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SAP is making a big bet on the future of the internet of things in manufacturing and other industries with a $2.2 billion investment in IoT technology and services over the next five years.
The IoT investment will fall into three areas: a portfolio of IoT-related products and services; acquisitions of companies that fill in SAP's technology gaps; and a number of innovation labs, where SAP works with customers and partners to develop IoT applications, according to Hans Thalbauer, SAP's senior vice president of extended supply chain and IoT.
"We think the time is truly right for customers around the world to start their engagement and their IoT investment," Thalbauer said. "Digital transformation is progressing very fast; companies and industries are being disrupted, and we need to enable companies to benefit from the transformation."
The IoT investment makes a lot of sense to some observers, and it's a natural evolution of SAP's strategy in the past few years.
"They've been pursuing the IoT story for some time, and they've got some good things in there already built around HANA Cloud Platform, so this is a solid statement of their commitment to this space," said Greg Gorbach, vice president of ARC Advisory Group, a Boston-based consultancy that tracks the industrial sector. "I like the fact that they're committing a substantial amount of money over a period of time, but they're also stepping up with this planned network of IoT innovation labs, which is on par with what some of their competitors are already doing and certainly signals to me that they're trying to compete aggressively in this space."
The three areas the IoT investment targets will help businesses to develop and deploy IoT applications and grow the IoT ecosystem, Thalbauer said.
The first area is an IoT portfolio that includes applications for different industries to use IoT technology to address the new era of manufacturing, also known as Industry 4.0, according to Thalbauer. Characteristics of Industry 4.0 include digitization, machine-to-machine communication, paperless manufacturing and a lot size of one, with the essential requirement that manufacturers can produce and ship goods more quickly and customize products to individual consumers.
The SAP IoT portfolios include applications that monitor and analyze machine performance for predictive maintenance, for example. The portfolios are available now in a basic jump-start package and an accelerated package, with a third more advanced package that will be available later, Thalbauer said. Industry-specific packages are available for industries such as automotive; consumer goods; agribusiness; and public institutions, such as city governments; among others.
The acquisitions part of the investment is already underway with SAP's purchase of two IoT-related companies. PLAT.ONE, based in Palo Alto, Calif., provides platforms to connect IoT devices, making it simpler to develop, deploy and manage IoT applications. The other acquisition, Fedem Technology of Norway, provides analysis software for IoT systems for purposes like monitoring physical systems in real time.
The third leg of the IoT investment stool is a number of coinnovation labs that SAP intends to use to showcase and develop IoT applications and systems with customers and partners. There will be several labs around the world, Thalbauer said, which will provide customers and partners access to design-thinking experts and hands-on demos of IoT technology, such as autonomous systems -- robots and drones -- IoT security technology, machine learning and 3D printing.
Labs help SAP demonstrate IoT benefits
Overall, the investment will help SAP meet the needs of customers who are increasingly seeing the need to develop IoT applications, Gorbach said. Many companies -- particularly older, traditional manufacturers -- feel they have to figure out IoT and implement it in some way, or they'll get left behind. These companies will benefit most from the IoT innovation labs.
"There's a gap between getting religion at that point that says that you know you have to make changes to believing it and making it real," Gorbach said. "This kind of innovation lab is a really good idea to bring those guys in and just show them that you can connect this to this. And if they can do it in such a way that they bring some of their own problems in and work through them, that opens eyes and moves things along so much. When you think about IoT, it's not just about connectivity, but we view it as more than that -- we view it as a key to business transformation in the plant and in the enterprise, so it's a big deal."
The IoT investment is all well and good, but SAP must put all the pieces together to be successful, according to Jon Reed, analyst and co-founder of Diginomica Ltd.
"SAP's big data and IoT landscape is getting pretty crowded, so a customer roadmap will be important," Reed said. "Past keynotes would make you think SAP had it all figured out, but this shows that SAP has recognized that HANA's in-memory isn't everything. SAP has already committed to the use of Hadoop and Spark in conjunction with HANA, so this accelerates that commitment. Now, we wait to see how the pieces fit together."
Trenitalia showcases fruits of investment
One of the first tangible fruits of the IoT investment was showcased by Trenitalia, Italy's primary railroad company. In an event at the National Railway Museum in Pietrarsa, Italy, Trenitalia and SAP demonstrated how the railway company is using IoT data managed by SAP technology to improve operational efficiency in train equipment. Data coming from sensors in real time helps to deploy trains when and where they are most needed and leads to predictive models, rather than reactive models, for future deployments.
Integrating IoT data and predictive analytics on SAP HANA, the Trenitalia system processes real-time operational data, according to the company. This then provides predictive models for machine learning and integration with business systems that can trigger corrective actions in service and maintenance systems to avoid unplanned downtime. Trenitalia teams can link data from motors, batteries and brakes with lifecycle models on usage, wear and other performance indicators, leading to better service and reduced maintenance costs.
"Being able to anticipate events and maintenance operations will enable our company to reduce errors, make processes more efficient and also deliver better services with continuously improving quality standards," said Danilo Gismondi, Trenitalia's CIO, in a press release. "We expect a reduction of maintenance costs of 8% to 10%, which, for our company, is a very significant value."
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