Impact of COVID-19 on the IIoT, Connected Applications, and Digital Transformation markets
Noone can accurately predict the social and economic impact of the COVID-19 pandemic, but by combining economic scenarios with datasets and prior experience, we can assess its impact on the engineering, manufacturing, and industrial (‘technical applications’) software markets in general, and IIoT (industrial Internet of Things) in particular.
In the short-term to medium-term, the predicted impact on different industries is not uniform; in general, industries that depend on disposable income, such as those that are travel-related or fashion-related, will be affected more than those that are vital, such as utilities and medically-related industries.
Other variations can be explained by the following market drivers:
- Reshoring due to the fragility of global supply chains, leading to increased investment in industrial automation software
- Increased investment in proven applications that have short-term payback
- Reduced investment in exotic applications that are harder to justify
- The negative affect of financial and societal factors on certain industries
- Proximity and safety measures enforced by the crisis
- The growth of cloud-based applications as used to manage business disruption
Winners and Losers – The Impact on IIoT/Connected Applications and Digital Transformation
Cambashi’s analysis of the connected applications (IIoT) market shows that the growth during the last few years has been very positive, and the effect of COVID-19 is likely to be temporary. Figure 1 shows growth still remaining positive for all market areas through the pandemic and then picking up again in 2023.
Figure 1; Impact of Covid 19 on the Connected Applications software market (provisional figures)
Market areas are affected positively or negatively because the connected applications are affected in different ways by the market drivers above. This allows us to identify in some detail, the ‘winners and losers.’
Predictive maintenance, for example, already delivers business value in several market areas, whereas some more ambitious applications are experiencing funding issues.
Business solutions require transformation programs as well as application software and an ecosystem of providers. The matrix below shows where the combination of Technological Capability and Business Impact is likely to be successful. in these times. The ecosystem of providers required to deliver ranges from management consultant on the top layer, to systems integrators in the middle, and technology providers at the base—and all involved at all levels.
Figure 2; Examples of ‘Winners’ in industrial IoT solutions
Cambashi’s view is that most digital transformation projects will be ‘winners,’ as shown in Figure 2, because many companies will accelerate digitalization to support flexibility in working arrangements and production location. Visionary companies will see the demand shock as an opportunity to invest in transformative digital technology such as BIM (building information management) and autonomous vehicle fleets so as to reap the rewards in the upturn. On the other hand, some transformation initiatives—in industries badly affected by the demand shock and cash-flow issues—will suffer.
There will also be ‘winners’ where more emphasis is placed on efficiency and cost-saving investments that have a quick payback, such as selling product as as service, predictive maintenance, and lights-out production. Use cases likely to be ‘losers’ include remote exploration for oil and gas—due to the oil price, and investment in exotic transportation technology, such as autonomous drone taxis.
One exception will be visionary companies that see the downturn as an opportunity to invest so as to reap the rewards in the upturn. Another possibility is that the travel constraints caused by the pandemic might actually accelerate digital transformation and 5G adoption, but this has yet to be proven.
Connected applications are often a key part of a digital transformation initiative involving an ecosystem of providers and adjacent technologies such as PLM (product lifecycle management), CAx, BIM (building information modeling), and MOM. For example, the ‘digital twin’ concept–using CAE (computer-aided engineering) and simulation technology–can be used to reconfigure a production line to meet operative distancing rules. Connected applications, linked to sensors, provide the ‘real world’ data and link to the digital model.
The impact of the COVID-19 pandemic on connected applications (IIoT) will be serious, but temporary; there will be winners and losers depending on how the business applications are affected by market drivers.
Cambashi models this in granular detail to show the effect by industry, country, and application and indicate where the winners and losers are likely to be. This is still projected to be a high growth sector and further research is planned to predict the shape and growth of the next phase. Given the complexity of the ecosystem, providers will need to understand how to position themselves in order to capitalize on new growth opportunities.
Footnote: Cambashi continues to research this market—with the support of industry players—to analyze the new wave of IIoT and connected applications growth in 2021 and beyond.