Digital Laboratory of the Future" : Those involved in the development of the laboratory environment, including IT, shadow IT and laboratory staff, often have different visions on how to best modernize the laboratory. CIOs and R&D IT leaders must clearly define what"digitize,""electronic,""digitalize,""IoT" and related elements really mean in laboratory terms. "The CIO of Everything: Orchestrating in an Internet of Things World" : The role of every CIO is becoming more complex due to the growth and highly disruptive nature of IoT. To stay ahead of the competition, CIOs must address and develop an IoT strategy, roadmap, resources and capabilities.

Related Priorities Table 1. Related Priorities Priority

Focus

Monetizing and Managing Emerging Technologies (/explore/initiatives/overview/10364)

This initiative will help enterprises integrate emerging technologies into their roadmaps, catch new ideas that can bring surprise business growth and manage ideas that can transform the business.

Supply Chain and Operations Trends and Innovation (/explore/initiatives/overview/10325)

Supply chain and operations trends and innovation identifies emerging technologies, business models and processes that position supply chain as a competitive advantage in enabling business outcomes.

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Priority

Focus

Delivering Effective Identity and Access Management Capabilities (/explore/initiatives/overview/10510)

The delivery of effective identity and access management (IAM) capabilities involves tools and best practices that manage identity, privileges, access and trust to support security, risk and business.

Building and Expanding a Digital Business (/explore/initiatives/overview/10544)

Digital business is the creation of new business designs by blurring the digital and physical worlds. Digital business involves the interaction of people, businesses and intelligent"things."

Source: Gartner

Gartner Analysts Supporting This Trend Saniye Burcu Alaybeyi (/analyst/56819) , Research Director Paul DeBeasi (/analyst/37173) , Research Vice President Jessica Ekholm (/analyst/15397) , Research Vice President Ted Friedman (/analyst/18810) , Vice President Distinguished Analyst Earl Perkins (/analyst/25748) , Research Vice President Randy Rhodes (/analyst/36219) , Research Director Denise Rueb (/analyst/54764) , Research Director Alfonso Velosa (/analyst/17921) , Research Vice President

Related Resources Webinars "IoT's Challenges and Opportunities in 2017" (/webinar/3641417?srcId=1-2993194175) "Rapidly Architect Your IoT System With the IoT Reference Model" (/webinar/3623721?srcId=1-2993194175) "Digital Twins: The Future of Better IoT Fueled Business Decisions" (/webinar/3611817?srcId=1-2993194175) "Key Considerations for a Successful IoT Service" (/webinar/3517219?srcId=1-2993194175)

Podcasts "Is Your Organization Mature Enough for the Internet of Things?" (/podcasts/internet-of-things-maturity/) "Connecting the Internet of Things to Business Value" (/podcasts/internet-of-things-business-value/)

Articles "The IoT Effect: Opportunities and Challenges" (/smarterwithgartner/the-iot-effect-opportunities-and-challenges-2/) "Chart the Path to IoT Business Value" (/smarterwithgartner/chart-the-path-to-iot-business-value/) "Sensing New Business Models With IoT" (/smarterwithgartner/sensing-new-business-models-with-iot/) "Use Enterprise Architecture to Unlock the Transformational Potential of IoT" (/smarterwithgartner/use-enterprise-architecture-to-unlock-the-transformationalpotential-of-iot/)

Acronym Key and Glossary Terms A&N

alarms and notifications

AI

artificial intelligence

DR

disaster recovery

I&O

infrastructure and operations

IIoT

industrial Internet of Things

IoT

Internet of Things

IP

Internet Protocol

SWOT

strength, weakness, opportunity and threat

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