Business software giant SAP is moving fast to help its customers tackle the challenges they face in addressing the Internet of Things. But what is the modus operandi of SAP and how does it see the IoT market developing?
In an interview with Tanja Rueckert, SAP executive VP for the Internet of Things and Customer Innovation, IoT Now contributor Antony Savvas asked how the company is addressing the key areas that enterprises need to know about the IoT and how SAP is supporting the growing market.
IoT market drivers, adoption models, big data management issues, industry alliances and standards and of course security are all issues at the fore when it comes to considering IoT company projects.
Timing
First of all, IoT Now asked about timing and questioned Rueckert whether she thought the IoT was already here and whether companies had to jump in now to take full advantage of the promised opportunities.
Rueckert says: “I truly believe IoT is here and now and it’s not hype. The technology trends clearly support this, as computing power and machine learning capabilities increased, while cost for IoT sensors and storage decreased. The “things” in the networks get more intelligent, as they create data that can be turned into smart data using the analytics systems already available on the market.”
She adds: “There is a clear pattern showing the IoT is here today and those that act now will lead in the future.”
That said though, when one thinks of the cloud and how long it took for widespread commercial take up of software-as-a-service, platform-as-a-service and infrastructure-as-a-service offerings, aren’t we getting a little ahead of ourselves with the IoT?
Rueckert disagrees. “The growth and take up of the IoT will accelerate much faster than the cloud. It may not be for everyone in a year’s time, but in two or three years there will be widespread take-up at a far wider level than was seen with the cloud.”
Rueckert says the IoT is a far different animal than the cloud at this stage of its development as it is already rapidly growing to support mission critical applications in the logistics, manufacturing, energy and utility sectors. With the cloud, companies first started to put their email, sales leads, HR and expenses systems into the public cloud, not mission critical systems or important business applications such as ERP.
The IoT is already central to major smart meter roll-outs in the utility sector – such as the £11 billion UK nationwide roll-out, which is being paid for by the government – and global manufacturing and energy firms are already in the process of linking their international operations and facilities using IoT networks.
She says: “With the IoT, companies have far less time, but at SAP we believe there are different value steps. Organisations may want to take little steps first then move faster after their initial testing, but they really have to start now.”
The energy sector is an important case in point. SAP Business Trends recently featured Peter Reynolds, a contributing analyst with the ARC Advisory Group. In relation to the falling global oil price, he says: “When you are making money and shareholders are happy, there is little case for change. But when prices are this low, it’s time to look at doing things differently.”
Reynolds says finding ways to lower operational costs is now key to survival for many oil and gas companies, and that embracing the industrial Internet of Things (IoT) is essential. After all, the industry is built on thousands of miles of pipe and millions of pumps, valves and gauges.
“There is an awful lot of legacy infrastructure out there,” Reynolds told SAP Business Trends (http://scn.sap.com/community/business-trends/blog/2016/01/25/low-oil-prices-prime-oil-and-gas-industry-for-iot-adoption), “but that doesn’t mean you have to rely on legacy thinking.” He says the IoT is really about rethinking work processes and transforming the operational experience.
Sensor-enabled infrastructure and wireless connectivity offer oil and gas companies alternatives to costly field operations. “Why monitor 50 pumps when you can monitor 50,000 pumps?” Reynolds asks.
Remote monitoring from a centralised location allows companies to achieve economies of scale, while still enabling them to make critical performance decisions based on massive amounts of data, he says.
Other areas that wider IoT use is expected in soon, says Rueckert, are manufacturing, mineral mining, healthcare, transportation and smart cities and retail. On the latter, she says: “You are looking at the ‘perfect store’ scenario, with things like intelligent shelves and also efficient energy control.
“I was talking to someone in retail recently and they told me that if something could be delivered to cut their energy costs using IoT they would be quickly on board, you wouldn’t believe what energy costs amount to on a retail business’s profit and loss sheet.”
The human effect
At the recently held World Economic Forum (WEF) in Davos, Switzerland, delegates heard that up to 7.1 million jobs will disappear in 15 major economies – including the US, UK, Germany, France and Italy – over the next five years during a “Fourth Industrial Revolution”. This would be as a result of “disruptive technologies” around artificial intelligence, machine-learning (including IoT), robotics, nanotechnology, 3-D printing, genetics and biotechnology coming to the fore.
The effects of these technologies would be further compounded by the rise of the mobile internet and cloud technology, enabling the rapid spread of internet-based service models, built around the IoT.
The WEF said the rapid advance in technological innovation will cause “widespread disruption” not only to business models, but also to labour markets over the next five years.
The greatest job losses, said the WEF, will happen in white-collar office and administrative roles. This loss is predicted to be partially offset by the creation of 2.1 million new jobs, mainly in more specialised “job families”, such as computing and mathematical or architecture and engineering disciplines.
Rueckert said such fears around robotics, artificial intelligence and applications linked to the IoT were understandable, but that it was up to SAP and the other big technology players to manage the fears.
She says: “There will be new job profiles as a result of technological advancement. For instance, I often hear fears around the wider use of algorithms and the potential for people to lose control over processes, but it is human beings that are developing the algorithms.
“If we are simply treating algorithms and other technology as a threat, we are not doing enough as a technology industry to uplift the intelligence of people. We must treat IoT and any other technology as an opportunity for human advancement.”
This is something that Sukamal Banerjee, global head of HCL Technologies’ IoT Practice, agrees with. He says: “It may sound like an idea from a sci-fi movie, but as the capabilities of machines continue to evolve and become more complex, they will increasingly act as collaborative partners for humans.
“As we grow increasingly used to the helping hand machines can lend, working practices will evolve to include them, leading to a huge upturn in productivity. This will enable people to enjoy more engaging working practices, as mundane and routine tasks are transitioned to machine counterparts.”
Incidentally, two specific jobs that will be in strong demand by 2020, despite the jobs cull, said the WEF, include data analysts, which companies “expect will help them make sense of the torrent of data generated by the technological disruptions”.
And “specialised sales representatives”, as “practically every industry will need to become skilled in commercialising and explaining their offerings to clients”, the Forum said.
So SAP will clearly be at the centre of this job creation spurt as a result of its active and expanding cloud and related IoT business. This is demonstrated by its recent full year 2015 reported results.
A growing potential business
SAP said cloud subscriptions and support revenue was €2.29 billion for the year (2014: €1.09 billion), an increase of 110 percent. While this figure came out of total group sales of €20.8 billion, SAP is predicting a lot more to come from its cloud related business – including IoT.
It said: “By 2017, SAP continues to expect its rapidly growing cloud subscriptions and support revenue to be close to software license revenue, and is expected to exceed software license revenue in 2018. At that time, SAP expects to reach a scale in its cloud business that will clear the way for accelerated operating profit expansion.”
And this is something that Rueckert has her mind firmly set on. “SAP has a cloud-first strategy, but with IoT we are not trying to re-market existing solutions, we are building a differentiating IoT platform, applications and services to help our customers digitise their business process and create new business models.”
The major effort towards this end involves SAP offering a platform built around its big data processing engine HANA, which is already an established solution among companies that need fast processing and crunching of data generated across their business.
The newer and IoT-specific SAP HANA Cloud Platform for the IoT includes an asset management product, a predictive maintenance and service product, and several other solutions that firms need to manage, monitor, and support their growing numbers of connected devices.
SAP helps customers implement practical business solutions with a wide variety of cloud-based IoT solutions which include the SAP Predictive Maintenance and Service solution, SAP Connected Logistics software and the SAP Manufacturing Execution application. And the SAP HANA Cloud Platform offers open APIs that allow third-party providers to develop IoT applications.
Rueckert confirms: “Software is our business and we have no intention of manufacturing IoT sensors or other hardware – data processing and data analytics remains our core business. With the IoT, we know we or any company cannot do it on their own. We want to help develop and work towards accepted IoT industry standards and we want more partnerships.”
SAP is already partnering with German industrial conglomerate Siemens in building what is marketed as the Siemens Cloud for Industry. This aims to be an open cloud platform for analysing large datasets across industries.
The effort includes allowing developers to build applications for Siemens Cloud for Industry that will be available through the SAP HANA store, as well as being available from the developers direct.
Security
SAP is also involved in alliances when it comes to IoT security. Rueckert says: “We want to make sure that there is greater security across the entire IoT stack, especially when it comes to our products and services being used in mission-critical applications. This is also why we joined the Industrial Internet Consortium (IIC).”
The Consortium aims to accelerate and promote business use of the IoT. SAP is working with more than 150 other IIC members to deliver use cases, test beds, reference architecture and frameworks and security.
Rueckert says: “On alliances, security and standards we don’t want to turn a positive into a negative, but we know we have to be even more visible in playing our full part in the development of a very fast growing market. But this really is a no-brainer for us as the IoT is already here and is set to be everywhere very soon.”
IoT and the cloud
The cloud, by providing a front-end management interface for IoT devices, offers organisations the scalability and flexibility they need to update and manage those devices. It can also provide the necessary online and shareable capacity to store the data collected from these connected devices.
A cloud-based management platform that can be located at a single location can control multiple IoT applications, and can provide the necessary data analytics to get the most out of this data for the benefit of organisations.
This contributes to efficient business processes, cuts IoT operational costs and helps the organisation to make greater returns from its technology investments.
IoT devices controlled in a cloud environment benefit from the classic scalability features of the cloud. They can be increased in number more quickly in response to the needs of the business using more efficient resource management.
What’s required when running IoT devices in the cloud?
To efficiently run IoT devices in the cloud, organisations need authentication and security to ensure that data transferred between devices and applications is verified, authenticated and protected from security threats and malware.
They also need managed connectivity and device management to make sure IoT devices can be detected, monitored, updated and managed over the air across multiple mobile and fixed-line networks, and across various mixed network operators.
In addition, they require device data aggregation and analysis to ensure information – like temperature, location, usage data and other readings – is efficiently organised and stored ready for examination.
And, as the efficiency and speed of wireless networks improve, the ability of the cloud to control large-scale device deployments will support more streamlined and cost effective systems for enterprises.
The delivery of such cloud-based IoT solutions will be enabled through industry alliances across communications hardware specialists, data storage specialists, analytics software leaders and mobile operators.
Tanja Rueckert – executive VP, IoT & Customer Innovation
Tanja leads the IoT & Customer Innovation unit which, working in close collaboration with customers and partners, focuses on developing innovative software solutions particularly in the area of Internet of Things (IoT) and Industry 4.0. Co-innovating with customers and partners to accelerate their digital transformation by bringing individualised, but scalable, business solutions to market is at the core of Tanja’s organisational charter. Expanding the market reach of SAP’s innovation pipeline through globalisation services complements her responsibilities.
Tanja joined SAP in 1997 and has held multiple leadership roles in quality and program management and was the COO of HR and Products & Innovation board areas. She holds a doctorate in chemistry from the University of Wuerzburg and the University of Regensburg. Tanja splits her time between Silicon Valley and SAP’s headquarters in Walldorf, Germany, and is a mother of two children.
