Analysis of the market of industrial IoT-platforms (IIoT platforms) in the world and prospects of their development in Russia
Analytical Report (full version)
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Analytical Report (full version)
Analysis of the market of industrial IoT-platforms (IIoT platforms) in the world and prospects of their development in Russia
A new study by J'son & Partners Consulting is aimed at analyzing the key market segment - cloud platforms for industrial Internet of Things (IIoT). This problem is solved in both Russian and world practice extremely rare due to its fundamental complexity. However, the importance of the analysis of this segment with the ability of platforms to aggregate data in the cloud, analyze it and provide the results of the analysis to all participants in the chain of added value is difficult to overestimate. IIoT platforms are the basis for the implementation of any business models of the digital economy and industry 4.0.
The global market of IIoT cloud platforms
Currently, in the public domain, there are a lot of market studies devoted to the market of Industrial Internet of Things (IIoT), the size of this market in monetary terms is stunning. The peculiarity of the vast majority of such studies is blurring of the object of the study, almost everything that is somehow connected with the IIoT can be considered as the object of the study, so it becomes a very broad concept, in fact equivalent to the concept of industrial automation. It is not a trivial task to stress the key element of the entire ecosystem, namely the IIoT platform, from a large amount of such diverse information. It is important not only from an academic point of view, because it allows to objectively (quantitatively) assess the degree of digitalization of the industry and its readiness for the practical implementation of business models of industry 4.0. It is also important from a practical point of view - developers of IIoT platforms and investors in such companies (existing and potential) need a clear picture of the target market, its existing volume and structure, growth potential, the appearance of competitive products for each of the market segments.
The study conducted by J'son & Partners Consulting showed that despite many years of intensive discussion of this topic, the market of cloud IIoT platforms and applications is at the very beginning of its formation. In fact, it originated as a commercial market only at the turn of 2015-2016, before that only few IIoT platforms were commercially available in the cloud format. However, despite its "infancy" stage, the IIoT market for cloud platforms and applications has a significant volume taking into account the fact that the market is still emerging. Thus, according to J'son & Partners Consulting, in monetary terms, the global market of cloud platforms and applications for the digitalization of the industry (the market of IIoT platforms and applications) amounted to $728 million in 2017.
This specified market volume includes only payments for the use of cloud platforms and services. The costs of industrial enterprises for on-premise applications and equipment are not included in the assessment. This estimate is two orders of magnitude smaller than the amount of "IIoT-associated revenue" typically reported in IIoT studies. Nevertheless, the market of cloud IIoT platforms and applications does exist, and in the coming years it is expected to achieve more than tenfold growth - according to the forecast of J'son & Partners Consulting - to $8.6 billion in 2022, - much higher than other industry segments of IIoT-associated revenue.
Such rapid growth will have a major impact on the development of other sectors of the economy, given the central role of industry in global value chains. Therefore, it makes sense for developers and investors to join this race in time, especially since the number of players in the market of cloud IIoT platforms is relatively small and significantly inferior to other industry markets for IIoT, for example, the market of cloud IoT platforms and applications for agriculture. In this regard, it should be noted that even with such moderate market volumes, some players, who are not related to the largest IT-corporations, already have a confirmed assessment of the shareholder value of a billion or more dollars (i.e., the capitalization of only one player is greater than the volume of the entire market), which indicates the confidence of investors in a great potential growth of the market of IIoT platforms and applications.
The volume of consumption of functions of cloud platforms and applications is an indicator of the industry digitalization level, quantitatively reflecting the time lag of the digitalization processes of the industry from other, less conservative industries, which are more actively moving in this direction. The key problem with the use of cloud IIoT in the industry is that until recently, the world had a very common practice to use IIoT platforms and applications to optimize production processes within the traditional industrial paradigm, developed as a result of the third industrial revolution, mainly in terms of optimizing the operation and repair of expensive equipment, that is, in addition to traditional local automation. Such a conservative approach significantly slowed down the processes of digital transformation of industrial sectors of the world economy in relation to such rapidly developing industries such as agriculture, which are moving in the direction of higher digitalization.
The consequence of this is the structure of the market for cloud IIoT platforms and applications, the main segment of which are cloud telemetry platforms of industrial equipment (basic and analytical AEPs/Application Enablement Platforms). Nevertheless, a significant share of the market is already occupied by much more complex applications - cloud ERP of the IoT generation, that is, full-featured platforms for managing all aspects of an industrial enterprise, integrated with MES/APCS and PLM/SLM (also transformable into IoT PLM/SLM).
The main potential for growth lies in platforms of the second type (full-featured platforms). The reason is that the platform revenue depends not only on the size of the connected user base, but also on the platform functionality, that is, the level of data processing offered by the platform. Thus, the expansion of the functionality of industrial IoT platforms, both independently and through the development of developer ecosystems, will allow to simultaneously increase both the subscriber base and the average bill, and the second growth factor is even more significant than the first.
Cloud ERP of the IoT generation, as well as developing in the same direction PLM/SLM applications, are not simply means of improving the efficiency of industrial enterprises within the paradigm of Industry 4.0, but are technological basis (enabler) for implementation of the digital economy business models. And only within the last two years, that is, simultaneously with the formation of the commercial market of cloud IIoT, the industry has finally come to understanding of this, more complex transformational role of industrial IoT platforms, its importance is in the fact that cloud IIoT platforms and applications are the technological basis of the fourth industrial revolution and the transition from the level of production and sale of products and related services to the level of creation and management of cyber-physical product and service systems throughout their life cycle.
In various industries the processes of digitalization have their own names, but, in fact, they are identical. They are Industry 4.0 (mass production of individual "smart" products) and Cloud Manufacturing in mechanical engineering, Digital Oilfield in oil and gas production, Smart Grid in electric power industry. This change in the perception of IIoT management of industrial enterprises is currently a key driver of such a rapid growth of the market of cloud IIoT platforms and applications, which, according to J'son & Partners Consulting, in the period between 2017 and 2022 will grow at 64% of CARG and thus become the fastest growing segment of the global cloud services market.
The key regional market is the North American market (USA, Canada), which formed almost 38% of the final consumption in 2017, the transformation processes there are most active, as well as in Germany and Japan. The market of Southeast Asia (China, India) has the greatest growth potential: the share of cloud platforms and services consumption in this region can grow from 27% in 2017 to 32% in 2022.
The Russian market of cloud IIoT platforms
As an independent commercial market, the consumption of functions of cloud IIoT platforms and applications in Russia is at the stage of origin, testing and first practices of implementation of solutions by Russian developers. Also, functions of such platforms are already in use by some global manufacturers of industrial equipment installed in Russia to fulfill their obligations to Russian customers for technical support and life cycle contracts.
At the same time, the use of industrial equipment monitoring systems installed inside local networks of enterprises is widespread in Russia, the number of domestic companies developing such systems is about ten. Being classified as "industrial platforms of the Internet of Things", they, however, according to the ideology of construction and functionality are somewhat different from the global basic IIoT platforms, which also provide monitoring of the actual state of the equipment. However, Russian systems are focused primarily on solving the problem of optimizing the use of the most expensive equipment of a single enterprise or even a separate workshop, that is, local tasks within the existing production and business paradigm.
At the same time, successful global IIoT platforms are positioned as enablers of business models of the digital economy and new principles and production technologies, such as Cloud Manufacturing, mass individualized production and additive technologies (3D printing). The result of it is the full use of features of cloud delivery models of IIoT platforms by global vendors, advanced analytical capabilities, their focus on end-to-end optimization of all chain of added value, the rate of openness and the formation of an extensive ecosystem of app developers on the basis of the IIoT platforms.
Thus, it is the unwillingness of Russian industrial enterprises to drastic digital transformation that is the main limiting factor for the development of IIoT platforms and applications in Russia. In this regard, it is important for Russian developers of IIoT platforms and applications to understand that the emerging global ecosystem of cloud IIoT applications and applications, each of which performs its role and interacts with others, is still open to new players.
In other words, the opportunities for Russian developers to become a part of this emerging global ecosystem have not yet been closed. Due to the still small volume of the Russian on-premise market for IIoT platforms (several thousand of connected units of industrial equipment) and the lack of the market of cloud IIoT platforms, actually any development in this area should be positioned as part of the global ecosystem,but not as a local analogue of any global platform or service that enters Russia as a component of proprietary technical support for industrial equipment of foreign production and, thus, is protected from competition with Russian platforms even in the Russian market.
At the same time, the attempts of domestic developers to adapt to the unpreparedness of Russian industrial enterprises to digital transformation, and thus deprive themselves of the prospects of successful entry into the global market, seem futile.
Key features of IIoT platforms and prospects in Russia
Regardless of its purpose, the key characteristics of IIoT platforms and applications that fundamentally distinguish them from "traditional" automation tools, which include all domestic developments of "IIoT-platforms", are:
- Cloud (public, hybrid) model of providing application functions, which, unlike the model of selling licenses for on-premise installations allows the provider/developer to accumulate and analyze the data of all connected users of the application. An array of data and models of their analysis is the main asset of any developer of such applications, which strategic investors are guided by when assessing the value of the developer.
- The openness of the platform and services to carry out intensive bilateral exchange of information with a wide variety of external systems. API integration with ERP and accounting applications, PLM/SLM applications, supplier and customer systems with end-to-end traceability is mandatory.
- Full functionality, due to the formation of ecosystems consisting of "basic" and analytical IIoT platforms, IOT ERP applications and IOT PLM, the total functionality of such IIoT ecosystems covers business processes of accounting and planning of the upper level (ERP, BI), and production processes of execution of plans (APCS), as well as processes of management of products and services throughout their life cycle (PLM/SLM).
- Mainly automatic input of primary data into the system, due to API-integration with the products of third-party sensors and controllers, as well as due to API-integration with the platforms of developers of these sensors and controllers or with specialized platforms collecting data from them, which can dramatically improve the quality and efficiency of data.
- Full use of a system of interrelated (integrated) simulation mathematical models for probabilistic (stochastic) analysis of data collected from connected control objects. With a large volume and range of accumulated data, it allows to correctly interpret the collected data, to make forecasts with high accuracy and detail, and to make scenario analysis with the choice of the most optimal scenario not only according to production criteria, but also according to the financial criteria of the top level (revenue, marginality) in the context of products and production capacities, taking into account the probability of these scenarios.
The appearance of a competitive IIoT platform / application must meet the above requirements.
As noted above, the obstacles to the successful development and implementation of such applications and platforms in Russia are:
- The prevalence of self-sufficient vertically integrated structures with weak horizontal cooperative relations, information closeness of enterprises, inability to open competition and distrust of the external environment, as a result – organizational unavailability to the implementation of the model of distributed production (cloud manufacturing) and end-to-end automation of the entire chain of creation and consumption of value added.
- Abnormally high proportion of morally and physically worn-out production equipment.
- An additional problem is the extremely limited financial capacity of Russian industrial enterprises, even large ones.
For Russian industrial enterprises and government industry authorities in Russia, it is important to understand that digitalization is not only an auxiliary process of Informatization of the industry, and is crucial for the development of industry in the country. The lack of vigorous action towards real digitalization will mean a complete loss of competitiveness of the domestic industrial sector and its irreversible degradation due to the inability to compete with the products of the new generation from the world's leading manufacturers.
This information note was prepared by the J'son & Partners Consulting. We work hard to provide factual and prognostic data that fully reflect the situation and available at the time of release. J'son & Partners Consulting reserves the right to revise the data after publication of new official information by individual players.
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Full results are presented in the report
«Analysis of the market of industrial IoT-platforms (IIoT platforms) in the world and prospects of their development in Russia»
1. Definition of cloud platforms and IoT applications for the digitalization of the industry, boundaries and methodology of research
2. Conclusions and recommendations
3. Cloud IoT platforms in the industry as a basis for the implementation of the concept of cyber-physical product and service systems
3.1. The concept of cyber-physical product and service systems as the basis of the fourth industrial revolution and the digital economy
3.2. The role of cloud IoT platforms in the practical implementation of the concept of cyber-physical product and service systems
3.3. Quantitative assessment of the global market for cloud-based IoT platforms and applications for the digitalization of the industry
3.4. Basic IIoT platforms of AEP/ADP class
3.5. Platforms and applications with advanced analytics and modeling.
3.6. Cloud applied transactional and analytical platforms and applications for automation of production (APCS, MES) and business processes (ERP, BI) in the industry
3.7. Cloud-based PLM platform and applications
4. Profiles of the largest and / or most promising cloud platforms and applications for digitalization of the industry, the most typical examples of implementation in the world
4.1. Basic and analytical IIoT platforms
4.1.1. Siemens MindSphere
4.2. IoT ERP и IoT PLM
4.2.1. Plex Manufacturing Cloud
4.2.2. QAD Cloud ERP
4.2.3. PTC ThingWorx
4.2.4. Autodesk Fusion 360
4.2.5. Dassault 3DExperience Platform
5. Profiles of developed and operating cloud platforms and applications for digitalization of industry in Russia
5.1. Acumatica Cloud ERP Platform
6. Potential consumers of digital services in Russia and compliance of their financial capabilities with the pricing policy and monetization models of global and Russian providers of digital services for industry
6.1. Evaluation of the current and potential consumption volume in Russia using the model of demand elasticity (the ratio of the size of the business of an industrial enterprise and potential size of the payment for digital services)
6.2. Evaluation of the economic impact of using industrial IoT platforms and IoT ERP/PLM platforms
List of pictures
Pic. 1. Business models of "traditional" and digital economies
Pic. 2. Components of cyber-physical product-service
Pic. 3. Developing an ecosystem of industrial cloud IoT platforms and applications
Pic. 4. Evaluation of the volume, product structure and dynamics of the global market of cloud industrial IOT platforms and applications, the fact for 2014-2017 and the forecast for 2018-2022, million dollars.
Pic. 5. Evaluation of the regional structure and dynamics of the global market of cloud industrial IOT platforms and applications, the fact for 2017 and the forecast for 2022, % and million dollars
Pic. 6. Developing an ecosystem of industrial cloud IoT platforms and applications
Pic. 7. Obtained in practice the effects of the use of adaptive automatic control of irrigation systems
List of tables
Table 1. Change of technological structures with the subsequent jump in productivity and transformation of socio-economic and industrial relations
Table 2. Main features of cyber-physical product-service
Table 3. Basic IoT platforms and cloud telemetry services for industrial and engineering equipment
Table 4. Platforms and applications with advanced Analytics and modeling
Table 5. The main differences between approaches to automation of production and business processes within industry 3.0 ("traditional" automation) And industry 4.0 (automation based on IOT platforms)
Table 6. Transactional analytical industrial IoT platforms and applications (IOT ERP)
Table 7. PLM IOT platforms and applications
Table 8. Availability of IIoT platforms and IOT ERP platforms for industrial enterprises of various sizes in Russia
Market reviewIndustry 4.0, manufacturing, digital economy Open