What is the Internet of Things?

Sometimes the term being used for Internet Of Things (IoT) is Industry 4.0. The 1 st industrial revolution was driven by the introduction of the steam engine leading to mechanization of production. The second industrial revolution was driven by electric power, which led to mass production. The third industrial revolution was driven by using electronics and IT to automate the administrative processes. Now, we are on the brink of the 4 th revolution, driven by embedded and ubiquitous computing, unleashing an enormous potential for intelligence. Every single industrial revolution has changed the way we do business. Internet of Things can disrupt even the most mature industries.

5 Ways to monetize IoT.

1. Insight in how your customer uses your product.

Companies can benefit enormously from knowing how their customers use their products. It would help them with creating better products, offering predictive maintenance services, and/or offering subscription based payment models.

2. Making hazardous environments safer for work

Collecting data from precarious situations allows for analysis and prediction of accidents. By creating intelligent products that monitor their environment and can take corrective actions, hazardous work can be made safer.

3. Saving money by higher efficiency

By tracking products through the entire production process, better efficiency can be achieved. Bottlenecks and errors can be detected much faster, leading to fewer waste and higher throughput times.

4. Higher customer satisfaction

Creating bespoke products for customers can be done much more efficient by keeping track of each product while it moves through production. This will allow companies that have always created only one flavor of their product to have more interaction with their customers by offering them customizable products, increasing customer satisfaction.

5. Creating customer lock-in by offering systems

When you are able to create symbiotic relations across products, a whole new paradigm will evolve. Instead of selling two individual products, you can sell a system of products that can do more together than just the sum of their functions. When you achieve this, you create an incentive for your customer to buy more products, because there is not only value in the discrete products, but also in the combination of these products. For example, France based company NEST has created a range of products for the smart home. They created a smart thermostat that learns the preferred temperatures. It can also detect when there is nobody at home, and allows to be controlled from an app, accessible on your phone wherever you are. This way it will help to save energy, and even makes suggestions about more efficient energy usage. Great product in itself, but when you also buy the smoke detector, which in itself is also a great product, the thermostat and smoke detector can work together. When the CO2 or smoke is detected, the thermostat can deactivate the heater, reducing further danger. This symbiotic relation creates value in itself. Therefore, customers will be more likely to buy more NEST products that increase the value of their system even more.

What is the industry doing?

SAP is investing heavily in Internet of Things solutions. In fact, the Internet of Things hype is happening for a while now, and it seems to be on its peak. When we look at Gartner’s Hype Cycle for emerging technologies, we will see this sentiment is reflected in their analysis.

In their analysis, they predict that IoT solutions will be ‘mature’ in 5 to 10 years. According to PWC, the German industry estimates to invest 40 Billion euro’s in the next 5 years in Internet of Things solutions. This investment is expected to lead to an increase in revenues of 30 Billion per year. ( http://www.pwc.de/de/digitale-transformation/pwc-studie-industrie-4-0-steht-vor-dem-durchbruch.jhtml )

Why your IoT solution should be connected to your SAP system.

There are several scenarios for using SAP in your IoT solution. The first, is to have additional information about your products. This require you to have smart products , which allows you to get insight about product usage. With that knowledge, the services department can propose predictive maintenance, or the sales department can propose re-sales.

In addition, with SAP you can make your production smarter. When you connect all your machines in your production environment to a IoT solution, you are able to measure all kinds of variables that have impact on production. Harley Davidson implemented the Industry 4.0 (IoT) solution of SAP and slashed maintenance interruptions by predictive analysis of machine breakdowns allowing for a more flexible schedule (schedule lock reduced from 21 days to just 6 hours).


Creating IoT solutions will inevitably lead to additional data, and additional logic in your SAP system. One of the risks of big data is that it will lead to big complexity. Complexity leads to higher IT costs. As such, you will need to make choices on how to implement IoT solutions. What data is really needed in your system? What logic should reside in SAP, and what logic should only reside in your devices? The goal is more insight, and insight can only come from taking complex data and reducing the complexity to simple, relevant constructs.

It all starts with inspiration

Maybe you have heard of a quote that Henry Ford is famous for: “If I would have asked my customers what they wanted, they would have told me they wanted a faster horse”. This quote illustrates well that it can be difficult to imagine real-world applications for new technologies. Just as nobody could have predicted 50 years ago why a hairdresser would ever need a computer, nobody can predict all the applications for IoT solutions in the future.

Still, if you want your company to thrive in the industry 4.0 era, (re-)imagining the future will be vital. Take a few minutes to think about the future. How will people 50 years from now use your products, or your services? Be very specific, narrow down on one problem you could solve with IoT, and build from there. If you don’t have any inspiration, you can always watch some sci-fi movies. Despite what most people think, the sci-fi writers did not really predict the future, they helped creating it. And so can we.

If you want to imagine the future of your company and the role IoT plays in this, please contact us. We like to help.