G00275232

The Internet of Things Revolution: Impact on
Operational Technology Ecosystems
Published: 23 April 2015

Analyst(s): Kristian Steenstrup, Dale Kutnick

A wave of change sweeping over operational technologies will impact how CIOs manage an expanded technology portfolio. The IoT brings inexpensive components and cloud-based analytics that will enable CIOs of even the smallest businesses to dynamically sense and contextualize more real-world data.

Impacts
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Developments in consumer IoT will compel CIOs to invest in new operational technology offerings that use "commodity sensors."

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CIOs who lag in their adoption of physical assets with IoT-enabled improved transparency and efficiency will be left behind.

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The proliferation of OT data collected from sensors will drive CIOs to seek benefits from new "data brokers" and data exchange businesses.

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With more real-time OT data available about physical processes, CIOs in sensitive industries will be wary of government regulators claiming "safety and environmental" concerns.

Recommendations
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Develop expertise in the rapidly evolving IoT space, especially vertical industry developments, and partner with business and operational system leaders to determine where it makes sense to augment operational systems.

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Partner with business unit leaders to deploy the IoT to improve support of product output and services, and to help develop investment return models, especially as widespread monitoring initiatives become more cost-effective.

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Work with business leaders to determine the commercial value of various internal data "inputs," as well as where, when and how (or "if") to acquire and curate external data.

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Encourage business leaders to proactively determine how to collect and package the environmental and safety data that will increasingly be available as a result of IoT deployment.

Strategic Planning Assumptions
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By 2018, IoT technologies will be successfully exploited and integrated by over 70% of incumbent leaders in operational technology (OT).

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Through 2020, new vendors entering the IoT space will challenge OT incumbents for more than 80% of new OT customers in small/midsize businesses (SMBs) and in underserved industries, driving OT solution costs down by more than 50%.

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By 2020, over 90% of surviving IoT entrants focused on the industrial market will be acquired by established OT vendors.

Analysis
During the past 20 years (but especially during the past 10), operational technology (OT) systems have evolved to become mission-critical operating platforms for industrial and commercial real estate environments, akin to ERP systems in the business IT world. As such, the leading OT players have developed "ecosystems" around their OT platforms that enable other vendors (especially software and peripheral vendors) and integrators to utilize and extend their installations by adapting to new technologies. These OT platforms for managing plants, buildings and infrastructure have been widely deployed among the largest asset-intensive companies, while small and midsize companies have often underinvested, due primarily to cost and complexity. Increasingly, however, inexpensive sensor (meaning the core of semiconductor capabilities — sensing, communicating and processing) components feeding cloud-based analytics enable the CIOs of even the smallest businesses to exploit the Internet of Things (IoT) to dynamically sense and contextualize more realworld data (see "The Internet of Things and Related Definitions"). This will impact how CIOs in OToriented industries manage a vastly expanded technology portfolio. We use OT to refer to the platforms that are used in running the operation of physical assets of enterprises, especially those that involve taking specific actions (for example, controlling electricity or energy flow, valves, lighting, ambient environment, machine tools or robots). Examples of OT include a wide range of items, including: process and discrete manufacturing systems; railcar control systems; medical equipment; oil and gas production, refining and transport; telecom infrastructure's switching and routing equipment; building management systems; and systems used to manage utility infrastructure. (Note that we do not refer to technology used by consumers as OT). The IoT is a network of dedicated physical objects (things) that contain embedded technology to sense or interact with their internal state or the external environment. The IoT is an ecosystem that includes things, communication, applications and data analysis. Within that category, we see some IoT offerings emerge that are specifically targeting the industrial customer base, rather than the consumer (see Figure 1).

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Gartner, Inc. | G00275232

Figure 1. Relationship Between IoT, OT and M2M

Source: Gartner (April 2015)

We view systems in four categories to analyze the impact:
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IoT for consumer products and customer/citizen interaction — such as Fitbits, smart watches and wearables

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Consumer-oriented IoT devices and platforms adopted directly into a commercial/industrial environment — such as human monitoring, augmented reality and unmanned aerial vehicles

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IoT targeting industrial usage and thus augmenting OT — such as commodity sensors deployed in the plant and in the field

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OT systems designed around new IoT devices

For industrial and asset-intensive companies, OT forms the operating platform of the organization. OT will be enhanced, extended, integrated and evolved, but will remain at the core of industrial and asset environments. But because the OT system (especially the "back end") is used to control a substantial and crucial physical environment — such as plants and assets that endure for a long

Gartner, Inc. | G00275232

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time — it is not going to radically or quickly change, but it can be enhanced and extended with IoT devices exploiting inexpensive remote monitoring devices to bring back situational data to help make operational decisions.

OT has supported business in some form for more than 200 years, originally managing mechanical and th...

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